This week the American Apparel and Footwear Association (AAFA) and 17 organizations filed a complaint with the U.S. Trade Representative’s office over counterfeits sold on Alibaba’s online platforms, urging the agency to step up its scrutiny of the Chinese e-commerce giant and relist it on a counterfeit watch list as a “notorious market.” Here is the response from Alibaba President Michael Evans.
We find it necessary to set the record straight in the face of uninformed and misleading accusations, which do little to advance the common cause of fighting counterfeits.
The American Apparel and Footwear Association has been quick to paint Alibaba as a bad actor for listings of counterfeit goods on its e-commerce platforms. But in doing so, it ignores virtually all of the relevant facts as to the enormous resources Alibaba has committed to combating counterfeiting, as well as the continually expanding and ever-more-effective programs it has developed as a part of those efforts.
The persistence of some level of counterfeit listings on a platform the scale of Alibaba despiteour massive efforts is not evidence of insincerity, bad faith, a lack of adequate expenditure, or any of the other rash conclusions AAFA asks USTR to reach. It is, instead, a recognition that no set of procedures can entirely eradicate the presence of counterfeit products on marketplaces such as Alibaba’s. And no one marketplace can do it alone. The only way we stand a chance in this fight against counterfeiters is by working together. We believe we can accomplish far more by cooperating than by hurling accusations of bad faith that do nothing to move the process forward.
Alibaba’s platforms host more than 100,000 brands, which in and of itself is testament to the trust companies and consumers havein our marketplaces. We routinely collaborate with brands, associations and regulators to maintain the integrity of our platforms. We spend millions of dollars a year on advanced technology and human capital to fight counterfeiters online and the sources of counterfeit production offline, efforts we describe over 30 detailed pages in our recent USTR submission.
Our broad set of anti-counterfeiting and anti-piracy measures reflect the company’s very strong commitment to the protection of intellectual property rights—which the AAFA chooses to ignore, instead leveling vague criticisms in an ill-informed allegation that Alibaba isn’t making progress and therefore isn’t acting in good faith. In fact, over the past year more rights holdersare successfully participating in our programs, more brands have joined our platforms and are working with us on our anti-counterfeit efforts, and more counterfeit products are being taken down and proactively blocked from ever making it to our marketplaces.
In its USTR complaint, the AAFA leveled other accusations that mischaracterize our position, are illogical or are flat-out wrong. We have refuted these claims below. But in firing off its salvos, AAFA misses perhaps the largest point of all: It serves Alibaba’s own business interests to create and maintain a safe and trustworthy marketplace. Sales of counterfeits harm Alibaba as much as they do rights owners.
We know that to be the global leader in e-commerce, we have to be the global leader in anti-counterfeiting. We are not claiming perfection, but we are claiming progress, along with an unwavering commitment to continue this fight by partnering across industries and borders with others to solve this global problem.
The AAFA claims that it “enables a collaborative forum to promote best practices and innovation.” But the AAFA’s continuing campaign to tarnish Alibaba’s track record by slinging unsubstantiated accusations is un-collaborative and unproductive at best. At worst, it creates divisions among companies and organizations that ought to be working together in the war on counterfeiters. In short, it helps the counterfeiters win.
HERE IS ALIBABA’S DETAILED RESPONSE TO THE AAFA
AAFA contention: Alibaba seeks to excuse inadequate IP enforcement procedures by “citing a novel ‘So Big It Fails’ defense by pointing to the volume of merchants and listings on its platform.”
- Alibaba never suggested that its size or growth excuses it from implementing adequate procedures. We said in our Oct. 7 comments (at pp. 1-2) that “any marketplace with over a billion and a half listings and over seven million merchants operating at any given time will have some number of counterfeit listings. The existence of such listings is not, in itself, an indication that a market is notorious or that there is a deficiency in the procedures that the marketplace has implemented.” That is not an excuse. It simply recognizes the fact that no procedures can entirely eradicate the presence of counterfeit products on marketplaces that are the size of Alibaba’s. This statement in our Oct. 7 comments was then followed by 30 pages of explanation of how we have implemented a broad set of anti-counterfeiting and anti-piracy measures, and dedicated enormous resources to implement those measures.
