Jack Ma Seeks China Laws on Counterfeiting as Tough as Those on Drunk Driving

Jack Ma on Tuesday appealed to Chinese legislators to toughen the laws and penalties against counterfeiting.

In a post on social-media platform, Sina Weibo, Alibaba’s founder and Executive Chairman called on Chinese authorities to treat counterfeiters and counterfeiting with the same imperative as they did in successfully cracking down on drunk driving several years ago. Nothing short of a concerted and unified effort by lawmakers, the judiciary and the public at large would stamp out the problem, he said.

“Similar to five years ago, if the debates and controversies had never happened around drunk driving, society would not have agreed on the proper legal penalties,” Ma wrote.

More importantly, Ma noted the lack of deterrents was stunting China’s innovation, hurting its reputation and threatening the country’s future.

Ma’s post comes a week after Alibaba released a public appeal, largely in response to ongoing criticisms about the presence of fake goods on its e-commerce platforms. But it had added significance, as this issue has become a hot topic for lawmakers attending the annual plenary sessions of the National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference in Beijing.

Alibaba said in its public appeal that China’s “ambiguous counterfeiting laws” hampered the ability to build legal cases against counterfeiters. That, Alibaba said, is “the fundamental reason for the inefficiency in combating counterfeiting and protecting intellectual property.”

Ma continued the drumbeat for stiffer laws, enforcement and penalties, saying existing ones are inadequate.

“There is a lot of bark around stopping counterfeits, but no bite,” he wrote, saying longer sentences and bigger fines would also discourage recidivism.

Later Tuesday, both the China Entrepreneurs Club and Lenovo Group Ltd. founder Liu Chuanzhi issued their own statements echoing Ma’s call for better laws and enforcement to stamp out counterfeiting. Ma is chairman of the China Entrepreneurs Club, founded in 2006 to nurture entrepreneurialism and business integrity. Liu is a former chairman of the private, non-profit group.

In his note, Liu asked the National People’s Congress to act swiftly. “I believe that (if)…we impose serious penalties on counterfeiters, we can remove this tumor from China within three years and move onward,”

The full group wrote that, “we call for government to increase the legal cost of counterfeiting and further develop laws,” noting the battle will be a lengthy one and require both authorities and businesses to remain resolute.

A translated version of Ma’s full Weibo post appears below.

To the Representatives of the NPC and CPPCC: Treat Counterfeiting Like Drunk Driving

Over the past few years, China’s legal system has made great strides in imposing tighter laws and stricter penalties on drunk driving. Without such strict law enforcement, we would surely see many more traffic accidents. On the contrary, the majority of counterfeiters are not held legally responsible for their actions. Because counterfeiting is such a low-risk crime, it’s hard to imagine how we can effectively rid society of counterfeit goods. We need to fight counterfeits the same way we fight drunk driving. For example, if the penalty for even one fake product manufactured or sold was a seven-day prison sentence,  the world would look very different, both in terms of intellectual property enforcement and food and drug safety, as well as our ability to foster innovation.

 

Anti-counterfeiting has become a popular topic of discussion lately, including proposals made by several representatives to the National People’s Congress. These are all very healthy discussions, and every opinion matters. Similar to five years ago, if the debates and controversies had never happened around drunk driving, society would not have agreed on the proper legal penalties.

 

In fact, many countries impose much stricter laws against counterfeiting. For example, in the United States first offenders can be sentenced up to 10 years of imprisonment; repeat offenders more than 20 years. Companies can be fined so heavily that they go bankrupt. Even consumers of counterfeit goods can be subject to detention. This is how the U.S. fostered such a healthy environment for innovation. 

 

Under China’s laws, counterfeit manufacturers and sellers do not have to bear any criminal responsibility for counterfeit goods worth less than RMB50,000. The maximum penalty for anything above that amount is seven years. This is a 20-year-old law and a 10-year-old judicial interpretation, severely out-of-date from reality, resulting in 99% of counterfeit activities bearing no consequences at all. Penalties are inappropriate for the severity of the crimes. There is a lot of bark around stopping counterfeits, but no bite.

 

Last year, law enforcement agencies poured tremendous resources into anti-counterfeiting. But due to lax existing laws, they couldn’t bring criminals to justice. For example, with the help of big data, Alibaba came up with 4,495 leads to cases for offline investigations, which resulted in the successful criminal prosecution of 469 cases — just over 10% of the leads we provided. We studied sentencings in 33 cases and found 80% of them were for probation. We also studied 200 counterfeit cases penalized by the Bureau of Commerce and Industry last year, and the average fine was RMB10,000. This reality only encourages more people to produce and sell fake goods.

 

The number of drunk-driving related accidents has dropped noticeably since the criminalization of drunk driving five years ago. The general public has become more aware of its dangers. The criminalization of drunk driving significantly moved the needle in terms of judiciary advancement and social progress. Selling counterfeit products, in essence, is a form of theft. Stealing is wrong, there is no doubt about it. However, Chinese society still lacks such awareness on the issue of intellectual property theft.

 

If we tighten the laws, it will greatly impact the effectiveness of combating counterfeits, heightening public awareness and consensus. The judicial branch will have a more reliable legal reference. Government departments can prevent the abuse of power. More importantly, this would demonstrate China’s determination to protect intellectual property rights through real action and its commitment to innovation.

 

The damage fakes have had on China goes well beyond the impact of counterfeits themselves. Fakes wreak havoc on innovation, on hard work, on people with integrity, and hurt the future of the country.

 

Counterfeiting has been rampant in China for decades, especially in rural China. Just like fighting the Battle on Shangganling Mountain, Alibaba today is fighting on the front line of the anti-counterfeiting war.

 

Despite the challenges, we will keep pushing forward. We have moved from online to offline in our fight and we will not stop. However, the anti-counterfeiting war is impossible for any, single company to fight alone.  

 

The existing laws are lagging, failing to impose actual threats on the behavior of counterfeiters and leave far too much room for cheating.  Fighting the war on counterfeits requires not only collaboration among various forces of society, but also a strong legal foundation. Everyone plays a role: law enforcement, government authorities, and consumers.

 

The reality is, counterfeit goods are being produced in a steady stream every day by illegitimate factories, just like the smog that comes from all directions and fills the streets. The internet is at the forefront of the issue. Of course, internet platforms need to identify, report, and take down counterfeit goods. But if you do not close down illegitimate factories and eradicate the source of pollution, the smog will never disappear. The reasoning is clear and simple: Alibaba will not be a bystander. Manufacturers will always be the source of the problem; and the law has to be the root of the solution. Only when we start tackling the fundamentals, will our country truly transition from a leader of manufacturing to a leader of innovation – from “rule of words” to “rule of law.”

 

Modifying and improving the law is a serious matter, but it is also a lengthy and complicated process. We will continue to fight and call for a counterfeit-free world for our children and ourselves.