On Friday, Alibaba Group Holding, an online retailer based in China, was sued in Manhattan federal court, by Kering luxury brands, including Gucci and Yves Saint Laurent. The brands argue that the retailer knowingly allowed counterfeiters to sell their products to consumers.
The Kering brands are alleging trademark infringement and racketeering and are seeking both monetary damages as well as an injunction preventing the future sale of these counterfeit products.
Alibaba Headquarters: By Thomas Lombard via Wikimedia Commons
In their lawsuit, the brands claim that Alibaba conspired with the counterfeiters to manufacture, sell and distribute products that infringe on the plaintiffs’ trademarks that confuse the consumer and lead the consumer to believe that the products are genuine luxury items.
This is the second time that Alibaba has been sued by Kering brands over counterfeit products. The brands filed a lawsuit in July of 2014, but withdrew it with the ability to refile if the two sides couldn’t come to a resolution of their issues. And, it seems they haven’t reached a resolution.
The lawsuit supports its claims that Alibaba is knowingly helping counterfeiters sell their goods with an example of an supposed Gucci handbag that is being sold for as low as $2 for consumers who will purchase at least 2000 units. Gucci handbags often retail from $600 and upwards, proving a huge discrepancy between authentic Gucci handbags and those sold on Alibaba’s marketplace.
By allowing these counterfeiters to sell their products, the lawsuit claims, Alibaba is helping them to reach larger target markets and even other sellers who sell counterfeit products within the United States.
The Kering brands are asking the court to impose an injunction that would prohibit Alibaba from allowing the sale of counterfeit products.
After years of litigations, LVMH and eBay recently settled a similar lawsuit, where LVMH claimed that eBay knowingly allowed its users to sell counterfeit products on its website.
The sale of counterfeit goods over the Internet is a serious issue for luxury brands. The reputation of a luxury brand rests on not only the high quality and luxurious materials used in its products, but also the reputation of exclusivity. When counterfeit sellers begin to sell knockoff products that are low quality and for a fraction of the retail price, it affects the reputation and ultimately the value of the brand.
It will be interesting to see if this case goes to trial or if the parties will be able to reach a settlement like LVMH and eBay, and ultimately what the outcome of this lawsuit has on the marketplace of counterfeits.