Alibaba, Baidu Get Snagged in U.S. Piracy Report

As if Alibaba Group’s problems weren’t bad enough, now the company, along with fellow Chinese Web firm Baidu (Nasdaq: BIDU) have become ensnared in a U.S. report accusing them of hosting sites that are rampant with piracy. (English article; Chinese) The U.S Trade Representative’s office has branded Alibaba’s Taobao e-commerce site and Baidu as “notorious markets” for abetting piracy and counterfeiting — a move that won’t do much to boost Taobao’s prospects for an IPO that many suspect will come in the next year or so. As you may recall, Alibaba’s B2B site, Alibaba.com (HKEx: 1688), is embroiled in its own scandal involving bogus vendors who defrauded buyers, resulting in the resignation of its CEO and COO. Chinese media are saying the report may be payback for China’s hard line towards Google (Nasdaq: GOOG) and other western Web firms in China. But regardless, investors might be well advised to avoid any Alibaba companies and also Baidu until the dust settles on this one. Investors in Yahoo (Nasdaq: YHOO), whose stake in Alibaba is one of its most lucrative assets, might also take note.