On October 25th, US time, Alibaba Group reached a shareholder class action settlement agreement. According to the agreement, Alibaba has agreed to pay $433.5 million (approximately RMB 3.09 billion) to resolve a class action lawsuit initiated by American investors.
However, Alibaba denies any allegations of fault, liability, misconduct, or damage, stating that reaching a settlement is only to avoid the cost and interference of further litigation. Meanwhile, Alibaba stated in the announcement that the settlement is subject to many conditions, including court approval, and does not constitute recognition or determination of any legal basis for the claims raised in the lawsuit.
The settlement document shows that this is the 21st largest securities class action settlement in the region since the enactment of the Private Securities Litigation Reform Act (PSLRA) nearly 30 years ago, and one of the top 50 securities class action settlements in the United States. The lawyer stated that Chinese investors may also receive this settlement amount.
Why did the high price settlement arise?
This is a securities class action lawsuit filed by investors, accusing Alibaba of making significant misrepresentations regarding its alleged monopolistic "exclusionary behavior" and Ant Group's initial public offering. The plaintiff believes that due to Alibaba's false and misleading statements, the stock price of Alibaba has been artificially inflated.
In the process of determination, the court rejected the plaintiff's questioning of Alibaba's statement regarding Ant Group's IPO, and the allegations of monopolistic behavior and misrepresentation by Alibaba became a key point of discussion. The settlement document mentions that antitrust claims involve complex economic and regulatory issues in the e-commerce market and China's antitrust laws, making this claim a significant challenge.
According to public information, in December 2020, Xinhua News Agency reported that the State Administration for Market Regulation had launched an investigation into Alibaba Group Holding Co., Ltd. for suspected monopolistic behavior, including "choosing between two", based on reports. In April 2021, the State Administration for Market Regulation announced that it had imposed administrative penalties on Alibaba Group Holding Co., Ltd. for implementing a "two choice one" monopoly in the Chinese online retail platform service market in accordance with the law, with a fine of 18.228 billion yuan, and required Alibaba to submit self inspection compliance reports to the State Administration for Market Regulation for three consecutive years. In August 2024, the State Administration for Market Regulation announced that Alibaba Group had completed its three-year rectification.
According to You Yunting, Senior Partner of Shanghai Dabang Law Firm, from the perspective of Alibaba's acceptance of the settlement, as Alibaba had previously stated that it did not constitute anti-monopoly, but was ultimately punished by the State Administration for Market Regulation, there is indeed a significant risk of compensation for Alibaba if legal proceedings are initiated. From the perspective of the plaintiff, the process of claiming compensation is very lengthy, and a large amount of evidence needs to be obtained in China, which also poses a risk of the plaintiff's claim failure. The settlement document also mentions that even if the plaintiff determines responsibility, they still face the risk of proving the causal relationship of their significant losses.
In the end, the settlement amount of $433.5 million accounted for 3.73% of the maximum possible compensation of $11.229 billion in this case. This proportion is more than twice the estimated average compensation of 1.8% in securities class action lawsuits in 2021, 2022, and 2023, and far exceeds the average proportion of 0.4% of the maximum compensation amount in securities class action lawsuits where investors have lost over $10 billion in the past decade.
It is worth mentioning that the reporter noticed that in Alibaba's quarterly financial report as of June 30th in August this year, a provision of 3.145 billion yuan (433 million US dollars) for shareholder class action lawsuits has been shown.
Are Chinese investors also involved?
If the conditions are met, Chinese Alibaba US stock investors are also expected to "share" this high settlement amount.
The settlement document shows that the "settlement class" of the class action lawsuit refers to all individuals and entities who purchased or otherwise acquired Alibaba's American Depositary Shares between November 13, 2019 and December 23, 2020 (inclusive).
But the term 'settlement collective' does not include: (a) individuals and entities that have not suffered compensable losses; (b) The defendant; Current and former officials and directors of Alibaba during all relevant periods; Its immediate family members and their legal representatives, heirs, successors or assignees, as well as any entity over which the defendant or any individual excluded under this paragraph (b) has or has had control at any time; (c) The individual defendant is a settler or any trust established for the benefit of the individual defendant and their immediate family members (or their members); (d) Current and former parent companies, subsidiaries, assignees, successors, and predecessors of Alibaba; (e) The defendant's liability insurance company. Any individual or entity who requests to be excluded from the court.
According to You Yunting, based on general experience, after completing the settlement process or receiving settlement funds from Alibaba, the law firm representing this lawsuit will publicize it on its website. Through the corresponding website entrance, investors can fill out forms, submit certificates, etc. After passing the review, they will receive corresponding compensation for losses. During this period, investors can pay attention to relevant email notifications from securities institutions or log in to relevant law firms on their own.
However, Yu Yunting mentioned his personal experience. Previously, he received an email from Amazon claiming that the products he purchased could be claimed for false advertising statements. The email showed a link to a law firm, where he submitted screenshots and order numbers and passed the review. Half a year later, he received a personal check sent from the United States, but by the time it was sent, the check had already expired. Although a second check delivery was obtained after communicating with Amazon, the check also expired when it was sent the second time. This means that in various situations, eligible domestic investors may also face more difficulties in obtaining compensation.