In an ironic twist of events, ecommerce hub Alibaba is suing over alleged counterfeit goods (instead of being sued). But the suit has cynics wondering: Is this a toothless PR maneuver on Alibaba’s part; a tack to distract from its recent reputation setback? Let’s quickly review the case, and then…speculate.
Alibaba Is Suing Users Over Counterfeits, But Not Asking For Much In Damages
Who Is Alibaba Suing? Someone selling “Swarovski” (cough) watches on Alibaba.
How Did It All Go Down? “Data analytics” and covert purchases led Alibaba to the counterfeit lair. And in classic Chinese law enforcement style — (which is a close cousin to classic Crockett and Tubbs style) — police raided a Shenzhen warehouse, uncovering 125 knockoff watches. (Cue the Price Is Right WhompWaaaaa, right!? Only 125 watches? That’s not a raid; that’s Capone vault territory…but I digress.)
On What Grounds Is Alibaba Suing? The online retailer claims terms of service violations and intellectual property infringement.
How Much Does Alibaba Want? ¥1.4 million (yuan), which, at the time of this writing, converts to about $202,000 US
Is The Timing of This Alibaba Counterfeit Lawsuit Suspicious?
Did you know that the United States Trade Representative’s office chucked Alibaba onto the Notorious Markets List, a compendium of places around the world — both online and off — where counterfeiters gather to collect or sell their wares. So, at face value, the timing seems a tad suspicious.
But then again, maybe that’s rushing to an unfair conclusion. After all, several months ago, Alibaba super-sized its anti-counterfeit army. Its mission: Hunt fraudsters. So, all things considered, who’s to say we’re not witnessing a bit of bad — but ultimately coincidental — timing?
Ecommerce Lawyer On Alibaba’s Counterfeit Lawsuit: “Alibaba Has A Piracy Problem”
Ecommerce attorney Aaron Kelly acquiesced that Alibaba “has a piracy problem.” What can people do about it? “Like anything,” he reasoned, “investing in anti-counterfeit efforts will help. But we also have to be honest about the marketplace.” He clarified, “To be clear, I think both Alibaba and Amazon are important companies — and that’s not some obsequious hedging. They both provide robust platforms that make life easier for entrepreneurs. What could be better than that? But with any marketplace, barbarians are at the gate. And what some people forget — or maybe don’t even realize — is that counterfeiters make money for the ecom platforms too. Sometimes, they make more than the average ethical seller, because, well, as the old saying goes, unfortunately, crime can pay.”
“To be clear,” Kelly enthused, “I’m not endorsing unauthorized knockoffs; just pointing out the uneasy win-win relationship that can sometimes exist between successful counterfeiters and online retail platforms.”
So, is fighting knockoff artists a useless exercise? “No,” Kelly explained. “It’s possible to shake counterfeiters with a combination of social engineering, protective measures, and legal maneuverings. But there’s always a chance that a scammer you successfully shoo away will just move on to a more vulnerable target.”
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Apple sued online retailers after discovering that 90% of Amazon-purchased Apple power accessories were fakes.
The Amazon Apple Counterfeit Sting: Summary
Sting Operation: Apple employees hopped on Amazon and anonymously bought a bunch of product accessories (chargers, cables, etc.) bearing the “genuine Apple” label.
Sting Operation Findings: According to Apple, 90% of the purchased products were revealed as counterfeits.
Amazon’s Reaction: Apple informed Amazon of the situation, at which point Amazon speedily suspended associated seller accounts.
Apple’s Counterfeit Lawsuit: Apple filed a lawsuit against the counterfeit peddlers. MacRumors quotes:
“Over the last nine months, Apple, as part of its ongoing brand protection efforts, has purchased well over 100 iPhone devices, Apple power products, and Lightning cables sold as genuine by sellers on Amazon.com and delivered through Amazon’s ‘Fulfillment by Amazon’ program. Apple’s internal examination and testing for these products revealed almost 90 percent of these products are counterfeit.”
The Amazon Apple Counterfeit Sting: Legal Analysis
The Apple counterfeit incident has industry pundits chattering about two things:
- Is Amazon’s product vetting process any good? And,
- What are the dangers of counterfeit products?
What do we think?
Well, for starters, we’re not surprised. Last year, Chinese officials reported that a whopping two-thirds of Alibaba-bought goods are counterfeits. http://money.cnn.com/2015/01/28/technology/alibaba-china-counterfeit-crackdown/?iid=EL
Secondly, Amazon’s e-commerce operation is colossal. Of course ne’er-do-wells have crashed — and will continue to crash — the party. Besides, the second Amazon upgrades the locks, indefatigable malefactors burrow through tunnels. So, it’s probably fairer to examine the efficacy of Amazon’s response when alerted of wrongdoing, rather than cast aspersions about recidivism.
In this case, in keeping with the company’s “zero tolerance” counterfeit policy, Amazon seems to have quickly shuttered the fraudsters.
To answer the second question: “What are the dangers of counterfeit products?” It’s not just about profit concerns, it’s about consumer safety. As an Apple spokesperson explained, due to a dearth of testing on bogus products, they “pose a significant risk of overheating, fire, and electrical shock.”
Now ask yourself: Pay a few bucks more for the genuine article, or risk burning down the (literal) house?
Consult With An E-Commerce Attorney
As we all well know: “$#!+ happens.” So, when the proverbial poo plops on your e-commerce business, get in touch — we’ll help clean up the mess. Our team [LINK] swiftly and successfully guides entrepreneurs through all manners of online business mazes.
