AAFA Pushes USTR, SEC to Tackle Pervasive Fraud on Alibaba's TaoBao

The TaoBao online service of Alibaba continues to peddle “innumerable” counterfeit goods on a daily basis, said the American Apparel and Footwear Association in an April 8 letter to U.S. Trade Representative Michael Froman and Securities and Exchange Commission Chairwoman Mary Jo White. Some AAFA members have been successful in forcing TaoBao to remove fake goods from the site, while other U.S. companies complain about the website’s “slow and cumbersome procedures” for removal, said AAFA in letters to the officials. “Even successes are short-lived as counterfeit products often reappear within hours or days of a take-down,” the letters said.

AAFA President Juanita Duggan urged Froman, in her letter to him (here), to include TaoBao in its 2015 Special 301 Notorious Markets List. Duggan criticized USTR for removing TaoBao from that list in 2012, and choosing to keep the website off the list for the two years to follow. Alibaba also is likely not a genuine partner in combating TaoBao counterfeits, said Duggan. “The slow pace has convinced us that Alibaba is either not capable of or interested in addressing this problem,” she said. “A strong message from USTR stating that the status quo will lead to the relisting of TaoBao in the 2015 report would send a clear signal that rhetoric without action will not be tolerated. We urge you to use every opportunity to deliver this message to officials from Alibaba and in other applicable intellectual property rights fora.”

Duggan pressured the SEC (here) to “increase scrutiny of Alibaba’s effort to police TaoBao for counterfeits,” particularly in light of the pledge Alibaba made in its initial public offering to strengthen fraud protections. “TaoBao should not be permitted to facilitate criminal activities while profiting at the expense of legitimate U.S. businesses. Increased attention from the SEC will be a powerful motivator in ensuring that efforts to eradicate TaoBao’s online piracy will be successful.”

AAFA is open to exploring the opportunity to strike a memorandum of understanding with TaoBao over the counterfeits, said the organization in an addendum to both letters, adding that AAFA urges TaoBao to launch a webinar program to shed light on the counterfeits. In that addendum, which summarizes AAFA concerns with TaoBao, AAFA says companies are reluctant to disclose sensitive information to TaoBao regarding the fraud. AAFA also complained of weak responses from local authorities that catch wind of the fraud, as well as a number of other concerns.