The case between Kering and Alibaba is still underway in federal court in New York and things are heating up. As of this week, U.S. District Judge Richard Sullivan has imposed sanctions upon the Bank of China Ltd. for refusing to turn over account information of Chinese entities accused of selling counterfeit luxury goods, and now is imposing a $50,000 daily fine until the bank turns over the required information, per Reuters.
According to Judge Sullivan, "the bank must pay a fine for withholding its records that involve Chinese entities that were sued in 2010 by subsidiaries of luxury goods conglomerate Kering SA, including Gucci Group, Bottega Veneta and Yves Saint Laurent," as first reported by Reuters.
The Kering-owned fashion companies subpoenaed the Bank of China, which is not a party to the lawsuit, seeking records of the alleged counterfeit sellers' accounts, but the state-owned bank argued that it could not turn over the records without violating Chinese privacy law. The bank also said the New York court had no jurisdiction over it.
Bank of China's attorney, Laura Hall, said at Tuesday's hearing that the bank had no choice but to refuse to turn over the records and be held in contempt so that it would have a right to appeal to the 2nd U.S. Circuit Court of Appeals. "We're bound by conflicting systems of law," she said. Sullivan, however, said the bank seemed to be prioritizing Chinese law. "What desire is there to comply with U.S. law?" he asked. "It doesn't seem terribly deep."
The plaintiffs asked Sullivan either to order the bank to pay $12 million they said they lost due to the counterfeiters, or to order it to pay a daily fine until it turns over the records. Sullivan said he would consider both options, but was leaning toward the latter.
The dispute is part of a larger conflict between China's opaque, state-dominated economic system and the disclosure-based U.S. regulatory regime. Clashes have grown more frequent as Chinese companies have sought to expand overseas or tap international capital by listing in the United States.