Despite difficulties, Alibaba’s efforts against fake goods are good for business

By Song Shengxia Source:Global Times Published: 2017/1/5 23:53:39

Alibaba's latest move to sue two vendors for selling fakes on its e-commerce platforms deserves a big applause. The fact that the suit is the e-commerce giant's first legal action against counterfeiters shows it is finally serious about cracking down on fake goods and is taking a necessary step to win the confidence of customers and brand owners.   

Alibaba announced Wednesday that it had taken action against two vendors allegedly selling fake Swarovski watches on its Taobao consumer-to-consumer (C2C) platform and claimed 1.4 million yuan ($203,284) in damages due to "contract and goodwill violations." The company said it will be taking similar actions against other counterfeiters.

However, the company's counterfeit battle is far from over. The complexity of the Chinese market, Alibaba's business model, the country's consumer culture and lax enforcement makes it tough to fully get rid of counterfeiters. Fighting fakes requires effort from a vast segment of society, new technology, innovation in market governance and improvement in the country's legal framework. Above all, China needs to upgrade its industrial structure and focus on higher added-value industries where competiveness of products comes from core technology, intricacy and fine detail instead of low costs. 

Eliminating fakes online is a tough task in China given the large size of its market, a deep-rooted disregard for intellectual property rights and price wars. As the world's largest e-commerce platform, Alibaba's marketplaces are open platforms that attract vendors and collect fees from sales ads, transaction commissions and online shop rentals. Fake goods are a significant source of revenue for some vendors who compete using low costs rather than added value, which generates revenue for Alibaba. Such a business model makes it almost impossible for Alibaba to fully eliminate fakes, especially on the C2C Tabao site. Further, some places in China rely on the sale of counterfeits on Taobao for people's livelihoods. Cracking down means crashing local industry and killing jobs. Besides, even if Alibaba spotted counterfeit goods, it would be a challenge to prove the goods are fake.

A fundamental reason for the widespread knockoffs is that many regions in China still rely on an extensive growth model that produces low-cost products, not higher added-value goods. Widespread fakes are not merely a problem for e-commerce platform operators, or for the country's regulatory framework. They are also closely related to the country's economic growth model and industrial structure which will require upgrades to the economy, industrial structure and governance.

That doesn't mean Alibaba should be exempted from the responsibility of eliminating fake products. There is still a lot of room for Alibaba to improve and the company's latest move is in the right direction. To protect its credibility and sustain growth, Alibaba needs to make sure that its crackdown on fake goods be a strategic focus.   

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn



Posted in: EYE ON THE ECONOMY

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