The Chinese online retailer receives a harsh verdict from brands doubting the company’s commitment to anti-counterfeiting and requesting that the site be labeled 'high risk'.
The biggest apparel trade group in the U.S. has requested that Alibaba Group Holding Ltd be categorised as a “Notorious Market”. This is a status applied to markets and ecommerce sites that have high levels of counterfeit and copyright infringement. Alibaba reported record profits of $4.8 billion in June this year and is the major player in Asia's significant e-commerce market, but has been much criticised in the past for prevalence of counterfeit goods.
What are brands saying
The American Apparel & Footwear Association (AAFA) sent a formal request to the U.S. Office of Trade Representation (USTR) last week, after a wave of complaints from brands who said that they were paying the cost for Alibaba's lack of enforcement. Alibaba was removed from the "Notorious Market" list back in 2012, however this in itself caused outrage at the time.
The request sent to the USTR emphasises that Alibaba has not met the recommendations given by the USTR to prevent the proliferation and sale of counterfeits. The letter cites reseach conducted by a Chinese government agency that showed that 67% of products sold on Alibaba´s Taobao site are counterfeit.
Rick Helfenbein, President and CEO of the American Apparel & Footwear Association stated that:
"Despite numerous public statements that the company is taking the counterfeit problem seriously, we have yet to see improvements on Alibaba's platforms."
"USTR removed Alibaba from its list several years ago, on the condition that the company meet specific requirements going forward. Those requirements have not been met, and as a result American consumers and our members are paying the price."
This sentiment has been echoed by non U.S. organisations such as Unifab, an anti-counterfeiting group that represent about 400 (mainly French) brands. Speaking to the Wall Street Journal a spokesperson for the group stated that it is “high time” Alibaba was re-listed.
How does Alibaba answer
In response, Alibaba issued a statement affirming that it is committed to protecting intellectual property rights of brands and has submitted to the USTR its practices to minimize presence of fake goods. In response to this request from the AAFA Alibaba Group have stated that despite their best efforts, the AAFA is unwilling to engage with them on a reasonable level of discussion about how best to combat counterfeits. Alibaba unveiled its new system for eliminating counterfeits in July this year, the "Intellectual Property Joint-Force System". Intended to stem the flow of counterfeits and satisfy bodies such as the USTR, as a result the USTR decided not to re-list the Alibaba group as a notorious site. However, the USTR has since raised concerns that Alibaba's new anti-counterfeit facilities are slow to react and difficult for brands to navigate and use effectively.
Alibaba is no stranger to controversy. Anti-Alibaba sentiment peaked in the business world in June this year when the owner of Alibaba Group Holding Ltd, Jack Ma stated that counterfeits may be better than the original products in some cases. Since this point the already frustrated brands have applied increasingly more pressure on the Alibaba Group. In May this year Alibaba was suspended over piracy concerns from the International Counterfeiting Coalition (IACC), a watchdog organisation.
Alibaba’s initial inclusion in the group caused outrage with more than 250 member brands threatening to leave the IACC. However Alibaba is not a lone scapegoat; since Birkenstock left Amazon over counterfeits a number of brands have floated the idea of leaving major e-commerce sites. Amazon has reacted in a stricter fashion and introduced a new anti-counterfeit policy called “Brand Gating”, which has seen a mixed response from sellers. The cold war of counterfeiting continues and although e-commerce sites are developing more sophisticated countermeasures to counterfeits, brands are still paying the price. With e-commerce such a powerful player in today's digitial environment, it's understandable that brands are cautious when deciding whether to stop interactions with the websites or not. However, it remains to be seen if in a world where counterfeits and illegal goods are worth an estimated $1.7 trillion, if sites can keep up with the changing methods of counterfeiters.
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