 "A sign of Alibaba Group is seen at CES (Consumer Electronics Show) Asia 2016 in Shanghai, China")
Alibaba Group Holding Ltd.’s commitment to protecting intellectual-property rights is under renewed pressure, with two trade groups—representing more than 1,000 global brands—calling for the Chinese e-commerce giant to be put back on a list of markets known for the sale of counterfeit goods.
The list, published annually by the U.S. Trade Representative, calls out marketplaces that “reportedly engage in and facilitate substantial copyright piracy and trademark counterfeiting,” according to the group.
The American Apparel & Footwear Association, which represents more than 1,000 brands, said in a Friday filing to the USTR that counterfeits remain “rampant” on Alibaba’s shopping sites, particularly the online flea market Taobao. Fakes appear in half the results for the brands it monitors, the apparel group said.
Unifab, an anticounterfeiting organization for about 400 French and global brands, told The Wall Street Journal it is “high time” Alibaba be put back on the USTR’s list.
“Despite a dialogue with Alibaba and years of negotiations, a tremendous amount of fake items can be found,” said David Saussinan, a Unifab spokesman. “No real proactive measures have been implemented” to remove fake listings.
Alibaba said Saturday it is committed to protecting brands’ intellectual-property rights, and has submitted a filing to the USTR about how it is minimizing infringing listings on its platforms. In the past, it has said it would spare no expense in fighting fakes.
This latest criticism comes as smaller but faster-growing e-commerce companies such as JD.com Inc. are challenging Alibaba, and as the company faces an investigation into its accounting practices by the U.S. Securities and Exchange Commission. Despite China’s slowing economic growth, Alibaba reported a better-than-expected 59% surge in revenue last month for the quarter ended June 30.
Two years after going public in the world’s largest IPO, Alibaba is still battling to shake off criticism that its growth relies partly on the sale of fake goods on its platforms.
In 2012, the USTR removed Alibaba’s Taobao platform from its list of notorious marketplaces, citing improvements that Alibaba has made in tracking counterfeits.
The move came after Alibaba hired James Mendenhall, a former general counsel of the USTR, and spent $461,000 to lobby the USTR, the White House, Capitol Hill and others in government about the Notorious Markets List and Chinese trade, according to the Center for Responsive Politics. This amount was more than quadruple what it spent on lobbying the year before.
Last year, the USTR said it had grown concerned about the sale of counterfeits on Alibaba’s platforms. While declining to put Taobao back on the list, the USTR said it would look for evidence that Alibaba is taking effective measures to root out fakes.
This year, Alibaba has spent $360,000 in lobbying as of Aug. 9, on issues including intellectual property and trade, according to the Center for Responsive Politics.
Alibaba doesn’t profit from fake-goods sales as it doesn’t own the products, but the concern is that such sales could drive up transaction volume—a closely watched metric of growth for analysts and investors—and allow Alibaba to boost its advertising rates on the shopping sites.
In June, Alibaba’s Jack Ma said it is in the e-commerce company’s interest to fight fake goods.
“Every fake product we sell, we are losing five customers,” he said.
Mr. Ma drew criticism at the time for also saying that fakes were sometimes of better quality than the originals.
While many brands are reluctant to speak out publicly about counterfeits on Alibaba’s sites, more high-profile brands have done so this year.
The International AntiCounterfeiting Coalition this year suspended a newly created category under which Alibaba was admitted as a member amid an outcry from global brands.
Fashion brand Michael Kors, in a letter to the IACC, said the group’s admission of Alibaba as a member provided “cover to our most dangerous and damaging adversary.”
French luxury brand Longchamp and Unifab also criticized Alibaba’s membership.
Alibaba said it has taken more steps to address brands’ concerns, including quicker removal of infringing listings and shifting the burden of proof to sellers on its platforms to show their goods are authentic.
Research conducted this year by L2 Inc., which advises brands on e-commerce issues, showed the average number of product listings for 10 top fashion brands fell 64% on Alibaba’s sites between February and September. The data show that between 28,000 and 111,000 listings for these brands remain on the sites.
It was unclear how many of these listings were fakes or unauthorized by the brands.
While Alibaba is doing more to weed out products that aren’t authorized by brands, “it’s still very easy to find goods sold by resellers and third parties,” said Danielle Bailey, head of research in the Asia-Pacific region for L2.
Even brands with official stores on Alibaba’s Tmall platform struggle with third-party sales and fakes, according to L2. For instance, in March, when users searched for high-end handbag brand Coach, only 12% of the results on the first page were from Coach’s official flagship store, according to L2’s data.
Coach has since closed it Tmall store. The company has said it wanted to consolidate resources, and would look for ways to leverage digital and social-media platforms to reach customers.
Alibaba attributed Coach’s closure to its operational strategy. The e-commerce company said this week that the L2 data showing an average decrease of 64% in brand listings is a “good result,” but Alibaba will “need to do more and will continue investing” to tackle the problem.
What is concerning to brands is that consumers can still easily buy fake goods on Alibaba’s sites, according to Paolo Beconcini, a consultant at Squire Patton Boggs who represents some brands.
“It doesn’t matter if I have 400,000 traders selling 10 fakes each or 110,000 selling 100 each,” said Mr. Beconcini, noting that a smaller number of sellers could be selling the same amount of fakes as before.
Write to Kathy Chu at kathy.chu@wsj.com
Source: The Wall Street Journal
