Court orders fakes seller to pay damages to online retailer JD.com

A Chinese court has ordered a former seller operating on the JD.com online retail platform to pay around $143,000 in damages for selling counterfeit cosmetics.

This is the first case involving a third-party seller sued by an e-commerce platform to be handled by the Beijing court, says the Xinhua news agency.

The merchant had signed an online service deal with JD.com that allowed him to set up a storefront on the site selling cosmetics of a “well-known brand”, according to the report.

JD.com discovered the scam after a carrying out a random inspection, and promptly shut down the storefront and filed a lawsuit alleging breach of contract demanding damages from its owner.

First set up in 1998, JD.com is billed as China’s largest online retailer as well as the country’s biggest Internet company by revenue, and says it is the only retail company in China that has its own end-to-end logistics fulfilment business.

The company’s founder Richard Liu insists it takes strenuous efforts to try to keep counterfeits off its platform, saying it has a “zero tolerance” stance on intellectual property rights, and in the past has publicly criticised rivals including its Chinese peer Alibaba for their record on brand protection.

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In 2017, the company set up its JD Tracing and Anti Counterfeit Alliance to highlight the transparency and tracking of its supply chain. It says it also levies fines on vendors using its platform to peddle counterfeit and otherwise illegal goods, with a “one strike and you’re out” model.

Other measures adopted by the online retailer include forging supply agreements with brand owners to ensure supply of legitimate products and auditing of third-party vendors, although that system seems to have broken down in this fake cosmetics case.

JD.com is also harnessing artificial intelligence to mine its data to look for anomalies – for example collating customer service complaints and image data – as well as blockchain to help secure its supply chain.

The company rolled out the blockchain technology out internally at first as part of its efforts to keep counterfeits off its site, and last year launched a branded blockchain – dubbed JD Chain – to make it available to third-parties.

JD Chain has been used for example to provide provenance for carp caught in China’s renowned Lake Chagan. Purchasers can scan a unique blockchain ID assigned to each fish, detailing origin, qualification, and even the name of the fisherman involved.

“Guaranteeing authenticity has been in our blood since the very beginning,” says a JD spokesperson in a recent blog post on its approach to anti-counterfeit.

“What makes JD unique is how we are able to take both a birds-eye view and hone in to look at specific cases first with our leading technology. We qualify potential issues and follow up offline rigorously. We call this our ‘smart brand protection’ approach.”