Fighting fakes: Ahead of IPO, Alibaba takes a tougher line

Fighting fakes: Ahead of IPO, Alibaba takes a tougher line

BEIJING/SAN FRANCISCO - Alibaba is taking a tougher line against counterfeit items sold on its online marketplaces as the Chinese e-commerce giant heads towards a US stock listing that could be the world's biggest technology company IPO.

Some security experts say the Chinese group's stricter standards on piracy and fake goods may even surpass those of Inc and eBay Inc.

In its IPO filing last week, Alibaba Group Holding Ltd said the perception that its sites are cluttered with counterfeit items could hurt its ability to win over customers, investors and US retail partners. The group, founded by entrepreneur Jack Ma 15 years ago, has stepped up efforts to clean house over recent years.

For example, Eduardo De Arkos last summer stumbled across a supplier attempting to make a counterfeit version of a floating pool toy his company made. Two days after contacting Alibaba, the supplier of the counterfeit had been removed.

"They reached out to the supplier and told them they couldn't do that," said De Arkos, CEO of US company Innovative Watersports that has sourced through Alibaba since 2012. "That's peace of mind a lot of people need when manufacturing overseas."

Alibaba's forceful response is a far cry from a few years back when its businesses were listed on the US Trade Representative's list of "notorious markets" for intellectual property (IP) infringement.

"This is a much more aggressive stance than I've seen taken by US marketplaces, including eBay," said Richard Last, a professor of retail at the University of North Texas and a former J.C. Penney executive.


But, given China's reputation for churning out fake goods, Alibaba still has much to do to convince the world it's not a hub for piracy and knock-offs.

China and Hong Kong accounted for 93 per cent of the value of IP infringing products seized by US Customs and Border Protection in fiscal year 2013, according to a US government report. The previous year, China accounted for 72 per cent.

This has deterred some US retailers from opening stores on Alibaba's Taobao and Tmall marketplaces, experts said. To go around that problem, Alibaba will launch a separate service with Amazon rival ShopRunner to sell items from more than 100 US retailers to Chinese consumers.

In its IPO filing, Alibaba acknowledged it could be exposed to lawsuits. "Although we have adopted measures to verify the authenticity of products sold on our marketplaces and minimise potential infringement of third-party intellectual property rights ... these measures may not always be successful," it warned. "We may be subject to allegations and lawsuits claiming that items listed on our marketplaces are pirated, counterfeit or illegal."

Listing in the United States may expose Alibaba to the kind of lawsuits over selling counterfeit goods that eBay and Amazon have fought for years - a magnet for litigious companies that don't now have to fight Alibaba on Chinese turf.

"I'm sure people will have a go," said Chris Bailey, a China-based executive at IP law firm Rouse. "The value of suing someone in the US if you win is greater than China."

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