WASHINGTON — The U.S. Trade Representative’s office declined to re-list Alibaba Group and its e-commerce platform Taobao on a key counterfeit watch list released Thursday, but the U.S. government sent a strong warning to the Chinese Internet giant, putting it on notice to immediately address rights-holders’ concerns.
U.S. trade officials outlined their serious concerns with counterfeits on Alibaba’s e-commerce platforms in its “Notorious Markets” report and list that identifies physical and online marketplaces said to be hubs for counterfeits and digital piracy.
The list does not represent findings of legal violations or reflect an analysis by the U.S. government of general intellectual property protections or enforcement activities in a country. Instead, the study is aimed at prodding foreign governments to address intellectual property allegations raised, intensify efforts to combat piracy and counterfeiting and to pursue legal actions where warranted.
The USTR decision comes despite a strong push by the American Apparel & Footwear Association in October to have Alibaba’s Taobao site re-listed in the report. An AAFA spokeswoman said Thursday the group was still satisfied with the strong warning the U.S. government sent to Alibaba in the report.
“The U.S. government sent a strong warning to Alibaba today — what it said was, ‘Clean up your sites, show us the results, and do it soon,’” said Juanita Duggan, president and chief executive officer of AAFA. “USTR told Alibaba to make serious reforms and get rid of the rampant counterfeit problem on its sites ─ AAFA agrees.”
The agency said in the report, “Brand owners continue to report that Alibaba platforms, particularly Taobao, are used to sell large quantities of counterfeit goods. The Alibaba Group reported that it has added new enforcement features since the 2014 List including a good-faith product takedown procedure, a three-and four-strikes penalty system, and an English-language version of the TaoProtect portal to register IPR and submit takedown requests.”
USTR said it is “increasingly concerned by rights holders’ reports that Alibaba Group’s enforcement program is too slow, difficult to use and lacks transparency.”
The trade agency said it has received positive reports from some rights holders who said they have “good working relationships and cooperation” with Alibaba Group’s enforcement teams.
“But it is unclear what effect these procedures are having on the overall prevalence of counterfeit goods on the Alibaba platforms, particularly Taobao,” trade officials said. “Furthermore, submissions this year from trademark holders in several industries do not report improvement of the underlying problem.”
In explaining its decision to not re-list Taobao or Alibaba in the report, USTR said Alibaba informed officials that the company is continuing its efforts to address complaints by companies and industry groups, including by “reportedly removing millions of listings for counterfeit and pirated products manufactured in China and offered for sale and export both on its own and pursuant to the notice and takedown process.”
But the U.S. also cited concerns raised by the Chinese government pointing to long-standing industry complaints in what’s called a white paper, which often details official policy positions, issued by the State Administration for Industry and Commerce in January.
U.S. officials said Taobao has also appeared in three of the top 10 cases named by the National Copyright Administration of China in its 2014 “Sword Net Action” campaign.
“During the 2015 review, commenters that rely on trademark protection widely criticized Taobao.com, Alibaba.com and other Chinese e-commerce Web sites under the Alibaba Group, including Tmall.com, a business-to-consumer platform, and 1688.com, a wholesale marketplace,” USTR said.
USTR declined to re-list Alibaba, despite criticism from rights holders, but the agency encouraged Alibaba to “enhance cooperation with all stakeholders to address ongoing complaints.”
“Given the size and the scale of Alibaba’s platforms, stronger and more efficient systems for addressing rights holders’ concerns should be undertaken without delay,” USTR said.
An Alibaba spokesman, responding to the USTR report, said, “Alibaba Group is committed to the protection of intellectual property rights and the fight against counterfeiting. Counterfeiting is an issue all global e-commerce companies face, and we are doing all we can to address and fight it.”
“We are an organization built on the values of integrity, transparency and honesty and believe that trust is an essential currency on our platforms,” he added. “We will continue to work with brands, governments and our sellers to maintain the integrity of our marketplaces.”
U.S. officials laid out steps for Alibaba, including: Simplifying Taobao’s processes for rights holders to register and request enforcement action; making Taobao’s “good faith” takedown procedures more available, and reducing Taobao’s timelines for takedowns and imposing penalties on counterfeit sellers.
“USTR will continue to monitor the situation in the coming year for evidence of whether the new enforcement changes are demonstrably effective in addressing ongoing concerns,” according to the report.
In a conference call with reporters, a U.S. trade official who spoke under the condition of anonymity said the discussion in the report “provided an explicit warning flag, so to speak, which starts the clock to next year’s report and encourages Taobao to work harder and more urgently on this issue.”
The report “very clearly lays out markers for Alibaba and Taobao to observe in the coming years and we really encourage them to take more measures to address these very important stakeholder concerns,” the official said.
Asked whether USTR’s decision to not re-list Alibaba or Taobao in the report was a disappointment, Duggan said in an interview that the government’s assessment of Taobao in the report is a “validation of everything we’ve said.”
She said the explicit warning that USTR has made in the report and the specific markers laid out are the markers that AAFA has been asking for.
“If they understand the U.S. government, they will start take this seriously,” she added. “The ball is in their court. This is a policy statement of the U.S. government.”
USTR did name several Chinese physical markets that sell counterfeit products, including fake brand-name apparel and footwear, in the report, including the Jin Long Pan Foreign Trade Garment Market in Guangzhou, the Luohu Commercial Center in Shenzhen and the Chenghai District in Shantou. Two other markets—the Qi Pu Market in Shanghai and the Silk Market in Beijing—were also named.
“China is reportedly the global hub for manufacturing counterfeits, and Guangdong province and the cities of Guangzhou and Shenzhen are its epicenter,” USTR said in the report.