BABA Alibaba Group Holding Limited

By Kathy Chu 

Alibaba Group Holding Ltd. is coming under fire from global brands for rampant counterfeits on its shopping platforms, after co-founder Jack Ma cast the Chinese e-commerce giant as the global leader in the battle against fake goods.

Alibaba is the "world's leading fighter on counterfeits," Mr. Ma said at an investor conference on Tuesday, noting that the company has technology to track down sellers and buyers of counterfeits on its platforms. "We can solve the (fake) problem better than any government, any organization, any person in the world."

Mr. Ma said that part of the problem is that counterfeiters are increasingly taking to the internet to distribute their fake goods, which can be "better quality" and offer cheaper prices than authentic branded goods.

The remarks are rankling global brands, which complain that counterfeit goods remain a significant problem on Alibaba's sites despite years of promises by the e-commerce company to crack down on sellers of infringing goods. NetNames, which tracks counterfeits online for brands such as Inditex and Billabong, said on Wednesday that generally the clients it represents estimate 20% to 80% of the branded goods on Alibaba's biggest China marketplace Taobao are fakes.

"For Jack Ma to say what he did requires both hubris and chutzpah," said Bharat Dube, chief executive of Strategic IP Information, which works with brands including L'Occitane en Provence to remove counterfeits online. "What world is he living in?"

Mr. Dube called Alibaba's efforts to address counterfeits thus far "superficial," and said the e-commerce giant could do a much better job of ferreting out fakes on its platforms.

Alibaba has said it would spare no expense in fighting counterfeits. An Alibaba spokesman said the NetNames estimate of fakes is a "wild, inaccurate guess made by a self-interested party. There is no methodology to support a claim like this."

The latest controversy comes a month after a prominent anticounterfeiting group, the International Anticounterfeiting Coalition, suspended a newly created category under which Alibaba was admitted as a member, following questions from brands about Alibaba's sincerity in fighting fakes. Fashion brand Michael Kors, in a letter to the IACC board, said that the group's admission of Alibaba provides "cover to our most dangerous and damaging adversary."

As Chinese authorities get ready to scrutinize fake goods online, Alibaba Group has promised wholesale changes to how it deals with infringing products, including shifting the burden of proof to sellers on its platforms to show that their goods are authentic.

Mr. Ma said that Alibaba has more than 2,000 people working to rid its platforms of counterfeit goods, but the substantial size of the platforms makes the task challenging. In the fiscal year ended March 31, Alibaba's China marketplaces handled $485 billion in merchandise volume, which analysts estimate is more than e-commerce sites Amazon.com and eBay combined.

"Brands are frustrated that Jack Ma and others are standing up and saying that they're investing all this money, but they don't see an impact," said Haydn Simpson, commercial director at NetNames, the counterfeit tracker.

Some analysts also question how much of Alibaba's volume comes from fake-goods sales or fake transactions, which involve sellers paying people to place fictitious orders to boost their standing on Alibaba's site. The concern is that such questionable transactions could drive customer traffic that in turn could profit Alibaba.

Alibaba has said that it uses sophisticated tools to identify and exclude fake transactions. Mr. Ma, at the investors' conference, also said the company's business could be hurt rather than helped by fake-goods sales. "Every fake product we sell, we are losing five customers," he said. "We are the victims of that." He didn't explain his reasoning for that statement.

--Eva Dou contributed to this article

(END) Dow Jones Newswires

June 15, 2016 11:52 ET (15:52 GMT)

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