AAFA contention: Alibaba’s “October 7 filing suggests that there is in fact an acceptable or tolerable level of counterfeits, particularly for big companies like Alibaba.”
- This is false. Alibaba has recognized that the problem of counterfeiting will never be completely eradicated, but that does not mean that counterfeits are “tolerable” or “acceptable.”
- It is highly likely that listings for counterfeit products exist on every major e-commerce marketplace in the world that allows third-party listings. Alibaba is making an extraordinary effort—well beyond what it is legally required to do—to prevent such listings from appearing on its marketplaces.
AAFA contention: The fact that Alibaba redacted business proprietary information from its comments “raises numerous questions and unfortunately undermines Alibaba’s credibility in making claims of its own progress.”
- AAFA’s position is absurd. The USTR provided a specific procedure for submitting confidential information. AAFA now argues that the comments of any entity that avails itself of that process must be dismissed as not “credible.” Alibaba cannot and should not be forced to disclose confidential information in order to state its position to the USTR.
- Alibaba is not aware of any e-commerce marketplace in the world that is as transparent as Alibaba has been in presenting detailed statistical information on its efforts to minimize sales of potentially infringing listings. The public versions of Alibaba’s main and rebuttal comments present a clear picture of the issues Alibaba is facing and the effectiveness of the steps it is taking. To cite just a small sample of the evidence provided in Alibaba’s public submissions:
- In the 12 months ended Aug. 31, 2016, Alibaba proactively closed approximately 180,000 Taobao stores. (See Oct. 7 comments at p. 4.)
- As of the end of September 2016, the number of participants (more than 900) in the Taobao Good Faith Program is more than 2.5 times the number of participants from the year before. (See Oct. 7 comments at p. 4.)
- Between September 2015 and August 2016 (the last period for which law enforcement data is available), Alibaba’s assistance led to the closing of approximately 675 production, storage or sales operations of counterfeit products. (See Oct. 7 comments at p. 21.)
- From January 2016 through August 2016, we undertook 25 proactive takedowns for every one reactive takedown. (See Oct. 21 comments at p. 14.)
- AAFA’s position is hypocritical. While it criticizes Alibaba for redacting specific statistical information, AAFA has declined to provide any specific information or evidence (business confidential or otherwise) regarding the alleged problems of its members. AAFA has provided no names of individual brands, no specific information on takedown requests, no information on the number of its members that have tried to participate in Alibaba’s good faith program, and no other specific information about its members’ experiences to support its allegations. This has made it impossible to respond in full to AAFA’s complaints or to address the specific problems its members are alleged to have encountered.
AAFA contention: The number of listings for counterfeit products on Alibaba’s marketplaces are exceptionally high.
- AAFA repeats the false claim that the Chinese government found that 67 percent of the listings on Alibaba’s sites are for counterfeit products. The conclusion is false, as Alibaba fully explained on page 7 of its October 21 rebuttal comments.
- AAFA also claims not to understand how to square the 380 million product listings Alibaba took down during the previous year with the “1.5 billion total listings that were also cited,” and wonders whether that means that “25 percent of [Alibaba’s] total listings were counterfeit.” Our comments were clear: 380 million product listings were proactively removed from the Taobao marketplace during the past year, and there are over a billion and a half listings “at any given time” across all of Alibaba’s marketplaces. (See Oct. 7 comments at pp. 2, 4.) The specific listings change from day to day, which means that over the course of the year, they number many more than 1.5 billion listings. The information Alibaba provided does not in any way suggest that 25 percent of the total listings on the Alibaba marketplaces are counterfeit.
AAFA contention: Alibaba’s “three strikes” policy is not new
- AAFA asserts that it was told about Taobao’s three strikes policy in 2014 and was told the program has already been implemented.
- The differences between Taobao’s current three and four strike systems are fully explained at page 14 of our Oct. 7 comments. In summary, the “three strikes” rule provides that a merchant account will be permanently closed when it receives three strikes for listing potentially infringing products, but this requires that the identical counterfeited trademark or pirated good is at issue in each case. Taobao also applies a “four strikes” rule for terminating the accounts of merchants who repeatedly list potentially counterfeit or pirated products. The four strikes rule applies regardless of whether the trademarks or pirated goods are identical.
