The owner of several of the world’s best-known luxury brands has filed a fresh lawsuit against Alibaba Group Holding Ltd., the latest challenge to the Chinese e-commerce giant’s assertions that it fights the sale of counterfeit goods on its platforms.
The lawsuit, filed Friday in federal court in Manhattan by Gucci, Balenciaga, Yves Saint Laurent and other brands owned by Paris-based Kering SA, indicates that the company is unsatisfied with Alibaba’s efforts to address the problem of counterfeiting of its brands.
The suit alleges that Alibaba and its associated companies “knowingly encourage, assist, and profit from the sale of counterfeits on their online platforms,” according to a copy of the filing reviewed by The Wall Street Journal.
Alibaba said the complaint had no basis and that it has a “strong track record” of helping brands fight counterfeits.
“Unfortunately, Kering Group has chosen the path of wasteful litigation instead of the path of constructive cooperation. We believe this complaint has no basis and we will fight it vigorously,” an Alibaba spokesman said.
Alibaba and Kering had said that they would work together to reduce the counterfeiting of Kering’s brands. The brands said in the latest filing that the claims made last July were now being reasserted.
Among the lawsuit’s allegations are that Alibaba permits and encourages “numerous counterfeiters” to operate on its various platforms even when the merchants openly state that they are selling fake goods.
The suit alleges that Alibaba helps counterfeiters by providing them marketing and logistical services on its various platforms, including the international wholesale trading site Alibaba.com, the global shopping site AliExpress.com and Taobao, its bazaar-like online marketplace.
Alibaba sells keywords to counterfeiters that include the names of Kering brands, allowing the merchants to attract more customers to buy fake goods that bear the brands, the lawsuit alleges. Also, it alleges, Alibaba’s search engine will suggest terms such as “cucchi” and “guchi” when “Gucci” is typed into search bars, directing customers to sellers of fake merchandise and enabling Alibaba to profit from the sales of such keywords.
The Kering brands are seeking unspecified damages based on sales or profit from the items and a court order preventing Alibaba from participating in the sale, marketing and distribution of counterfeit products, among other measures.
Such complaints underscore one risk for Alibaba, which in September raised $25 billion from global investors in the world’s largest initial public offering.
Alibaba has long grappled with allegations that its online shopping platform Taobao is full of counterfeit merchandise, which could damage the company’s reputation and image among investors and brands.
The issue was a key focus of a Chinese government report in late January that criticized Alibaba for not doing enough to address the sale of fake goods, bribery and other illegal activity on its sites. Chinese officials later removed the report in what Alibaba called a vindication.
In April, a U.S. clothing trade group accused Alibaba of tolerating fake goods on Taobao. The American Apparel and Footwear Association, which represents more than 1,000 brands, sent letters dated April 8 to U.S. securities and trade officials complaining that Alibaba had been “sluggish” in implementing measures to curb the sale of counterfeit goods on Taobao.
Alibaba said at the time that it has been working with the association on the issue since 2012 and that it is dedicated to fighting counterfeits.
Deputy U.S. Trade Representative Robert Holleyman later addressed the clothing group’s concerns, saying U.S. officials were “troubled” by reports from the association that Taobao’s measures for taking down counterfeit items were unclear and slow.
“We also believe that Taobao’s continued failure to engage with administrative and criminal enforcement authorities is cause for heightened concern,” Mr. Holleyman said in a speech at a conference the clothing association held in Washington, D.C. last month. He said trade officials would urge Taobao to “get things back on track.”
Alibaba didn’t immediately respond to a request for comment on Mr. Holleyman’s remarks.
In the past year, brands such as Burberry that have opened up on Alibaba’s Tmall site have received promises from the e-commerce giant that it will purge gray-market goods—products sold by retailers not authorized by the brands —on Tmall or do more to fight fakes on Taobao. But Alibaba hasn't made the same deal with all brands on Tmall, a marketplace of about 70,000 mostly large brands.
Meanwhile, the International AntiCounterfeiting Coalition, a group that works to protect intellectual property, negotiated an agreement with Alibaba last year to automatically remove suspected counterfeits from its largest shopping site, Taobao, and the pact is going “exceptionally well,” said coalition president Bob Barchiesi on Sunday.
The expedited takedown process, similar to what sites like eBay use, means that suspected counterfeits are now removed within two days, according to Mr. Barchiesi, instead of taking up to weeks to be removed. The process is available to about two dozen brands that have signed up but could expand, the group said.
(Published by The Wall Street Journal – May 17, 2015)