Alibaba Group went on the defensive Friday.
This story first appeared in the April 10, 2015 issue of WWD. Subscribe Today.
The Chinese Internet giant defended steps it has taken to fight counterfeits on its online marketplace Taobao and said it is committed to continuing its dialogue with the American Apparel & Footwear Association, after the AAFA filed two complaints with the U.S. government Wednesday claiming counterfeiting is worsening on Taobao and calling for immediate action.
“Alibaba has been working closely with AAFA since 2012 to discuss how Alibaba can collaborate with the association and its members to address sales of counterfeit goods online,” the company said in an e-mail to WWD. “We are committed to continuing our dialogue with AAFA.”
The company reiterated Alibaba’s commitment to “fight against counterfeits because the health and integrity of our marketplaces depend on consumer trust.”
Alibaba said it works closely with government agencies and brands, and has widened its coalition with industry associations to tackle this issue at its source.
“Our track record of fighting illicit activities is clear and like all global companies in our industry, we must continue to do everything we can to stop these activities,” the company said.
Alibaba outlined several measures it said it has taken to prevent counterfeiting and pirated goods from being offered or sold on its marketplaces.
They include the use of data mining technology to analyze and track transactions of infringing products and identifying “hot spots” of counterfeit distribution and sales; collaborating with Chinese public security, copyright, quality inspection and intellectual property agencies to take down online counterfeiters; providing an online complaint platform for brand owners to report infringements; conducting random checks through third parties that purchase suspected counterfeit products on its marketplaces, and establishing cooperative relationships with more than 1,000 major brand owners and several industry associations to “enhance the effectiveness of our takedown procedures and other anticounterfeiting measures.”
The AAFA filed two formal complaints against Alibaba late Wednesday with the U.S. Securities & Exchange Commission and the U.S. Trade Representative’s office calling on federal officials to step up scrutiny and oversight of Alibaba and Taobao because its members have suffered losses in the millions of dollars due to counterfeit sales on the online marketplace.
Juanita Duggan, president and chief executive officer, said AAFA has been working with Alibaba for more than a year but charged the implementation of new commitments by the Chinese company has been “sluggish and nonexistent.”
AAFA called on the SEC to use its oversight authority to increase scrutiny of Alibaba’s efforts to police Taobao’s counterfeits and asked USTR to send a strong message to Alibaba that “status quo will lead to the relisting of Taobao” on the agency’s 2015 “Notorious Markets” report.
In a separate e-mail to WWD, USTR defended its decision not to relist Alibaba’s Taobao online marketplace on its closely watched Notorious Markets report on global counterfeiting and digital piracy. Responding to the AAFA complaint, a USTR spokeswoman said in an e-mail that the Notorious Markets List relies “heavily” on publicly available submissions from any interested party.
“In the process leading to the 2014 Notorious Markets List, the AAFA and numerous other interested parties submitted comments for consideration,” she said. “In determining the 2014 List [published on March 5, 2015] USTR carefully reviewed the AAFA submission and all other submissions, as well. With respect to Taobao, the 2014 list identified both signs of progress, as well as concerns.”
She cited the report, which said: “USTR is concerned about these developments [new allegations of counterfeiting on Taobao], but does not relist Taobao at this time. USTR encourages the company to continue working with all stakeholders to address ongoing complaints [and] will continue to monitor the situation. The 2015 Notorious Markets List will be determined by a similar process.”
The USTR spokeswoman also pointed to a “Special 301” report on the state of intellectual property rights protection and enforcement by trading partners around the world as further scrutiny by the agency. The 2015 report is slated to be released at the end of this month.
The Special 301 report is much broader than the Notorious Markets report, which highlights by name specific online and physical marketplaces that “reportedly engage in and facilitate substantial copyright piracy and trademark counterfeiting.” The purpose of the Notorious Markets report is to prod foreign governments to address intellectual property allegations raised, intensify efforts to combat piracy and counterfeiting and to pursue legal actions where warranted. China remained on the “Priority Watch List” in the 2014 Special 301 report released last April and it has been listed in the report every year since its inception in 1989.
“Trading partners placed on the Priority Watch List are the focus of increased bilateral attention concerning the problem areas,” USTR said in a Federal Register notice seeking public comment on the new 2015 report.