Alibaba Faces Backlash Over Promises on Counterfeits -- Update
June 15 2016 - 2:22PM
Dow Jones News
By Kathy Chu
Alibaba Group Holding Ltd. is coming under fire again from
global brands for rampant counterfeits on its shopping platforms,
after co-founder Jack Ma cast the Chinese e-commerce giant as the
global leader in the battle against fake goods.
Alibaba is the "world's leading fighter on counterfeits," Mr. Ma
said at an investor conference Tuesday, noting that the company has
technology to track down sellers and buyers of counterfeits on its
platforms. "We can solve the [fake] problem better than any
government, any organization, any person in the world."
Mr. Ma said that part of the problem is that counterfeiters
increasingly are taking to the internet to distribute their fake
goods, which can be "better quality" and cheaper than authentic
branded goods. Alibaba later said that Mr. Ma meant that Chinese
brands can sometimes be better quality than famous names.
The remarks are rankling global brands, which complain that
counterfeit goods remain a significant problem on Alibaba's sites
despite years of promises by the e-commerce company to crack down
on sellers of infringing goods.
"For Jack Ma to say what he did requires both hubris and
chutzpah," said Bharat Dube, chief executive of Strategic IP
Information, which works with brands including L'Occitane en
Provence to remove counterfeits online.
Mr. Dube called Alibaba's efforts to address counterfeits thus
far "superficial," and said the e-commerce giant could do a much
better job of ferreting out fakes on its platforms.
Alibaba has said it would spare no expense in fighting
counterfeits.
NetNames, which tracks counterfeits online for brands such as
Inditex and Billabong, said Wednesday that generally the clients it
represents estimate 20% to 80% of the branded goods on Taobao are
fakes.
An Alibaba spokesman said Wednesday that the estimate of fakes
is a "wild, inaccurate guess," and added that "there is no
methodology to support a claim like this."
The latest controversy comes a month after a prominent
anticounterfeiting group, the International Anticounterfeiting
Coalition, suspended a newly created category under which Alibaba
was admitted as a member, following questions from brands about
Alibaba's sincerity in fighting fakes.
Fashion brand Michael Kors, in a letter to the IACC board, said
that the group's admission of Alibaba provides "cover to our most
dangerous and damaging adversary."
As Chinese authorities get ready to scrutinize fake goods
online, Alibaba has promised wholesale changes to how it deals with
infringing products, including shifting the burden of proof to
sellers on its platforms to show that their goods are
authentic.
Mr. Ma said Alibaba has more than 2,000 people working to rid
its platforms of counterfeit goods, but the substantial size of the
platforms makes the task challenging.
For its fiscal year ended March 31, Alibaba said its China
marketplaces handled $485 billion in merchandise volume, which
analysts estimate is more than e-commerce sites Amazon.com and eBay
combined.
"Brands are frustrated that Jack Ma and others are standing up
and saying that they're investing all this money, but they don't
see an impact," said Haydn Simpson, commercial director at
NetNames, the counterfeit tracker.
While Alibaba is imposing stiffer penalties on counterfeit-goods
sellers and turning to advanced technology to fight fakes, there is
"certainly room for improvement," said R.J. Hottovy, an equity
strategist with Morningstar, which rates Alibaba's stock three
stars, effectively a neutral.
Some analysts also have questioned how much of Alibaba's volume
comes from fake-goods sales or fake transactions, which involve
sellers paying people to place fictitious orders to boost their
standing on Alibaba's site. The concern is that such questionable
transactions could drive customer traffic that in turn could profit
Alibaba.
Alibaba has said that it uses sophisticated tools to identify
and exclude fake transactions. Mr. Ma, at the investors' conference
Tuesday, also said the company's business could be hurt rather than
helped by fake-goods sales.
"Every fake product we sell, we are losing five customers," he
said. "We are the victims of that." He didn't explain his reasoning
for that statement.
--Eva Dou contributed to this article.
Write to Kathy Chu at kathy.chu@wsj.com
(END) Dow Jones Newswires
June 15, 2016 14:07 ET (18:07 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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