Alibaba Sues Sellers of Fake Swarovski Watches in Crackdown
by Selina Wang
January 4, 2017
Alibaba Group Holding Ltd. sued two vendors it said used the company’s Taobao website to sell counterfeit Swarovski watches, just weeks after the site was labeled a haven for knockoffs by U.S. regulators.
The lawsuit is the first legal action taken by an e-commerce site in China against sellers of counterfeit goods and Alibaba seeks 1.4 million yuan ($202,000) in damages, the company said Wednesday in a statement. The case filed with the Shenzhen Longgang District People’s Court is part of Alibaba’s larger efforts to root out counterfeit goods on its shopping sites. The company said it intends to take similar legal action against other vendors.
“We want to mete out to counterfeiters the punishment they deserve in order to protect brand owners,” Zheng Junfang, chief platform governance officer of Alibaba Group, said in the statement. “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 shares rose 2.2 percent to $90.51 at the close in New York. The stock has gained 15 percent in the past year.
Despite Alibaba’s effort to rid its sites of fake goods, the U.S. Office of the Trade Representative last month named Taobao a “notorious” market, citing an unacceptably high level of reported counterfeiting and piracy. Alibaba said it has tightened policies against copyright infringement and made it easier for brands to request fakes be removed. It took down 380 million product listings and closed about 180,000 stores on its Taobao platform in the 12 months to August, the company said in a letter to the U.S. trade office.
The company was disappointed by the U.S. decision, arguing that it has worked diligently to combat fakes. The notorious market listing harms Alibaba’s ability to expand overseas, where it needs to build relationships with retailers, brands and entertainment companies.
Amazon.com Inc. has also stepped up efforts to fight counterfeit goods to boost credibility. In November, Seattle-based Amazon filed two lawsuits against vendors allegedly selling fake items through its online marketplace. The lawsuit detailed how Amazon is trying to fight counterfeits, which includes spending “tens of millions” of dollars each year on technology to detect bad actors and potentially fake products.
Similar to Amazon, Alibaba said it’s using technology such as machine learning and data analysis to identify and take down fakes. The company said it detected a Taobao merchant suspected of selling counterfeit goods and provided the information to the Shenzhen Luohu District police, who raided the seller on Aug. 10 and confiscated more than 125 counterfeit Swarovski watches. Another fake Swarovski seller on Taobao was found during the process.
Last month, Alibaba sued Shatui.com, which allegedly links merchants with people willing to falsify purchases and write positive comments that can drive up sellers’ rankings on Alibaba.
The company said that from April to July last year it provided leads to Chinese authorities on counterfeiting that helped seize fake goods valued at more than 1.4 billion yuan, spur the arrest of 332 suspects and shut down 417 production lines.
(An earlier version of this story corrected the currency conversion in the second paragraph.)