Banned Nazi P#%N on Taobao? Global Firms Are Local

In early February an American law firm filed a class action lawsuit against Alibaba for violating the US Securities Exchange Act by concealing information about regulatory problems it faced in China. The case linked to a spat between Alibaba and China’s State Administration of Industry and Commerce over the amount of counterfeit goods on Alibaba’s website and the adequacy of Alibaba’s measures to address the problems.

Around the same time, it was revealed Japanese authorities had raided Amazon’s headquarters in Tokyo and other Amazon-related offices over suspicions Japan’s Amazon site offered materials deemed child pornography. Both companies stressed they complied with the law and highlighted their measures to identify and remove illegal materials. The two e-Commerce giants’ transborder problems recall the difficulties Yahoo! confronted after 2000 when it was sued by Jewish and anti-racist groups in France because of its display and sale of Nazi films, paraphilia, and weapons, which violated French laws against the sale or display of racist material. The French court ruled Yahoo! had to block access to such materials in France. Despite the risks of fines, confiscation, and other penalties, Yahoo! resisted, arguing it lacked the technical means to enforce the French court’s ruling. In the end, Yahoo!, which also faced a court case for condoning war crimes and crimes against humanity (ultimately won) and lost an appeal in the US against the aforementioned lost case, decided to ban the sale of hate-related items from all its sites. In an era of economic globalization, many businesses, especially Internet companies, think of the world as a borderless one. The reality is anything but. Firms need to remember “national” is part of the word "multinational." Consequently, they must put in place the structures that will ensure they operate within the parameters of a world of territorially bounded states.