Kering SA, one of the largest luxury goods conglomerates, is teaming up with China’s largest e-commerce retailer, Alibaba, to combat against the sales of counterfeit products on the e-commerce site. This collaboration comes after Kering dropped its lawsuit against Alibaba, which claimed trademark infringement and that Alibaba made it possible for fakes to be sold worldwide. The lawsuit claimed that fakes of Kering brands, including Balenciaga and Yves Saint Laurent, are often sold on the e-commerce platforms of Alibaba.
In an attempt to crack down on the proliferation of fakes being sold on its site, Alibaba has banned listings that infringe on trademark and copyright rights and has forced sellers to make deposits and use a ratings system. However, it seems the sell of counterfeit products continues, and Kering and Alibaba have decided to work together to combat the counterfeit products sold on the site. What sort of procedures that will be implemented to fight the sale of fakes has yet to be revealed.
The two companies simply made a statement that they “agreed to work together in good faith through the normal business process on ways to enhance intellectual property protection in a manner that can further reduce counterfeiting of Kering brands and ensures a healthy and vibrant e-commerce ecosystem for consumers, merchants, and brand-owners alike.”
While the Parisian luxury conglomerate has dropped the suit against Alibaba, the claims against merchants named in the suit are still ongoing. One such merchant sold handbags bearing the Gucci logo as low as $2 to $5 each if the purchaser ordered at least 2000 bags, while the Gucci bag retails for $795.
The news of the cooperative efforts that is being created between the two companies points to how negatively counterfeiting can effect both luxury brands and retailers. In its IPO filing with the Securities and Exchange Commission, Alibaba stated that the perception that its sites sell fakes could damage its reputation. The Chinese company is set to go public soon and is gearing up to be biggest initial public offering in U.S. history with analysts valuing the company at $187 billion.
While it is well-known how counterfeit products can negatively affect a brand by degrading the brand’s worth in the marketplace, its interesting to see how counterfeit products can negatively affect a retailer who is associated with selling these fakes in the marketplace.
Oftentimes, if a retailer is known for selling counterfeit items, the retailer is then seen as somewhat cheap and also untrustworthy. It becomes difficult to distinguish between what is genuine and what is a counterfeit. If a retailer is unable to properly regulate the sale of counterfeit goods on its site, and counterfeit goods are being misrepresented as genuine items, customers will begin to question everything that is sold on the site because they can’t be sure if what is being presented to them is genuine or not.
Similarly, being associated with counterfeit products can have severe legal implications for an e-commerce retailer. eBay and LVMH were in a heated legal battle since 2006 where LVMH alleged that eBay was complicit in the sale of counterfeit goods bearing the trademarks and names of several of LVMH’s brands. That lawsuit was recently settled but only after a lower court granted damages of nearly $20 million to LVMH, a sum which was lowered to nearly $3 million by an appeals court.
The details of the settlement are unknown, so we will never know what amount of money was exchanged, if any, but we can be sure that only a significant amount of damages and a proper system of measures to combat counterfeit would appease LVMH. The press that was created for eBay over the years from the lawsuit could have had a significantly negative impact on how consumers as well as the retail and fashion industries viewed the e-commerce giant. And, perhaps, seeing what a toll the lawsuit has taken on eBay, perhaps Alibaba realized that the best practice would be to take a stand against counterfeit products.
As mentioned above, what measures will be put in place to fight the sale of fakes on its e-commerce sites are unknown, but it will be interesting to see what exactly Alibaba does in the future. After all, it seems that the success of its IPO and reputation could be affected by its actions concerning the intellectual property rights of luxury brands.
- “Alibaba Cooperates With Kering On Fakes After Lawsuit Pulled,” Women’s Wear Daily.
- “Suit Against Alibaba Opens Windows on Issue of Counterfeiting,” Wall Street Journal.