Alibaba’s Fight Against Counterfeits: Where Are We Now?

Last week, Glossy reported a bit of good news for luxury brands and resellers around the world: 2018 saw a drop in counterfeit goods among resellers, according to new data from luxury goods authentication platform Entrupy. Things are looking similarly positive for a platform that has faced significant challenges with counterfeit sellers as luxury retailers looked to international online growth — China’s Alibaba.

Just three years ago, Alibaba made headlines for its suspension from the International Anti-Counterfeiting Coalition (IACC), marking one of the major turning points in the company’s rocky journey to win the trust of the luxury industry and its consumers. Alibaba would go on the following year to form its own anti-counterfeiting alliance, which has ballooned from 30 members at launch to 121 brands, including big-name luxury labels like Louis Vuitton, Tapestry (Coach), Michael Kors, and Prada, as well as valuable consumer brands like Disney, Apple, and Starbucks.

It seems this alliance is paying off. Now, Alibaba is boasting a 70 percent year-on-year drop in listings removed from its e-commerce platform in response to consumer complaints of the product being counterfeit.

Alibaba’s recently released Intellectual Property Rights Report, which covers their efforts for 2018, trumpets “record results”, including closing more than 1,500 offline facilities manufacturing counterfeit goods, contributing to an estimated total value of $1.2 billion. Online, approximately 96 percent of listings featuring counterfeit products were removed before any items were sold, while IP rights holder takedown requests dropped by 32 percent from the previous year, according to the company.

Notably, these announcements came not long after President Trump signed a memorandum in late April pledging to curb the sale of counterfeit goods online from Alibaba, U.S. e-commerce giant Amazon, and a number of other sites. To that Alibaba responded in a statement, “We welcome this new initiative and the attention it brings to the global fight against counterfeiting.” The company has “developed best-in-class systems to protect [intellectual property] and battle the scourge of counterfeiting,” and looks forward to “further advancing the working relationship and cooperation with the US federal agencies mentioned in today’s order, as well as with our global commerce peers.”

That same month, Taobao landed on the U.S. Trade Representative (USTR) notorious markets list for the third year in a row, joining the likes of FMCG e-commerce newcomer Pinduoduo. USTR released a report with its reasoning, citing that, “Although Alibaba has taken some steps to curb the offer and sale of infringing products, right holders, particularly SMEs, continue to report high volumes of infringing products and problems with using takedown procedures. Serious concerns remain about Alibaba’s responsiveness to SMEs, who continue to express concerns over ineffective takedown procedures, burdensome enrollment requirements for a Good Faith program that reduces the evidentiary burden for takedown requests, and Alibaba’s delays in responding to SMEs.”

Alibaba does address its Good Faith program in its latest report, claiming that in 2018, the “’Good Faith’ takedown program, which makes it easier for rights holders with a strong track record of successful takedown requests to submit those requests, moved to automatic membership for qualified brands and further relaxed the requirements necessary to join. The two improvements helped to grow the program’s membership 44% year-on-year as of October 2018.”

April has been a significant month for addressing IP protection issues. Despite its inclusion on USTR’s list, the e-commerce group received recognition at the Luxury Law Summit, whose participants include executives from Gucci, Chanel, and Louis Vuitton, all of whom sell online through the high-end channel on Alibaba’s Tmall platform. Matthew Bassiur, Alibaba’s vice president of global IP enforcement, was awarded the Luxury Law Innovator in Intellectual Property Rights and Technology, presented by the Luxury Law Alliance’s president, Fred Mostert, who said Alibaba “has significantly improved its standing within the international community,” and that “Alibaba over the past three years has gone from being criticized for its efforts in IP protection to being viewed as a leader and innovator in the field.”

At the summit, American Apparel & Footwear president and CEO Rick Helfenbein also hailed Alibaba’s efforts, saying the company “has grabbed the flag on IPR protection and is running with it.”

How did we get here? Alibaba’s big data and artificial intelligence capabilities, for which the company is well known for, have proved to be a boon for its crackdown efforts, buoyed by a growth in confidence and participation from international brands and Chinese law enforcement. The group’s IP protection alliance now has members spread across 16 countries and regions. According to Bassiur, the group employs learning algorithms to detect counterfeit goods, so that “the more the brand holders are contributing to the enforcement of their own trademarks, the better the algorithms will understand what might be infringing their rights.”

In a 2017 report from Fortune, Alibaba revealed it had the capability to “scan more than 10 million product listings a day” and put an end to around 675 counterfeit operations in an approximate four-month period from August 2016 to January 2017. Meanwhile, in all of 2018, the group’s efforts led to the arrest of more than 1,900 counterfeiting suspects, according to state-run media outlet China Daily.

“Normally in other countries when we work with the platforms, we experience a reactive form of dealing with counterfeit issues, whereas what we experience here, through our cooperation with Alibaba, is a very proactive way dealing with counterfeits, “Jesper Herold Halle, commercial consul at the Danish Consulate General in Shanghai, said at the Luxury Law Summit as reported by China Daily.

For both the luxury and the FMCG industries, the counterfeit battle is far from over. In January 2018, Alibaba suggested that many of the counterfeiters on its platform moved to platforms that are less strict like Pinduoduo, which has recently come under fire for hosting vendors with fake and counterfeit goods. Others have moved to less official sales channels like WeChat to peddle counterfeits, and to complicate matters further, many vendors are increasingly boasting products that look practically identical to the real thing, thanks to access to factories that also manufacture the authentic products.

For more on Alibaba’s IP protection battle, see it’s full report here:

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