Alibaba Settles Shareholder's Counterfeit Disclosure Lawsuit for $250 Million

E-commerce accused of securities fraud

May 1, 2019 - Los Angeles, CA – Alibaba will pay a quarter of a billion dollars to settle a shareholders securities fraud lawsuit accusing it of defrauding shareholders ahead of its 2014 initial public offering. A class of Alibaba shareholders filed suit against the Jack Ma-founded company for allegedly failing to mention that Chinese officials had threatened huge monetary fines if Alibaba failed to cut down on the counterfeits on its sites. The terms of the settlement are pending court approval. 

Alibaba denied wrongdoing. It said the settlement ends all pending securities litigation against the company, its executive officers and its directors. (In re Alibaba Group Holding Limited Securities Litigation, U.S. District Court, Southern District of New York, No. 15-md-02631. )

Appropriately named after the fable "Ali Baba and the 40 Thieves," Alibaba and its subsidiary websites (AliExpress.com, Taobao.com, 11main.com, etc.) offer counterfeit products directly to consumers and fraudulent resellers on Amazon, eBay, Walmart, and other e-commerce websites. About 85% of counterfeits come from China, with many enabled and facilitated by Alibaba who takes a transaction fee for each item sold.

Alibaba Group President Michael Evans claims that the company has worked above and beyond to protect brands. The fact is, the company ignores its own policies and counterfeit notifications from brand owners. Counterfeits remain, consumers are deceived, and manufacturers and retailers are being harmed in a big way with little recourse. Alibaba and its subsidiaries are best avoided.

Peter K. Navarro, White House assistant to President Trump for trade and manufacturing policy, wrote a harsh condemnation in the WSJ recently; "when you purchase brand-name goods through online third-party marketplaces like Alibaba, Amazon, and eBay, there’s a good chance you’ll end up with a counterfeit." The criticism accompanied President Trump's signing a presidential memorandum to help protect American consumers, manufacturers and factory workers from a flood of counterfeits and the widespread direct-to-consumer shipments of infringing and replica goods.

The value of counterfeit and pirated goods is forecast to grow to $2.8 trillion and cost 5.4 million net job losses by 2022 states a 2017 International Chamber of Commerce Report.

Consumers have the choice to avoid businesses that enable and facilitate global criminal enterprises, and Congress can enact legislation that holds e-commerce websites accountable for their sleazy practices. Will they?