Wal-Mart Is Making Chinese Money Moves
Wal-Mart is making e-money moves.
As we type, the Goliath of cheap retail is massaging its way into the hearts, minds and wallets of Chinese shoppers via its new Global E-Buy service. The company also assumed full control of Chinese e-commerce retail site Yihaodian and announced plans to expand its brick-and-mortar presence in the country.
Why the Sino-product-push? Potential profit, of course! Studies confirm that over 60% of the China’s denizens will pay a premium for American-made products.
Wal-Mart’s initiative seems to be in direct competition with programs run by JD.com and Alibaba.com — two huge online retailers out of China. JD.com already partners with several stateside brands including Converse, Nautica Kids and Samsonite. And for the unapologetically sybaritic, Alibaba hawks trendy international goods through an Epcot-esque “pavilion” system that showcases each country’s aspirational brands. (Step on up! We’ve got Prada in Italy; Zac Posen in the U.S….you get the picture.)
What does this mean for online private label entrepreneurs? Since Wal-Mart is making it rain with expansion-money, now is probably a good time to hang a shingle on Wal-Mart’s platform. But before doing so, ensure your agreements with Amazon and other e-commerce platforms don’t include an exclusivity clause.
P.S. – Recently Alibaba.com surpassed Wal-Mart as the world’s largest retailer. Do you think that’s going to be a motivator for Wal-Mart? (You bet your rollback dollar it will!)
Amazon Has An India Problem
In 2014, Jeff Bezos rolled into Indian on an elephant-painted bus (he really did; you can check the pics here), slipped into traditional dress, and announced to an enthusiastic crowd that Amazon was pouring $2 billion into the Southeast Asian economy.
Why the Hulk-sized commitment?
Well, only Amazon knows for sure. But let’s consider the playing field. Wal-Mart’s all about China right now, so it makes sense that Amazon sets its sights set on the other Asian behemoth, India — with its 1.2 billion residents and exploding middle class — who’ve taken to online shopping like hipsters took to fedoras.
In e-commerce, cash-money terms, Indian is a pot-o-gold at the end of the rainbow Rangwali Holi.
Understandably, though, the country’s retailers aren’t thrilled about an Amazon e-commerce invasion. So, they enlisted lobbyists, and poof, legislators pushed foreign ownership regulations through Parliament.
Will Amazon’s India Expansion Affect Stateside FBA Businesses?
So, what does this mean for third-party sellers on Amazon? Well, for now, Indian officials probably won’t sanction Amazon, even though pundits think Amazon “appears to violate” the regulation — which places restrictions on “companies with substantial foreign ownership from operating retail outlets that sell from their own inventory of goods.” Experts predict sanctions are a few months off. Satish Meena, an analyst at Forrester Research in India explained:
They’ve not given any timeline for enforcement. There’s no proper instructions to companies about how to implement these things.
Granted, the rules are still murky, but the new law clarifies India’s position on foreign e-commerce operations, which is:
“To protect our country’s economy from foreign takeover, we’re going to make sure that Indian-based companies have a leg up.”
Can Startups Benefit From India’s New E-Commerce Law?
Who can benefit from India’s new e-commerce regulations? Well, to comply with the new rules, Amazon.in will most likely broker some sweet deals — for everything from shipping to manufacturing to even administrative duties — with Indian vendors, which could be a lucrative opportunity for entrepreneurs able to set up shop out of India (even if that means partnering with a resident).
Three Factoids For Thirsty E-Commerce Entrepreneurs
- The Chinese e-commerce market is expected to reach $672 billion by the end of the year.
- ATTN WEB DEVELOPERS: Shockingly, according to The Search Agency, 40% of the top 100 global retailers don’t have dedicated mobile websites.
- Retailers are starting to explore alternative shipping options — another potential startup opportunity.
Connect With A Private Label Lawyer
Who’s on speed dial for private label business problems?
Internet law firm Kelly Warner has a team ready and waiting to help solve e-commerce challenges. We’re here to assist with account suspensions, removing defamatory reviews, intellectual property issues, listing hijackings…and just about anything Internet law related.
Alibaba becomes the world’s largest retailer. (2016, April 7). Retrieved May 19, 2016, from http://www.cctv-america.com/2016/04/07/alibaba-becomes-the-worlds-largest-retailer#ixzz47GOAZuq0
Amazon might have just hit a regulatory roadblock in India. (2016). Retrieved May 19, 2016, from http://www.digitaltrends.com/web/amazon-india-regulation/#ixzz45dAEdzsD
Chang, L. (2016, April 10). Amazon might have just hit a regulatory roadblock in India. Retrieved May 19, 2016, from http://www.digitaltrends.com/web/amazon-india-regulation/#ixzz45dAEdzsD
Wingfield, N., & Goel, V. (2016, April 07). Amazon May Violate India’s New Rules on Foreign E-Commerce. Retrieved May 19, 2016, from http://www.nytimes.com/2016/04/08/technology/amazon-may-violate-indias-new-rules-on-foreign-e-commerce.html
Meola, A. (2016, April 28). Walmart is making a strong push into China to compete with Amazon, Alibaba, JD.com. Retrieved May 19, 2016, from http://www.businessinsider.com/walmart-debuts-global-e-buy-in-china-to-compete-with-amazon-alibaba-jdcom-2016-3