Alibaba Makes Another Move to Battle Counterfeiters

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Online sales of counterfeit products drain an estimated $1.7 trillion from global revenues every year, according to one estimate. The response by some vendors to counterfeit sales has been less than aggressive, and Alibaba Group Holding Ltd. (NYSE: BABA) has been accused of being among the worst offenders.

Alibaba said on Wednesday that it is suing two vendors in Shenzhen Longgang People’s District Court for selling fake Swarovski watches, and it is seeking more than $200,000 in damages for “violation of contract and goodwill.”

This is a far cry from founder Jack Ma’s comments back in April that appeared to defend counterfeiting:

The problem is that fake products today are better quality and at a better price than the real names. They are the exact factories, the exact raw materials, but they don’t use the brand names. … We would love to work with the brand companies, but it’s not fake products destroying them — it’s this new business model revolutionising the whole road.

On its Alizila news website, Alibaba’s chief platform governance officer, Jessie Zheng, said Wednesday:

Selling counterfeits not only violates our service agreement, it also infringes on the intellectual property rights of the brand owner, puts inferior products in the hands of consumers and ruins the hard-earned trust and reputation Alibaba has with our customers.

Zheng also said that Alibaba plans to pursue other vendors trafficking in counterfeit goods and take them to court.

Between April and July of last year, the company said it shut down 417 production lines, made 332 arrests and seized fake goods valued at $205 million.

Just last month the Office of the U.S. Trade Representative (USTR) added Alibaba’s Taobao e-commerce website to its list of “notorious markets,” saying:

There is a reported significant disparity between the timeliness and effectiveness of Alibaba’s responses to complaints submitted by right holders in [Alibaba’s] Good Faith Program and those outside the program. … Not only do counterfeit and pirated goods pose a grave economic threat to U.S. creative and innovative industries, undermining the Chinese and global market for legitimate U.S. products, substandard counterfeits such as auto parts pose a potential public health threat to unsuspecting consumers. One large motor vehicle manufacturer reported that at least 95 percent of the merchandise bearing its company’s brand names and trademarks found on Alibaba platforms is suspected to be counterfeit.

Given the recent nomination of Robert Lighthizer as President-elect Donald Trump’s choice to fill the post of USTR, Alibaba — and other Chinese companies — face a long-time advocate for increasing tariffs on imports. In addition to China, it’s possible that Canada and Mexico, among many other countries, will find themselves in tough negotiations on trade policies.

Alibaba’s shares traded up about 3.1% on Thursday, at $93.32 in a 52-week range of $59.25 to $109.87.