Alibaba slams “ridiculous” claims in Notorious Markets relisting

Chinese e-commerce giant Alibaba has accused the US of treating the online marketplace as a “scapegoat… to win points in a highly politicised environment” following the news that Taobao has been relisted as a notorious market for selling counterfeit goods.

In several strongly worded statements, Alibaba rebuked the US Trade Representative (USTR) for relisting Taobao in its 2017 Special 301 Out-of-Cycle Review of Notorious Markets, the second year in a row it has been named. In a damning response, the firm claimed the allegations of intellectual property infringement levelled at it did not reflect its efforts to crackdown on counterfeits and called the relisting political point scoring in the US’ bilateral dispute with China.

“As a result of the rise of trade protectionism, Alibaba has been turned into a scapegoat by the USTR to win points in a highly politicised environment and their actions should be recognised for what they are,” an Alibaba spokesperson said in a statement. “The USTR’s actions made it clear that the Notorious Markets List, which only targets non-US marketplaces, is not about intellectual property protection, but just another instrument to achieve the US Government’s geopolitical objectives.”

This year’s USTR’s Notorious Markets list names Taobao alongside 24 other online markets and 18 physical markets “around the world that are reported to be engaging in and facilitating substantial copyright, piracy and trademark counterfeiting”, which undermines the innovation and intellectual property rights of US IPR owners in foreign markets, the USTR said in a statement.

“Marketplaces worldwide that contribute to illicit trade cause severe harm to the American economy, innovation, and workers,” said USTR ambassador Robert Lighthizer. “The Trump Administration is committed to holding intellectual property right violators accountable and intensifying efforts to combat counterfeiting and piracy.”

The USTR estimates that imports of counterfeit and pirated products account for 2.5 per cent of global imports, with a value of nearly half a trillion dollars.

Taobao was not named on the Notorious Markets list between 2012 and 2015 but was added in 2016 after calls from 18 trade bodies emphasising “the enormous number of counterfeits that persist on Alibaba platforms”.

The continual criticism and pressure on its reputation has pushed the online marketplace to action, forcing it to introduce a number of measures in an attempt to crackdown on counterfeits. While the American Apparel & Footwear Association, a former critic of Alibaba, had noted an “improvement” on Alibaba’s platforms, the Auto Care Association had urged the USTR to relist Alibaba as a notorious market in 2017.

According to the USTR, small and medium sized enterprises (SMEs) continue to have problems accessing and utilising takedown procedures on Taobao.com. “In 2017, more SMEs have requested assistance from US government agencies and embassies regarding Taobao.com than any other e-commerce platform,” the report said, adding that Alibaba’s efforts to address right holders’ concerns appear to be aimed more towards global brands rather than SMEs, while the claimed results of those steps “remain to be objectively verified”.

Furthermore, “despite USTR’s call in the 2016 List for Taobao.com to expand its Good Faith takedown program, the enforcement program reportedly continues to be burdensome and insufficient to end the sale of counterfeit products on the platform,” the USTR says.

The USTR does acknowledge Alibaba’s “considerable efforts” and the improved dialogue with two US trade associations, however it also notes “important unresolved concerns remain”. The USTR points to a lack of identified metrics to objectively assess the scale of infringing products sold on Taobao. “The data provided by Alibaba to date do not directly reflect the scope and status of the counterfeiting problem on the Taobao.com platform but instead is merely suggestive of progress made. For example, a decline in the number of takedown requests, while perhaps indicative of a positive trend across platforms, does not speak to the overall scope of the problem on Taobao.com.”

The relisting – and reasons given for it – has rankled the e-commerce site, which claims the USTR report “does not stand up to any reasonable examination of the facts”.

In an 11-page point-by-point rebuttal, Alibaba questions the legitimacy and accuracy of the data used as evidence of the USTR’s claims, calling many of the USTR’s statements “ridiculous”, “outrageous”, “condescending”, “patently false” and “patently absurd”, adding that the USTR does not understand Alibaba’s business.

Alibaba also suggests it is “not appropriate” to compare Alibaba with other e-commerce sites, specifically American companies that are not considered as part of the report, and says the USTR “completely ignores” not only the work Alibaba has been doing for many years but also the fact that Alibaba has “met and dramatically exceeded” the USTR’s three 2016 recommendations.

The e-retailer lists a number of actions it has undertaken to address the issue of IP infringement, and notes that “many groups who previously had actively sought for us to be put on the list, changed their tune this year and advocated to the USTR that we should not be included”.

“We have been more transparent than any platform in the world regarding the presence of counterfeit products on our platforms. Nobody – not Amazon, not eBay – has been as transparent as we have been,” the e-commerce site adds.

As part of the Notorious Markets report, the USTR gives seven recommendations for Alibaba’s improvement, which the firm calls “a classic move-the-goalposts”. 

One recommendation states that Alibaba should take efforts to ensure that its referrals of criminal leads to Chinese authorities lead to meaningful enforcement outcomes, such as by targeting large manufacturers and distributors of counterfeit goods.

In response, the e-commerce giant said: “Alibaba is not a law enforcement authority and, as such, cannot possibly ensure that ‘referrals of criminal leads to Chinese authorities lead to meaningful enforcement outcomes’. All we can do is provide the information, support any investigations and the local authorities decide whether or not to prosecute.”

It added: “No private company in the world – in any country – can serve the role of a government, which is what the USTR is insisting Alibaba do in its report. If USTR has a concern with the Chinese government, then it should raise the concern directly with the Chinese government. They should not use Alibaba as a pawn in their bilateral disputes.”

Alibaba group president Michael Evans said in a separate statement: “Alibaba is doing more to protect brands and rights holders than any e-commerce company in the world, and we not only addressed, but went above and beyond, each specific concern raised by the USTR last year… It’s clear that no matter how much action we take and progress we make, the USTR is not actually interested in seeing tangible results. Therefore, our inclusion on its list is not an accurate representation of Alibaba’s results in protecting brands and IP, and we have no other choice but to conclude that this is a deeply flawed, biased and politicised process.”