Alibaba Group Holding Ltd (NYSE:BABA)’s Counterfeit Problem Lives On

Alibaba Group Holding Ltd (NYSE:BABA) can no longer claim to have contained trade in counterfeit goods on its marketplaces. It is emerging that fake Star Wars merchants are already widely listed on Alibaba’s Taobao marketplace. Without being seen to be doing enough to protect intellectual property rights of its vendors, Alibaba risks losing many critical customers.

Alibaba’s executive chairman, Jack Ma, is on record saying that sale of a single fake item costs the company five customers. While Alibaba claims to be doing all within its means to fight counterfeit merchants on its marketplaces, not all vendors agree with it. Kering SA, the company behind the luxury brands Yves Saint Laurent and Gucci sued Alibaba over actions that seem to promote sale of products that fringe on its copyright. In the suit, Kering alleged that Alibaba’s search engines were directing customers to imitation of its luxury products when they misspelled its brand name in the search box.

Fake Star War merchants

In the latest case, a search for Star Wars merchants on Taobao is said to turn up about 61,000 listings that are mostly fake or unlicensed products. As if that is not enough, the fake Star War products sell at just a tiny fraction of what the franchise owner Walt Disney Co (NYSE:DIS) would ask for its genuine items.

Fighting fakes

Alibaba Group Holding Ltd (NYSE:BABA) has in the recent times made numerous announcements about implementations to fight counterfeit trades on its marketplaces. However, there are no signs that the company is winning the war if at all it is fighting. As part of its ongoing war against copyright infringement, Alibaba recently hired a former Pfizer Inc (NYSE:PFE) executive to lead its global team on intellectual property enforcement. The executive will devise anti-counterfeiting measures to help Alibaba deal with the problem that is already staining its reputation.

Expanding overseas

Counterfeit trades are toxic to Alibaba Group Holding Ltd (NYSE:BABA)’s long-term prospects. With the fake claims hanging around it, the company will find it difficult to earn global acceptance now that it is looking to overseas for the next phase of its growth. Alibaba also risks returning to the U.S. list of Notorious Markets if it doesn’t step up its fight against fake trades on the marketplaces it controls.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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