From the Fake Goods’ Haven to Counterfeiters’ Number One Enemy

09/10/2019

E-commerce platforms in the US are lagging behind Alibaba when it comes to preventing counterfeit activities. And it reflects how China is moving away from being the fake goods’ haven to become counterfeiters’ new enemy

 

Unlike US major marketplaces, the Chinese e-commerce giant Alibaba has recently given a significant boost to the fight against online counterfeiting, placing itself at the forefront of the battle. And it is not alone. “I find it shocking that US counterparts are so far behind,” said Doug Collins, a Republican congressman in the US and ranking member of the House Judiciary Committee.

Last July, at the hearing of the House Judiciary Committee’s Subcommittee on Courts, Intellectual Property, and the Internet, Chinese e-commerce platforms were praised to commit themselves much further to fighting against counterfeiting compared to US ones such as Amazon, eBay, and Walmart.

“We learned Alibaba’s anti-counterfeiting policies and programs are significantly more effective than any of their US counterparts,” said Doug Collins at the round table with both brand owners and platforms. A statement confirmed by the International Anti-Counterfeiting Coalition’s (IACC) president Rober Barchiesi.

Alibaba’s annual report on intellectual property rights (IPR) protection has indeed revealed that 96% of listings for counterfeit items on its platforms are now deleted before transactions even take place. A record that the US peers have not reached yet.

 

fight against fake goods - alibaba - cifnews

© 123rf. Applying the latest technologies such as Blockchain and big data, Alibaba is now able to proactively detect and remove illegal listings on its platforms more efficiently than the US peers.

 

Already in 2017, the Hangzhou-based giant launched the Alibaba Anti-Counterfeiting Association (AACA), thanks to which the company confiscated fake goods worth $700 million that year, compared to $438 million worth of goods reported and stopped in 2016.

AACA’s mission is to work with brands and stakeholders to remove counterfeit product listings on the group’s platforms with the help of new technologies and data-driven initiatives such as the use of artificial intelligence (AI) to identify and take down suspicious listings.

Last year, Alibaba referred to 1,634 IPR violations in China, which led to the arrest of 1,953 criminal suspects and the closure of 1,542 facilities. Moreover, an impressive number of insertions were removed, whose 96% occurred before a single sale took place.

As the firm deployed more sophisticated technology to track and intercept counterfeit merchandise, there were much fewer suspected fake products found on its online shopping platforms last year.

 

According to Alibaba’s latest IPR Protection Annual Report released in May, its platforms experienced a 67% year-on-year decline in potentially problematic listings in 2018.

 

Alibaba, which operates the popular Taobao and Tmall e-commerce marketplaces in China, has always had problems with counterfeiters trying to sell on its online platforms. Therefore, it has been under scrutiny since 2015 when brands accused the company of allowing the proliferation of fake goods on its channels.

In 2016, the United States Trade Representative (USTR) thus put Taobao on its blacklist, which included the platform for two years in a row. According to the Chinese giant, it is an “uninformed” judgment that neglects the company’s latest efforts and results. Even Alibaba’s membership in the IACC was suspended in 2016, following the protest of brands like Gucci and Michael Kors.

In the same year, the e-commerce provider thus declared a zero-tolerance policy towards counterfeits and created a new 300-person team to ramp up the fight against fake goods in the Chinese market. The number of members of its anti-counterfeit alliance has recently tripled and it now includes large luxury brands such as Valentino, Estée Lauder, and Shiseido.

 

pinduoduo vs alibaba - fake goods - cifnews

© 123rf. Accused of allowing the proliferation of fake goods on their platforms, both Taobao and Pinduoduo have been included in the US Trade Representative’s “notorious markets” list.

 

But Alibaba is not the only Asian e-commerce in the USTR’s “notorious markets” list. It also includes the social commerce app Pinduoduo and the Southeast Asian platform Shopee.

In August 2018, the State Administration for Market Regulation (SAMR) investigated Pinduoduo and then announced it should better regulate the activities of third-party vendors. The platform thus removed over 10 million fake items from its site and blocked more than 40 million product links suspected of copyright violations.

Currently, Pinduoduo is working with over 400 luxury brands to fight counterfeiters and has created a $20 million account to refund consumers who were unwittingly sold fake products.

In this delicate period for Chinese e-commerce, even Xiaohongshu has been accused of selling fakes. Moreover, last March, local media reported the details of a shady industrial chain in which an alleged false army of auditors was being paid to post fraudulent opinions and increase the number of fans.

Today, the company is, therefore, trying to crack down on fraud by using technologies like AI and machine learning, in addition to humans to detect the violation of the rules. Xiaohongshu has also launched a new revision system called Xiaohongxin, or Little Red Heart in English, which allows only verified users to rate the products.

 

According to the World Trade Organization, counterfeit goods represent between 5 and 7% of the world’s trade, worth about $600 billion a year. And the Middle Kingdom is regarded as the leader of this market.

 

However, although counterfeiters have leveraged e-commerce for a long time, China’s new e-commerce law, which took effect on January 1st, now aims to discourage counterfeiting through heavier fines. The law does not only place more responsibility on digital platforms to remove sellers of fake goods but it also addresses false-advertising, consumer protection, data protection, and cybersecurity.

This new law targets both e-commerce platform operators like Taobao and the merchants who sell goods on these kinds of marketplaces. However, it also prosecutes vendors with their own websites or who sell on social media. Before January, only individual merchants were liable but now the law makes platform operators jointly liable with the vendors selling fake goods and could fine them up to $290,000 for the property infringement.

The Dragon is, therefore, addressing the problem of counterfeiting very seriously. At a press conference, Zhang Mao, head of the SAMR, said they “will make producers and sellers of counterfeit products pay the price until failure” while the country will push for companies’ self-discipline and feed a social credit system. The aim is to gradually reduce the number of counterfeit products and alleviate people’s concerns, he added.

Moreover, China is still taking further steps to improve national legislation protecting IPR. On April 23, some changes to the Chinese trademark law were approved with the aim to fight against malicious trademark deposits and to increase compensation for damages resulting from counterfeiting.

 

china's fight on fake goods - beijing - cifnews

© Unsplash. Although counterfeit products in China represent a massive industry, recent government regulations and crackdowns by e-commerce platforms are changing things.

 

Nevertheless, the high presence of fake goods in China and the consumers’ fear of being scammed have led to the emergence of a new sector, that of the product authentication. Chinese new apps such as Zhiduoshao and Isheyipai now offer to verify the authenticity of luxury goods by checking the photos that users upload.

Fred Mostert, President of the Luxury Law Alliance, said that in addition to constructive collaboration, technological progress will be crucial for effective brand protection online, especially since piracy constantly updates the tech tools it uses to manufacture counterfeit goods.

 

Applying the latest technologies such as Blockchain and big data, Alibaba is now able to proactively detect and remove illegal listings on the platform quickly and efficiently.

 

Alibaba has launched the use of a counterfeit-identification system that analyses not only data and information related to goods and product listings but also data related to merchants. Algorithms behind this “Full View of Merchants” system search for unusual transactions and certain anomalous traffic data, which trigger an additional investigation.

Although Taobao has long been considered the “far west” of fake goods in China, IACC has been “greatly pleased by the progress Alibaba has shown during the past five years.” The company has been responsive to concerns from stakeholders and proactively enforced measures while using platform data to work with law enforcement to tackle counterfeiting offline.

However, the Hangzhou giant is just the mirror of the country’s fight against counterfeiters. A fight that not only reveals China’s intention to adhere to the world’s IPR protection standards but that also puts the country’s tech progress into play. And once again, overseas competitors are lagging behind the Dragon.

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