By and and  on August 12, 2014

While Kering SA and the Alibaba Group have moved their e-commerce counterfeiting dispute from the courtroom to the conference room, scores of other companies are also staring down the problem of online counterfeit sales.

The Kering suit, which was filed July 9 in New York and withdrawn July 24 following constructive dialogue between the two parties, alleged that Alibaba Group Holding Ltd., China’s biggest e-commerce company and affiliates, made it possible to sell fakes throughout the world. “Kering and Alibaba have agreed to work together in good faith through the normal business process on ways to enhance intellectual property protection in a manner that can further reduce counterfeiting of Kering brands and ensures a healthy and vibrant e-commerce ecosystem for consumers, merchants, and brand owners alike,” according to a Kering statement released Monday.

The suit claims trademark infringement against such Kering brands as Gucci, Bottega Veneta, Balenciaga, Saint Laurent and others. Kering is present in more than 120 countries, and the company’s shares are traded on the Euronext Paris.

Kering executives declined further comment. Alibaba did not respond to requests for comment.

Both parties are trying to reach a resolution within what is believed to be a 90-day time frame. Should that not happen, the matter could wind up back in court. The Kering-Alibaba showdown started when the French company sued several Alibaba Group e-commerce platforms and Alipay, as well as other unaffiliated entities. Kering has withdrawn the suit against Alibaba, but it still is pursuing legal action against merchants named in the filing that sold counterfeit goods of its brands.

The plethora of counterfeit goods being sold online is only getting worse, according to Robert Barchiesi, president of the International AntiCounterfeiting Coalition. “With the combination of China’s copycat culture and the insatiable appetite of U.S. consumers who are always looking for a bargain, you have a perfect storm,” he said Monday, adding of Alibaba’s e-commerce platform Taobao, “This is not just a Taobao problem. It is a big problem for them but it’s a massive problem for a lot of other companies.”

Last summer, the IACC signed what it calls a MarketSafe deal with Taobao, which also covers the Tmall platform, both of which are businesses within Alibaba Group. The ongoing effort zeroes in on fighting online counterfeiting sales. Launched in May, MarketSafe’s first claim was filed in June and 15,000 erroneous listings have been removed since that time, according to Barchiesi. While Alibaba has said it can take up to five working days to remove a product from its site, through its dealings with the conglomerate the IACC can expedite that process to a day or two, Barchiesi said.

While MarketSafe now focuses on 20 brands and is still considered a model pilot program, the aim is to expand the program next year, he said. With the IACC serving as an intermediary, it is up to the participating companies, none of which were identified, to seek out “infringing listings” on Taobao’s platform and then to share that information with the IACC, Barchiesi said.

Part of the reason the IACC was able to join forces with Taobao was due to the high marks it has received through its Rogue Block initiative. Through that effort, the IACC has worked with credit card companies, Western Union and other transaction services to dismantle payment operators on sites selling counterfeit goods. In the past several years, the IACC has “built up a reputation for having really good quality control in place and mindful due diligence,” he said. Digital platforms like Taobao have taken notice of the fact that 3,600 to 3,700 payment service providers affecting “hundreds of thousands” of Web sites have been shut down by such law enforcement agencies as the U.S. Department of Homeland Security, Barchiesi said.

In general, rights holders need to establish online roadblocks suitable for different platforms rather than one policy for everyone — that customized tactic is taken by Taobao, Alibaba and AirExpress, according to Barchiesi. Just last month LVMH Moët Hennessy Louis Vuitton and eBay settled out of court their own legal battle over the sale of counterfeit luxury goods on eBay, though both companies were short on details about the deal. LVMH declined to comment Monday in the wake of the Kering-Alibaba news.

With its initial public offering filing in motion with the Securities and Exchange Commission, Alibaba has expressed concern about how the perception of fakes could damage its reputation.

Although Barchiesi has not been involved with the Kering-Alibaba negotiations, the idea of collaborating to fight counterfeiting is something he supports. “Combining resources, expertise and information only makes good sense,” he said.

Groupe Clarins has also run up against challenges expanding its digital efforts internationally, especially in China, where the Web is protected by the so-called Great China Firewall. Known officially as the Golden Shield Project, the government-controlled firewall restricts the dissemination of information and impacts e-commerce businesses from abroad, resulting in slower load times and compromised site functionality.

Earlier this year Laurent Malaveille, Clarins’ former digital executive vice president who now heads up its efforts in the Swiss market, noted that “sales are done through the gray market and through unofficial channels” in China. Clarins’ solution was to embrace the reality rather than fight it, so the brand opened two online stores in September, a stand-alone one and a second on Tmall.com.

“From Day One, we knew that to be relevant to China we needed to have both properties,” Malaveille said. “So we decided to go there respecting our DNA as a luxury brand, selling our products at full price and with full service.”

With Clarins’ online sales exceeding expectations in China, Malaveille has said that Tmall is not only going to be its number-one China store this year, but it’s “also going to affect the brand perception among the online audience,” adding that “we have pushed down the gray marketers and discounters in the search engine results.”

In the U.K., Compagnie Financière Richemont, parent of brands including Cartier, Dunhill, and Van Cleef & Arpels, is seeking an order from Britain’s high court to block access to Web sites selling counterfeit versions of its brands’ watches and jewelry. The Switzerland-based luxury goods group wants the major Internet providers in the region — BT, Virgin Media, Sky, TalkTalk and EE — to block users’ access to six sites that sell the bogus luxury goods. Neither Richemont nor the court would comment at press time.

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