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Alibaba's counterfeit problems continue

Posted by David Casellas on Wednesday, Dec 21, 2016

Alibaba, the world’s largest online retailer, is under pressure once again. Despite alleged efforts to tackle the sale of counterfeits, the e-commerce company continues to face criticism from global brands who its sites ‘blacklisted’.

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Pressure groups representing more than 1,000 brands have renewed calls for Alibaba’s sites to be put back on the list of markets that “reportedly engage in and facilitate substantial copyright piracy and trademark counterfeiting’. In 2012, Alibaba’s largest platform Taobao was removed from the list, published annually by the United States Trade Representative, on the grounds that the group had made improvements in monitoring counterfeit goods on its platform.

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However the U.S. agency has since expressed concerns and said that it will look for evidence that Alibaba is taking “demonstratively effective” measures to address the problem of counterfeits on its site. A report published by the USTR last year acknowledged Alibaba’s new anti-counterfeit enforcement features which include a product takedown procedure, a 3 and 4 strike penalty system, and the launch of an English language version of the Tao Protect portal where rights holders can register IPR and submit takedown requests. However several brands have expressed frustration that Alibaba is failing to deliver in the fight against fakes. Amid increasing complaints from rights holders that the enforcement programme is too slow, too difficult and lacks transparency, the USTR have questioned the overall impact of Alibaba’s anti-counterfeit measures on Alibaba.

For many brands, Alibaba's anti-counterfeit system isn't enough. According to Unifab, an anti-counterfeiting organization which represents around 400 French and global brands, it is “high time” Alibaba was put back on the USTR’s list. Speaking with the Wall Street Journal, Unifab spokesman David Saussinina said:

“Despite a dialogue with Alibaba and years of negotiations, a tremendous amount of fake items can be found… No real proactive measures have been implemented.”

The American Apparel and Footwear Association, which works on behalf of hundreds of world famous companies and suppliers, has also been highly critical of Alibaba’s shopping sites and filed complaints to the USTR earlier this year. The group claim that fakes appear in half of the results for the brands it monitors.

The evidence certainly suggests that a significant number of the goods available on Alibaba are counterfeits. A recent investigation by Forbes searched Taobao for “Gucci” listings under 300 Chinese yuan - the equivalent to less than $50. The search yielded 30,000 results despite this price range being well below the retail price of any legitimate Gucci product. In an online chat with the first four sellers that appeared, Forbes were able to confirm that in some cases factories were hired to produce the goods using the original design, while the remaining goods were simply made to look similar to the real Gucci product but with slight alterations such as misspellings.

Gucci and other luxury brands have attempted to sue Alibaba in the past but their most recent effort saw them back down amid mediation threats. Jack Ma, founder of Alibaba, declared he would rather lose the case than settle. Mr Ma was last year ranked the 22nd most powerful person in the world by Forbes after building up a multi-billion dollar empire through his e-commerce business. His Chinese retail sites handle five times the volume of Ebay, however they have for many years been associated with fakes and Taobao is still referred to as the “largest online place for the sale of counterfeit goods”.

While Ma’s businesses are accustomed to criticism from Western brands and the U.S. government, a Chinese regulator has now also publicly condemned the e-commerce sites. Zhang Mao, head of the State Administration for Industry and Commerce, told a Chinese news site that he had repeatedly emphasized to Mr Ma that he and his business were not outside the law. While Zhang applauded Alibaba for spending more than $160 million on anti-counterfeit efforts he added that there were plenty of issues which remained unresolved and that Ma must take primary responsibility.

Mr Ma defended his business in an article he wrote for the Wall Street Journal claiming counterfeit goods have no place on Alibaba and that his company is 100% committed to leading the fight against global counterfeiting. He cites an “unparalleled level of technology, capital and people” contributing to the group’s anti-counterfeiting efforts, and a data processing system which enables real-time scanning of over 10 million new product listings a day while analyzing trademark and price amongst other features.

However many brands remain unsatisfied with Alibaba’s efforts, even with the group’s revamped fake goods procedures. The new rules encourage brands to enroll in a “good-faith takedown” service and assure partners that complaints will be reviewed in 1-3 days instead of up to seven days as was previously the case. In an open letter to Mr Ma, the American Apparel & Footwear Association criticized Alibaba saying that despite years of discussion, no “meaningful” solution had been reached. The group wants to see significant changes to the counterfeit-removal procedure, including shortening the process to minutes and allowing brand owners to preapprove authorized vendors and wholesalers.

While Mr Ma claims his company is working to protect rights holders and fight the “root causes of infringement,” the trade of fake goods have in part contributed to his enormous wealth. Mr Ma has at times expressed a complete lack of sympathy for luxury brands, acknowledging that they are not happy with his business but calling their prices “ridiculous”. Despite having the power to implement change, it remains uncertain if Alibaba will ever commit to tackling counterfeit trade in a way which will satisfy pressure groups, governments and the affected brands.

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About the author

David Casellas

Post Written by David Casellas

David Casellas is the Co-founder of Red Points and is head of international strategy and future planning. David is an expert in digital piracy and intellectual property protection. He has over 7 years of experience working with global brands and international bodies.