HONG KONG — A tip-off from Alibaba to Chinese authorities uncovered a counterfeit cosmetics operation that peddled goods worth over 20 million renminbi, or $2.9 million at current exchange, the Chinese e-commerce giant said Friday.
The police are investigating 10 suspects in total — four have been arrested, and six more are being sought — who allegedly were involved in the scam, which imitated mainly La Mer, Jo Malone and SK-II products, according to Alibaba. The more than 4,000 items discovered in the warehouse raids included face creams, serums, fragrances, eye creams and more, many of which were found scattered unhygienically on the floor.
While some of the packaging was faked in its entirety, the ring, which operated out of residential buildings, also rinsed out authentic containers and filled them with their own concoctions.
A Nanjing hygiene department investigator said, “They would take the recycled bottles and soak them in a bucket on top of the toilet, use their hands to scoop product into the containers and package that as their ‘product.'”
The tip-off to Alibaba began with one small online store which eventually unraveled a chain of counterfeit production hubs that spanned Shanghai, Jinhua in Zhejiang province, and Danyang in Jiangsu province. Many of the buyers in turn resold the products either through WeChat or bricks-and-mortar stores.
The store had been operating since 2015, one of two by the same group. A statement from one of the involved parties, whose name was not disclosed, said they took advantage of the lack of consumer awareness.
“We specifically did high-end cosmetics because people thought the authentic goods were too expensive, while not having access to a real counter to try it so even if they used it, they could not tell the difference,” he said. “One set of La Mer is a few thousand renminbi and our costs were in the tens of renminbi.”
Alibaba has stepped up its efforts to weed out fake products from its platforms after being returned to the U.S. Trade Department’s notorious markets list last year. In January, it formed an anticounterfeiting alliance with 20 brands including Louis Vuitton and Swarovski, and has filed suit against two Taobao sellers accused of distributing fake watches. The following month Alibaba founder Jack Ma argued that harsher punishments for counterfeiters would help stem the spread of counterfeit goods, referencing the decline of drunk driving cases in the nation after tougher penalties were implemented.