Wednesday, October 7, 2015

U.S. APPAREL MANUFACTURERS FIGHT WITH ALIBABA'S TAOBAO ON COUNTERFEITING

US apparel manufacturers fight with Alibaba on counterfeits can strengthen Amazon's US and global position.




U.S. Trade Group Seeks Relisting of Alibaba’s Taobao as ‘Notorious’

Association says counterfeit goods remain rampant on Chinese e-commerce giant’s online bazaar


Alibaba has long had to contend with complaints from brand owners about counterfeit goods sold on its Taobao platform. ENLARGE
Alibaba has long had to contend with complaints from brand owners about counterfeit goods sold on its Taobao platform. Photo: Reuters
BEIJING—An escalating dispute between Alibaba Group Holding Ltd. BABA 2.69 % and a U.S. apparel trade group over counterfeits underscores the Chinese e-commerce giant’s battle against criticism it doesn’t do enough to fight fakes sold on its platforms.
The American Apparel & Footwear Association on Monday urged the U.S. government to once again label Alibaba’s online bazaar, Taobao, a “notorious” market for counterfeit goods. Alibaba said it works hard to get rid of counterfeits.
The dispute marks the latest challenge to Alibaba as it also wrangles with the impact of slowing economic growth in China and increasing competition in the online-shopping sector. Such woes, as well as broader concerns from investors about Chinese stocks, have sent the company’s shares plunging to below its initial public offering price of $68 a share, although it has recovered some ground in recent days.
Alibaba has long had to contend with complaints from brand owners about counterfeit goods ranging from luxury brands to sportswear sold on its Taobao platform, a marketplace that serves millions of sellers, many of them individuals.
The U.S. Trade Representative had previously put Taobao on its list of problematic markets for pirated goods. Including Taobao in the list served to shame Alibaba rather than impose any actual penalties on the company; it also came as China sought to prove it was doing more to protect intellectual property. In 2012, the U.S. agency removed Taobao from the list, citing Alibaba’s efforts to address complaints by brand owners.
How to Spot a Fake on Taobao
The situation has deteriorated since 2012, according to the apparel trade group known as AAFA. “In fact, it has gotten worse. Increased pressure is needed to fix this problem,” the group said in comments submitted to the USTR. “Otherwise, counterfeits will only continue to proliferate world-wide as Alibaba continues to expand.”
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USTR officials didn’t respond to a request to comment.
Alibaba, based in Hangzhou, said the trade group has declined to meet with it to discuss the issue. “Alibaba stands ready to discuss any outstanding issues with the AAFA, however for months they have refused to meet with us,” it said in a statement.
AAFA disputes Alibaba’s assertion that it has refused to meet, saying that many conversations between the sides have been initiated by the trade group.
Alibaba said it works with many of the group’s members daily and that it uses a “broad range of measures” to prevent counterfeit goods from being sold on its marketplaces.
The apparel trade group said that despite earlier discussions with Alibaba, the group hasn’t been able to persuade Alibaba to develop a program to remove counterfeits from its site in a way that is “transparent, comprehensible and fast.”
Brands say they want Alibaba to be more proactive about taking suspicious listings off its sites, especially in cases where products are being sold at a fraction of the retail price or are clear fakes.
Some companies say that despite notifying Alibaba that items are being sold under their brand names that they don’t actually make, brands still have to request each individual listing be removed. Luxury group Kering SA, KER 2.08 % for instance, said in an amended complaint to a lawsuit filed in May in New York that Alibaba allowed Gucci bed sheets to be offered on Taobao even though Gucci doesn’t make bed sheets.
Alibaba said effective anticounterfeiting measures require help from rights owners and guards against abuse of that system.
The e-commerce giant is also facing increasing scrutiny at home, where Chinese regulators have sought to take a harder line against the sale of fake goods that hurt the country’s image. Alibaba disputed a Chinese government agency report at the beginning of this year that said it didn’t do enough to fight fakes, and said it was vindicated when the agency removed the report from its website days later.
What Alibaba can realistically do to fight counterfeits is limited by broader problems with the legal system and efforts to protect intellectual property, or IP, said Joe Simone, a Hong Kong-based anticounterfeiting lawyer specializing in China.
“Counterfeiting existed well before Alibaba came along,” Mr. Simone said. “The Chinese government and legislature are behind in bringing their IP laws and enforcement systems in line with international practice.”
Brands have taken their complaints to courts outside of China. Kering alleged in its New York lawsuit that Alibaba sells keyword searches on its online marketplaces including trademarked terms such as “Gucci” without brand authorization. Alibaba’s search engine may also suggest similar-sounding terms such as “Cocci” and “Guchi” when shoppers search for Gucci, effectively steering customers to the counterfeit products, the suit said.
Alibaba has previously dismissed the complaint as having no basis.
For Urban Armor Gear, a California-based seller of cases for phones and tablets, counterfeit listings of products carrying its brand name are still a problem on Taobao, according to a consultant for the brand.
But the company, which opened a store on Alibaba’s branded Tmall site this year, said that after filing up to 1,000 requests a month to Alibaba for three months to take down listings of suspected counterfeits, the number of sellers of such goods has fallen significantly.
“We’ve got it pretty well under control now,” said Dave Lukasik, the brand protection consultant hired by Urban Armor Gear, referring to unauthorized listings on Tmall and the wholesale site Alibaba.com.
Alibaba said it relies on brand owners to monitor its platform and notify Alibaba of problematic listings, and that Urban Armor Gear’s experience shows that its process of handling requests for removals works.
Still, the USTR has kept the issue on the front burner. In a March report, the U.S. agency said it was concerned about fake goods on Taobao and was monitoring the situation. Alibaba has said in response it is dedicated to fighting fakes.