- As we explained in our October 7 submission (at p. 14), as of Jan. 2017, Taobao will have only a single policy. Taobao will apply a three strikes rule for terminating the accounts of merchants who list potentially counterfeit or pirated goods, regardless of whether the trademarks or pirated goods are identical. This is a new policy, and it will expedite the closure of the accounts of repeat infringers.
AAFA contention: Contrary to a previous USTR report, Taobao has not simplified the process for intellectual property rights-holders to register and request takedowns of infringing product listings.
- This is false. Alibaba’s Oct. 7 and Oct. 21 comments summarize Alibaba’s extensive efforts to make it easier for rights holders to take advantage of its enforcement mechanisms. As evidence of the success of this effort, the number of takedowns on Alibaba’s marketplaces resulting from notices has more than doubled from where it was two years ago, and more rights holders are utilizing Alibaba’s takedown procedures and are successfully submitting more takedown requests.
- Moreover, Alibaba launched a Good Faith Program to make it easier for rights holders to protect their IP when they have an established track record of submitting legitimate takedown notices. Participants in the Good Faith Program enjoy a presumption of good faith that simplifies takedown notification obligations.
- In addition, this month, Alibaba will merge the registration and login processes for TaoProtect and AliProtect, creating a one stop shop for takedown notices on Alibaba.com, AliExpress, Taobao, Tmall and 1688.com.
- Our Oct. 7 comments also describe our collaboration with the IACC to expand the availability of the IACC MarketSafe¬Æ program to allow more companies to participate, including SMEs.
AAFA contention: Alibaba has made “very little tangible program changes ‚Ä¶ during the past 10 months.”
- Our Oct. 7 submission explained at length the many changes that we have put in place this year and the progress we have made in implementing and expanding our existing IP enforcement programs. These steps include the launching of the IP Joint Force System, deploying new technology to deal with repeat offenders who open stores using different national IDs, deploying new technology to deal with the misuse of brand keywords, implementing a new policy against the use of blurred trademarks, dramatically expanding the number of participants in the good faith program, increasing the proportion of proactive takedowns and investing in new technology to enhance the proactive takedown program, increasing the number of total takedowns (proactive and reactive), continuing to work with law enforcement on off-line investigations, and entering into collaborative agreements with government agencies around the world.
- We also pointed to many new initiatives that we will roll out over the coming year, including, for example, the expansion of the IACC MarketSafe¬Æ program and implementing a uniform “three strikes” policy.
AAFA contention: Contrary to the 2015 Notorious Markets report, Alibaba has not made it easier for rights holders to use Taobao’s Good Faith Program, and it continues to apply the Good Faith Program in an inconsistent manner.
- Alibaba’s Oct. 7 and Oct. 21 comments detail the steps taken to make Alibaba’s IP enforcement mechanisms, including the Good Faith Program, easily accessible. By the end of September 2016, we had more than 900 brands in the Good Faith Program, which is more than 2.5 times the number of participants from the year before. Almost two-thirds of these brands are international (many with headquarters in the United States).
- Alibaba is also working to ensure that more companies, including SMEs, can submit good faith notices through IACC’s MarketSafe¬Æ program. In addition, as noted in our Oct. 21 rebuttal comments (at p. 16), we actively recruit rights holders who desire to enter the Good Faith Program. We proactively reach out to rights holders who have not met the requirements of the Good Faith Program and educate them on how they can meet our standards.
- AAFA vaguely alleges that “some AAFA members‚Ä¶have been able to participate in the good faith takedown program, [while] other have been unable to gain access.” AAFA never identified who those members are or what issues might be complicating their ability to participate in the Good Faith Program, which makes it impossible for Alibaba to help those members resolve their issues or otherwise respond to the allegation.
AAFA contention: Contrary to the 2015 Notorious Markets report, Taobao has not on average reduced the time necessary to take down counterfeit products or punish counterfeit sellers.
- The precise reduction in complaint resolution time is business confidential, but the average takedown time has been reduced over the last year.
- AAFA argues, again without any evidence or specific information, that some members report delays in takedowns or the imposition of penalties on merchants. Alibaba cannot respond to the specific allegation if it does not know what the problems are.