Gucci sues Alibaba over ‘counterfeit goods’

18 May 2015 | Author: | No comments yet »

Alibaba Has Fashionistas Furious, But ‘Smart Money’ Not Afraid Of A Little Lawsuit.

News that luxury goods brands are again suing Alibaba for counterfeits sold on its e-commerce platforms is evidence that the Chinese giant is moving too slowly to clean up counterfeits for Western brands’ liking.

Paris-based Kering PPRUY 0.53% , the owner of Gucci and Yves Saint Laurent among others, said in the lawsuit that Alibaba’s search engines steered customers who input keywords like cucci to fake products and counterfeit Gucci bags selling on Alibaba’s platforms for $2 to $5, compared to the listed $795 price. The company has been ordered to shut down the local branch of Taobao, its business-to-consumer marketplace, within six months and pay a fine of NTD$240,000 (about US$7,888). The current situation is similar to Alibaba’s ongoing negotiations with Taiwan’s Investment Commission over the legality of Alibaba.com’s operations in the country.

Laurent and other high end fashionista firms sued Alibaba Group Holding on Friday, arguing the online shopping giant had knowingly made it possible for counterfeiters to sell their products on their website. What is damaging is the perception that Alibaba has made so little progress in nearly a year that the brands decided rather than continuing discussions, they would sue—again. As part of the lawsuit withdrawal last year, Alibaba and Kering announced in a statement “constructive dialogue” and had “agreed to work together in good faith through the normal business process on ways to enhance intellectual property protection.” Kering’s new complaint in U.S. federal court at best indicates a breakdown of dialogue; at worst, it shows Alibaba is failing to strictly police counterfeits and fakes products on its platforms. We believe this complaint has no basis and we will fight it vigorously.” The lawsuit cited a fake Gucci handbag on the website for just $2 each by a Chinese merchant looking to sell in bulk quantities of 2,000 or more. In January, China’s State Administration for Industry And Commerce (SAIC) accused Alibaba of selling fake goods and misleading customers on its biggest shopping platform Taobao.com.

In prepared statement, a Taobao Marketplace representative said “We are having positive ongoing discussions with the relevant Taiwanese authorities and we hope to find a suitable way forward in order to continue to serve the needs of Taiwan consumers and merchants.” Alibaba has not disclosed how much revenue it makes from Taiwan, and consumers there would still be able to use its China-based sites even if their local versions shut down. In March, Alibaba announced the creation of NTD$10 billion (US$316 million) fund for entrepreneurs in Taiwan who want to sell merchandise on its sites. The Kering suit in the coming months may provide a window for investors who lopped $30 billion off Alibaba’s public market value earlier this year when SAIC released a report criticizing Alibaba’s handling of counterfeit goods, whether Alibaba is now fighting fakes vigorously enough.

At an event in Taipei, Alibaba founder Jack Ma said that investments will focus on food and agricultural products, which are an crucial vertical for Chinese e-commerce companies. As the problems facing the local operations of Taobao.com and Alibaba.com underscore, however, working with Taiwanese merchants might not be as straightforward as Alibaba would like, thanks to strict investment laws for mainland Chinese businesses that were put in place due to the tense political and economic relationship between the two countries.

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