INTERNET: US Industry Group Attacks Alibaba on Piracy
Bottom line: A US trade group’s statement criticizing Alibaba’s anti-piracy efforts reflects widely diverging views between the company and its critics, and could see Alibaba’s name return to the annual US list of “notorious” piracy sites.
I’ve written several times about the difficult task that leading e-commerce site Alibaba (NYSE: BABA) will face in maintaining its status as a friend of Washington in the battle against piracy, following a major scandal earlier this year involving the rampant sale of fake goods on one of its main websites. Most news has involved steps Alibaba is taking to boost its chances of staying off an annual list of “notorious” websites for piracy, which is published annually by the Office of the US Trade Representatives. But now we’re getting a taste of the opposition Alibaba will face in that battle, with a major US trade association blasting the company for shortcomings in its anti-counterfeiting policies.
Frankly speaking, I’m just slightly surprised that other groups haven’t come out with similar statements to the one just issued by the American Apparel & Footwear Association (AAFA), which represents more than 1,000 clothing and shoe makers. After all, many such trade groups representing major retail brands must also be quite unhappy with Alibaba if the earlier Chinese government report showing that nearly two-thirds of the goods sold on the company’s popular Taobao marketplace were fakes.
But the AAFA’s statement certainly compensates for the lack of other attacks so far, and is quite scathing in its condemnation of Alibaba’s anti-piracy efforts. The association’s statement characterizes Alibaba’s response to the problem as flawed, slow and cumbersome, and uses many other negative adjectives. (AAFA statement)
It also criticizes Alibaba for its lack of transparency in the anti-piracy battle, and says the company needs to show more evidence of what it’s doing to the brands whose products are being counterfeited. To make sure that Alibaba is clear about potential consequences of failing to respond to its criticism, the AAFA adds that it has sent letters detailing its dissatisfaction to US securities regulator and also to the US trade representative’s office.
Unusually Blunt
I frequently write about this kind of clash, and can honestly say it’s rare to see such a blunt and harsh criticism released in such a public way. That probably means the AAFA has tried to negotiate with Alibaba behind the scenes to reach an agreement that will satisfy both sides, but was clearly unhappy with what Alibaba was offering. One media report said Alibaba responded by saying it hadn’t seen the AAFA statement yet, and that it had been working with the group since 2012 on how to collaborate in the anti-piracy war. (English article)
The AAFA’s statement comes after Alibaba has taken several big steps to try and ensure it will stay off the next edition of the “notorious” list that is likely to be published in about a half year’s time. The company has built up a team of high-powered lobbyists with strong Washington connections, and has also issued a number of statements forming new alliances and reaffirming older ones with major trade groups to show its commitment to fighting piracy. (previous post)
This latest statement shows that Alibaba’s goal of staying off the “notorious” list is far from guaranteed, and that at least some trade groups are using their leverage to try and get more concessions from the company. Out of everyone involved, the US trade representative’s office is probably feeling the most pressure. That’s because its approval of Alibaba’s anti-piracy efforts over the last 3 years looked quite flawed after China’s own commerce regulator released its report early this year detailing how rampant piracy was on Taobao.
All of these factors mean there’s quite a strong possibility that Alibaba’s name could be added back to the US “notorious” list when the new edition comes out, despite the company’s best efforts to prevent such an outcome. Such a development would undoubtedly become another mini-scandal, putting further pressure on Alibaba and its stock, and forcing it to take stronger measures to clean up Taobao.
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