27 February 2017
Reporter: Barney Dixon

Alibaba calls for tougher counterfeit penalties

Alibaba Group has called for heavier criminal penalties against counterfeiters in China.

In a public appeal on 27 February, the ecommerce giant said that while counterfeiting has been “well documented and discussed ... the practice is still prevalent”.

“Individuals carrying out these illegal actions have been damaging the manufacturing and business environment, legitimate merchants and consumers, all of whom are victims but must bear the cost.”

Alibaba held a press conference at its headquarters in Hangzhou and claimed that China’s “ambiguous counterfeiting laws” are stopping authorities from building strong legal cases against counterfeiters, ending in a low conviction rate.

“Current regulations are no longer able to cope with the need to fight counterfeiting,” the company said in its appeal.

“Criminals can escape any legal consequence, leaving law enforcement agents and consumers feeling helpless, and society bearing the damage.”

Alibaba said its platform governance department identified 4,495 leads in counterfeiting cases in 2016. Each involved a value of goods exceeding the statutory minimum of RMB 50,000 ($7,200) required for criminal investigation.

Of these, only 1,184 of the cases were taken on by the relevant authority, which ultimately led to just 33 convictions, or 0.7 percent, according to Alibaba. Furthermore, 37 out of the 47 convicted individuals (78.7 percent) involved in counterfeiting crimes were granted probation.

Jessie Zheng, chief platform governance officer at Alibaba, said during the press conference: “The current regulations are no longer able to cope with the need to fight counterfeiting.”

“Criminals can escape any legal consequence leaving law enforcement agents and consumers feeling helpless, and society bearing the damage.”

She added: “A clear message was sent to society that there will be serious legal consequences to drunk-driving, creating an effective deterrent to this criminal behaviour. The same should apply to counterfeiters.”

Alibaba has long been criticised for not doing enough to fight counterfeiting on its ecommerce platforms. In December, the US Trade Representative returned Taobao to the Special 301 Out-of-Cycle Review of Notorious Markets, after a four-year absence.

But in recent months, Alibaba has ramped up its enforcement actions across its platforms.

In 2016, Alibaba launched Operation Cloud Sword, a joint effort between Alibaba and Chinese law enforcement that resulted in the end of 417 counterfeit production rackets.

Alibaba said in a statement that it is “unambiguously committed to continuing its efforts to fight counterfeiting, however, its ability to remove merchants and products is much less productive in the long term without the support of more legally enforceable sanctions.”

Geoffrey Potter, chair of the anti-counterfeiting practice at Patterson Belknap Webb & Tyler, said Alibaba should be "commended for joining the ranks of brand owners that for many years have been urging the Chinese government to bring more criminal cases against counterfeiters and to incarcerate convicted counterfeiters".

"The Chinese bring far too few cases given the tremendous scale of the problem and far too often the only penalty is the confiscation of counterfeits or a modest fine."

But he also pointed out: "Alibaba cannot and should not delegate to the government or to brand owners its responsibility to police its own marketplaces. Only Alibaba has the ability to control the markets it owns and operates.”

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