Alibaba Warned by U.S. to Combat Sales of Counterfeit Products

23 Dec 2015 | Author: | No comments yet »

Alibaba Group Holding Ltd Slips as US Trade Office Raises Eyebrows over Its Platforms.

On Thursday, the Trade Representative stated that there are growing concerns pertaining to pirated items’ sale on Alibaba Group Holding Ltd (NYSE:BABA) shopping website, reported Reuters. Trade Representative said Alibaba should intensify its efforts to work with companies to eliminate fakes on platforms like Taobao, the company’s massive online bazaar. “Brand owners continue to report that Alibaba platforms, particularly Taobao, are used to sell large quantities of counterfeit goods,” the report said.

It also said brand owners continued to complain even after Alibaba enacted new measures for getting fakes off its platforms. “Despite these new procedures, USTR is increasingly concerned by rights holders’ reports that Alibaba Group’s enforcement program is too slow, difficult to use, and lacks transparency.” The agency said it wouldn’t add Alibaba to its list of notorious markets for fakes, “but it encourages the company to enhance cooperation with all stakeholders to address ongoing complaints.” In a statement, Alibaba said it is committed to fighting counterfeits. “Counterfeiting is an issue all global e-commerce companies face, and we are doing all we can to address and fight it,” it said. The USTR released its 2015 Out-of-Cycle Notorious Markets report Thursday, which highlights select online and physical marketplaces that reportedly engage in and facilitate counterfeit activity. Alibaba’s two famous shopping websites— and Taobao Marketplace—were put on piracy blacklist in 2008, as they were linked to intellectual property infringement. After the company made several efforts to get rid of the fake products and sham sellers, and Taobao were removed from the blacklist in 2011 and 2012, respectively. For the past three years, the company has been working to clean its website; however, the Trade office is still unclear about the efforts made to ensure copyright standards.

Duggan said the AAFA had been frustrated with Alibaba’s efforts over the years and that a letter her organization sent to Alibaba Executive Chairman Jack Ma in July had gone unanswered. “We hope Alibaba responds to this report and uses its position as one of the largest technology companies in the world to lead the way and eradicate counterfeits from its sites. So far this year, the stock lost nearly 20%, as the company’s reputation was seriously damaged due to the fabricated goods offered on its platforms. In May, Gucci sued the online retailer for “counterfeit goods.” Other brands, such as Puma and Yves Saint Laurent, have also accused Alibaba for making it possible for sellers to offer deceptive goods. Volkswagen AG (ADR) (OTCMKTS:VLKAY) has named American attorney Kenneth Feinberg in charge of handling the financial claims raised on the auto giant after the diesel emission scandal. Feinberg has prior experience of handling high-profile scandals such as General Motors Company’s (NYSE:GM) ignition switch defect that caused over 120 deaths, and BP Plc’s 2010 oil spill in the Gulf of Mexico.

Apart from facing a class action lawsuit, the company would have to incur nearly $9.4 billion in vehicles recalls, according to Bloomberg Intelligence. It also revealed strong sales of over 13 million units in the opening weekend following launch, curiously failing to report the number of orders in the first 24 hours. Moreover, robust opening weekend sales were said to have come on the back of iPhone Upgrade Program and China’s inclusion in the list of launch countries. These include higher iPhone average selling prices, iPad Pro benefiting margins, potential for an iPhone refresh that could target new price points, higher gross-margins during the “s” cycle and strong share buybacks.

Recently, market research firms such as IDC have said that the worldwide smartphone market is fast saturating, as developed markets especially continue to mature across the globe. In face of these concerns, Apple must rely on replacement rates and switchers from Android to continue an upward growth trajectory, apart from the growth driven by upgrade cycles.

Even though the region was recently hit with an economic downturn, revenues from China grew 99% year-over-year (YoY) in Apple’s fourth quarter fiscal year 2015 (4QFY15). Current data indicators suggest that the Chinese economy is showing signs of recovery, with National Bureau of Statistics data suggesting that industrial activity rose to a five-month high of 6.2% in November.

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