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AAFA Files Complaint Against Alibaba for Counterfeit Merchandise

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The American Apparel and Footwear Association (AAFA) is fighting what it calls “rampant proliferation of counterfeit apparel and footwear” on Chinese e-commerce company Alibaba’s Taobao platform.

Taobao Marketplace provides a space for consumer-to-consumer retail by letting small businesses and individual entrepreneurs open online stores.

In letters to the U.S. Trade Representative Michael Froman and U.S. Securities and Exchange Commission (SEC) chairwoman Mary Jo White Wednesday, AAFA, which represents more than 1,000 leading brands, addressed its concern about the company’s slow progress in addressing counterfeits, stressing that online enforcement is more important than ever.

“Alibaba’s TaoBao platform is notorious as one of the biggest platforms for counterfeit goods worldwide. Our members encounter innumerable counterfeits on TaoBao every day, which result in millions of dollars of lost sales, damage to reputation, legal costs, and exhaustion of internal resources. While some have had mixed success in securing take-downs of a small percentage of these infringing products, others are frustrated at the slow and cumbersome procedures that prevent swift action. Even successes are short-lived as counterfeit products often reappear within hours or days of a take-down,” the letter noted.

USTR removed Taobao from its Special 301 Notorious Market list—which publicly calls out companies for intellectual property infringements, piracy and counterfeiting—in 2012 despite citing ongoing concerns about the widespread availability of counterfeit goods on the site, and didn’t re-list the company in the 2013 or 2014 report.

According to the AAFA, Taobao’s counterfeiting has worsened since being delisted.

In its initial public offering (IPO), Alibaba said, “Although we have adopted measures to verify the authenticity of products sold on our marketplaces and minimize potential infringement of third-party intellectual property rights through our intellectual property infringement complaint and take-down procedures, these measures may not always be successful,” a point AAFA noted as “particularly troubling.”

The letters listed out concerns AAFA members have had in working with Taobao for the last decade, including:

  • Lack of clarity or consistency in documents necessary to effectuate a take-down
  • Long delays before take-downs are executed
  • A weak punishment system
  • Lack of cooperation with local law enforcement
  • Lack of enforcement for copyrights and trademarks
  • Lack of trust by Taobao in brand owners’ take-down requests
  • Taobao acting as both judge and jury in determining whether a take-down request is justified

AAFA said for much of the past year it has been working with Alibaba representatives to address the counterfeiting concerns and though the company has accepted several of the concepts, including an updated take-down system, a “trusted reporter program” and an increased focus on physical raids and law enforcement cooperation, implementation has been sluggish or non-existent.

“The slow pace has convinced us that Alibaba is either not capable of or interested in addressing this problem,” the letter noted.

AAFA implored USTR to send a message stating that doing business as usual will earn Taobao its spot back on the Notorious Market list for the 2015 report, and asked the SEC to use its oversight authority over Alibaba to increase scrutiny of the company’s efforts to police Taobao counterfeits.

“TaoBao should not be permitted to facilitate criminal activities while profiting at the expense of legitimate U.S. businesses,” the SEC-addressed letter noted.

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