Alibaba's Notorious Market Condemnation Well Deserved

Despite public ridicule, the e-commerce giant is still the go-to website for fake goods.

January 25, 2018, Los Angeles, CA – E-commerce giant Alibaba (NYSE:BABA) has an enormous counterfeit problem. Once again, The Office of the United States Trade Representative has publicly condemned Alibaba, leaving the e-commerce giant on the U.S. Notorious Markets List - a designation is reserved for the world’s most notorious markets for counterfeit goods.

The designation is well deserved, but is the warning reaching consumers or solving the problem?

Alibaba, appropriately named after the fable “Ali Baba and the 40 Thieves,” and its subsidiary websites remain the go-to websites for an inexhaustible supply of counterfeit products offered to consumers and fraudulent resellers on Amazon, eBay and other e-commerce websites.

Despite claims from Alibaba Group President, Michael Evans, that the company has worked above and beyond to protect brands, the fact is the company ignores its own policy and notifications from right holders. The counterfeits remain, consumers are deceived, and manufacturers and retailers are being harmed in a big way with little recourse.

In addition to trademark, copyright and patent infringement, Alibaba makes this illusory claim on its website "Listings of counterfeits, replicas, or other unauthorized items are prohibited on the Site strictly" - but that is not true. Alibaba even admits to hundreds-of-millions of counterfeit listings on its websites, and in simplest terms, counterfeiting is stealing.

Alibaba claimed it tightened policies against infringement in 2016, touting that it took down 380 million product listings and closed about 180,000 stores in the previous 12 months, just on its Taobao.com subsidiary. For 2017, store closures grew to 240,000¹ - hardly representative of any success. Alibaba didn't comment on how many items had been sold to deceived consumers, or that the duped buyers had been notified.

Jack Ma, Alibaba's CEO and bad-boy of counterfeits, wants China’s top lawmakers to come down hard on counterfeiting, and jail time for those who sell them.

• Tough language from a CEO whose websites facilitate and enable distribution of counterfeits throughout the world. In fact, it’s Alibaba who can’t knock off the knockoffs, and enforcement action should be directed at Ma. In a quote to Bloomberg, “There is a lot of bark around stopping counterfeits, but no bite,” says Ma, sounding more like criticism he should be taking than giving.

Alibaba purports to be on a mission to fight the rampant counterfeiting problem on its platform, and make it easier for brands to remove fakes, but that's also not true. Alibaba's "AliProtect" counterfeit enforcement program presents a gauntlet of obstacles, cryptic conflicting instructions, and absurd responses to rights holder's notifications. Infringement notices are ignored, or receive automated responses including "The trademark in question and / or its similarities is not found in the listing.  Please advise where the infringement part is in the listing." Apparently, Alibaba has determined it is an expert in the millions of infringing trademarks and counterfeit products offered on its website.

Despite Alibaba's brand protection claims, The Counterfeit Report, an industry watchdog and consumer advocate, still found and removed over 18 million infringing items on Alibaba websites, authorized by the right holders. Inexplicably, test purchases were ignored, refunds were denied for counterfeit products, and communications went unanswered.

Alibaba, a billion dollar company, doesn't even have telephone customer or intellectual property infringement support. Calls to U.S. Corporate Headquarters (408) 785-5580 go unanswered, are disconnected, or instruct that a message be left. Alibaba emails that request information or documents state "Please do not reply to this email/message. This mailbox is not monitored and you will not receive a response" and users are directed to an Alibaba web-form that won't accept document files.

Companies that facilitate criminal activity and profit from dishonest sales which impact consumer safety, jobs and public trust create a public perception of deception and impunity. However, their reputation damage is only a small part of the problem: the value of counterfeit and pirated goods is forecast to grow to $2.8 trillion, and cost 5.4 million net job losses² by 2022, while manufacturer's brand integrity is tarnished or destroyed.

Congress can act to protect consumers with the same internet connection filters currently used to detect and block terrorism, sexual predators, and Value Added Tax ("VAT") avoidance to block Alibaba and its subsidiaries. Will they?

Footnotes:

⁽¹⁾ Alibaba shuts down 240,000 online stores selling fake goods in 2017
    Jan 17, 2018
    China Daily

⁽²⁾ THE ECONOMIC COSTS OF COUNTERFEITING AND PIRACY
The report was prepared for The International Chamber of Commerce Business Action to Stop Counterfeiting and Piracy unit (ICC BASCAP) and The International Trademark Association (INTA)
January 2017
Frontier Economics, Ltd.