Alibaba Group had its wrist slapped Thursday by a U.S. government agency, but avoided the embarrassment of having its e-commerce marketplaces put back on a list of international marketplaces that promote the sale of phony goods.
The U.S. Office of the Trade Representative, a White House agency that monitors trademark infringement and other trade issues on behalf of U.S. companies, issued a report calling on Alibaba to do more to prevent the sale of counterfeit products on its Chinese e-commerce sites, Taobao.com, Tmall.com and 1688.com. Those sites account for about 80% of online retail purchases in China, the world leader in online shopping by the value of sales.
However, the report did not put any of Alibaba’s sites on the U.S. governments “Notorious Markets List” that flags marketplaces that routinely deal in counterfeit goods.
The U.S. agency had put Taobao, Alibaba’s biggest online shopping site on the list in 2008, but removed it in 2012, citing Alibaba’s efforts to fight counterfeiters. A new mention would damage Alibaba’s reputation in the United States, where its shares trade on the New York Stock Exchange and where it’s cultivating business relationships with retailers and entertainment companies as part of the company’s global expansion. It also would have been a setback following Alibaba’s feel-good moment last month when President Barack Obama interviewed Alibaba executive chairman Jack Ma as part of a panel discussion during international trade talks in Manila.
There had been much lobbying related to Alibaba in the weeks leading up to the release of the “notorious markets” report. The American Apparel & Footwear Association, a trade association of U.S. manufacturers, had been pressing the government to restore Alibaba’s Taobao to the list.
In response, Alibaba submitted a 22-page letter in October detailing all its steps to fight the sale of counterfeiting on Taobao, a marketplace with some 8 million sellers that is open to anyone with a Chinese ID card. The letter from Eric Pelletier, vice president for International Government Affairs at Alibaba Group, included a description of new procedures Alibaba implemented in April to close the accounts of any seller after four instances of selling goods with the trademarks of other companies and three instances of selling goods with the trademark of a single company.
Nonetheless, the report issued Thursday said the trade representative is “increasingly concerned by rights holders’ reports that Alibaba Group’s enforcement program is too slow, difficult to use, and lacks transparency.”
The office of the trade representative called for Alibaba to simplify the process for stakeholders to lodge complaints and request enforcement action, make procedures to remove counterfeit products readily available and reduce the timelines for removing counterfeit goods and levying fines against sellers.
Alibaba “is committed to the protection of intellectual property rights and the fight against counterfeiting,” the company said in an e-mailed statement. “Counterfeiting is an issue all global e-commerce companies face, and we are doing all we can to address and fight it.”
Alibaba has been at odds with the American Apparel & Footwear Association, which has been lobbying to have Alibaba’s Taobao marketplace returned to the “notorious markets” lineup for failing to stop the sale of fakes.
“We feel very validated and vindicated today,” said Juanita Duggan, president and CEO of the American Apparel & Footwear Association, said after the report was released. “It’s a complete validation and it tells us that we should continue to fight the good fight until we have some results.”
Alibaba said in a statement that it remains “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. We will continue to work with brands, governments and our sellers to maintain the integrity of our marketplaces.”
Bloomberg News contributed to this report.