• Last year Taobao listed in Special 301 Out-of-Cycle Review of Notorious Markets
  • AAFA highlights “meaningful dialogue” that followed this development
  • Alibaba reports 25% drop in takedown requests from brands

The public comments received by the US Trade Representative (USTR) in the run-up to this year’s Special 301 Out-of-Cycle Review of Notorious Markets have been published, with Alibaba contending that none of its platforms engage in or facilitate counterfeiting. The USTR will make the final decision on whether any of its sites make the list, but the e-commerce giant will be heartened by the comments of a previously critical brand association, which expresses a more positive understanding of the challenges Alibaba faces.

Last year, after a four year absence, the US Trade Representative’s annual Special 301 Out-of-Cycle Review of Notorious Markets relisted Alibaba’s Taobao marketplace platform. The move was a blow to the company and, in the time since, the e-commerce giant has stepped up its messaging around the anti-counterfeiting activities it is conducting. That effort includes pointing to the launch of legal action against counterfeiters, calling on the Chinese government to do more to tackle illicit trade and unveiling a brand alliance programme. This week the public comment period for the upcoming Special 301 Out-of-Cycle Review of Notorious Markets closed, before which Alibaba outlined a lengthy case for the defence.

In its submission, Alibaba’s vice president, head of international government affairs, Eric C Pelletier, contends that “none of Alibaba’s platforms engage in or facilitate copyright piracy or trademark counterfeiting, and none should be included on this year’s list”, adding that the company “strives to be an industry leader, and a leader in China, in protecting intellectual property”. He then goes on to provide facts and figures to support this contention.

A headline figure cited is a 25% decline in takedown requests during the period from September 2016 to August 2017 (compared to the preceding 12 months), which he states is “all the more remarkable given that there has been an 11% increase in the number of registered accounts in our IP protection system”. The submission then expands on how Alibaba has developed technology to identify potentially infringing listings before they are posted to an Alibaba platform (noting that in the aforementioned period Taobao.com proactively took down 28 times more listings than were removed reactively in response to complaints from rights holders; 98% of these before a single sale took place”) and monitors for infringing listings.

In terms of brand collaboration, he points to the expansion of Alibaba’s Good Faith program, which since its introduction in June has resulted in the Taobao Marketplaces handling 97% of all takedown requests within 24 hours during business days, and the creation of the IPP Platform portal for registering IP rights and submitting takedown requests. The creation of an Alibaba Group Anti-Counterfeiting Alliance with 30 global brands (including 3M, Ford, Johnson & Johnson, Mars, Procter & Gamble, Louis Vuitton, and Sony), and the decision by Kering to end litigation against Alibaba in favour of collaboration, are similarly cited as examples of how the company is working with key companies.

Finally, in terms of law enforcement collaboration, he states that Alibaba has provided the police with 1,573 leads, with China’s Public Security Bureau arresting1,009 suspects and shutting down 982 manufacturing and distribution locations. As such, he concludes: “With these comprehensive and effective steps Alibaba has taken to protect IP, there is no basis for listing any Alibaba platform, including Taobao, as a ‘notorious market’.”

The comprehensiveness of the submission illustrates that the stakes are high for the company – removal from the list would provide both an endorsement of its anti-counterfeiting efforts and provide a solid reputational boost. Last month we reported from Shanghai, where we noted that local brand protection professionals were more positive about Alibaba’s efforts than some of their western counterparts have been. A natural question to ask is whether the tide of sentiment is slowly turning – and the other comments received to date for the upcoming 301 provides some clues.

In total there are 19 other submissions and just two address Alibaba’s placement on the list in a meaningful way. The Autocare Association recommends that Alibaba, Taobao and AliExpress be included as notorious markets in the upcoming report. It states that “Alibaba sellers often seek to sell large volumes of counterfeit products to retailers”, with members reporting “widespread proliferation of counterfeits”.

The other comment to address Alibaba’s inclusion on the list comes from a previously fierce critic of the e-commerce giant, the American Apparel & Footwear Association (AAFA). This year, however, the organisation – which represents more than 1,000 brands – does not include Alibaba or Taobao on its list of problematic online marketplaces. Instead, Stephen Lamar, executive vice president, notes that last year’s inclusion of Taobao “directly led to improvements in online enforcement on Taobao and other Alibaba platforms as well as an ongoing and productive dialogue that we have conducted with Alibaba for much of the past year”. He goes further, citing “meaningful dialogue… [that has] generated a better understanding of the challenges Alibaba faces and the resources it applies to tackle the unacceptably high level of counterfeits on its platforms”, and notes that – while some still report high levels of infringing product and issues with takedown programmes – many members have reported improvements in terms of takedown procedures and timelines.

The positive words from the AAFA will go some way to giving Alibaba confidence that its platforms will be omitted from the upcoming list and suggests that – as was our sense on the ground in China – more brands are seeing the benefit of collaborating, rather than conflict, with Alibaba.