China's Alibaba Group Holding has sued two of the sellers of counterfeit Swarovski watches on its Taobao e-commerce platform, in what the Chinese e-commerce giant is declaring as "breaking new ground" in China. The lawsuit, which was filed in Shenzhen Longgang People’s District Court against Liu Huajun and Wang Shenyi, marks Alibaba's first legal action against counterfeiters amid persistent allegations that fake goods are widely available on its sites.
Alibaba said the legal action, in which Alibaba claims that it is entitled to 1.4 million yuan ($201,671) in damages for breach of contract and violation of goodwill, will not be its last, and it has already compiled a list of counterfeiters against whom it will take similar action.
The news of the lawsuit comes less than two weeks after the United States Trade Representative re-added Taobao to its "Notorious Marketplaces" list, an annual release that identifies the online and physical markets known for the sale of counterfeit and intellectual property right-violating goods. Alibaba managed to escape placement on the list four years ago and has not returned to it until now.
"We want to mete out to counterfeiters the punishment they deserve in order to protect brand owners," the statement quoted Zheng Junfang, Chief Platform Governance Officer of Alibaba Group, as saying. "We will bring the full force of the law to bear on these counterfeiters so as to deter others from engaging in this crime wherever they are."
Alibaba said in a statement released in its Alizila news site that it identified the counterfeiters after detecting a merchant selling fake Swarovski watches on Taobao, China's most popular consumer-to-consumer online shopping platform. Its counsel then purchased one of the watches, which was later confirmed by Swarovski to be fake. A second counterfeit Swarovski seller on Taobao was also identified during the action.
Breaking New Ground?
Unsurprisingly, the article that Alibaba released on its own news site in connection with the recently-filed lawsuits is more self-praising than contextually complete, which very well may suggest that such litigation is the latest in Alibaba's pattern of failing to adequately fight fakes on its site and yet, talking a big game on the subject. Alibaba chairman Jack Ma, after all, has a history of declaring to the media how seriously his company's stance is on counterfeits and then failing to back that those assertions with solid, wide-sweeping action.
As its article, entitled, "Alibaba Breaks New Legal Ground in China, Sues Alleged Counterfeit Sellers," states: "Alibaba Group said Wednesday it is suing two vendors using the company’s Taobao online-shopping website to sell fake Swarovski watches, the first-ever instance of an e-commerce platform taking a counterfeiter to court in China."
This is interesting. While this very well may be the first time an e-commerce marketplace has initiated legal action against individual sellers in China, it is worth noting that it is an increasingly common tactic among the world's other big online marketplaces and luxury brands.
Amazon, for instance, recently filed counterfeit-centric suits against individual sellers of fakes. The lawsuits, which were filed in a Washington state court in November, claim that more than 20 companies and individuals were involved in selling counterfeit exercise and furniture moving equipment on Amazon's site.
In 2013, Louis Vuitton got the ball rolling for brands when it filed suit in a Southern Florida federal court against individuals selling fakes on iOffer. More recently, Lacoste filed suit against an array of iOffer sellers; Gucci filed its own suits against iOffer sellers; and both Chanel and Adidas initiated litigation against a handful of individual Amazon.com and iOffer sellers for offering counterfeit Chanel jewelry and iPhone cases, and fake Adidas wares.
With this in mind, one could argue that despite its claims, Alibaba's new lawsuits are serving far less to "break new ground" legally and in its purported fight against fakes than they are functioning to keep up appearances (and thus, avoid bad press and any stock price-related implications) by following in the footsteps of similarly situated online sites.
While it is somewhat unfair to compare China-based Alibaba with American giant, Amazon - namely due to the size of the Alibaba operation (Two figures: Sales on the Taobao marketplaces make up more than 80% of all online purchases in China, and as of 2014, TaoBao boasts 8 million active sellers), it is not unfair to expect Alibaba to do more. As consider the Chinese attitude towards fakes. As Bloomberg View's Adam Minter notes: "As a China-based company, Alibaba has greater exposure to counterfeiting than Amazon does, given that Chinese consumers are generally quite price-sensitive and less averse to purchasing fakes."
So where does that leave Alibaba? Minter, for one, thinks, "[Alibaba] isn't helpless. For one thing, it could simplify its procedures for brand owners to report instances of counterfeiting. It could also use its global profile and political leverage to push the government to prosecute more counterfeiters.Although that might be risky for Alibaba, the alternative is to resign itself to a reputation befitting a notorious flea market -- not one of the world's most influential e-commerce companies. Given the choice, Alibaba shouldn't hesitate to prove it's better than the counterfeiters."
As for Alibaba's take on its inclusion on the U.S. trade Representative's "Notorious Markets" list, Alibaba's article states: "Alibaba executives say the decision was driven by politics in a U.S. election year, citing the company’s growing track record for anti-counterfeit work and its multifaceted approach to finding and removing listings for fakes from its shopping websites."