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AAFA Calls for Alibaba's (BABA) TaoBao to be Listed as 'Notorious Market'

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October 6, 2015 7:59 AM EDT

Alibaba (NYSE: BABA) is on watch Tuesday after the American Apparel and Footwear Association posted the following to its website on Monday:

Synonymous with counterfeits, Alibaba's fast-growing ecommerce site TaoBao has long been criticized for allowing the sale of fakes, especially of clothing, shoes, and handbags. Today, the American Apparel & Footwear Association called for TaoBao to be relisted as a Notorious Market.

Although the U.S. government removed the company from its "Notorious Markets" list of the most egregious violators in 2012, it did so under the condition that TaoBao improve its practices. AAFA says those improvements have not been made.
"Our members face enormous difficulty working with TaoBao in solving the problem of counterfeits, meanwhile illegal merchandise continues to proliferate," said President and CEO of AAFA, Juanita Duggan.
Duggan added, "These problems persist despite our repeated efforts to work with them. The sheer volume of counterfeits on the site as reported by our members, along with the company's unwillingness to make serious reforms is why, after three years, we feel it is necessary to recommend that TaoBao be added back to the list and that the U.S. elevate the pressure on them to make substantive, measurable improvements to the counterfeit problem."
The annual Notorious Markets list, prepared by the Office of the United States Trade Representative (USTR), identifies "select online and physical marketplaces that reportedly engage in or facilitate substantial copyright piracy and trademark counterfeiting."
The comment period, which ends today, allows the public and industry sectors to submit its recommendations based on first-hand experience.
In its submission, AAFA explained, "In the 2013 and 2014 reports, USTR continued to urge TaoBao and Alibaba to work with the apparel and footwear industry to address our industry's serious concerns, particularly those involving small and medium sized enterprises that do not have access to costly enforcement resources...Our concerns have not been addressed. Counterfeits remain rampant on TaoBao and are often found on other Alibaba sites."
AAFA's submission follows complaints regarding the slow, sluggish, and confusing systems TaoBao uses to process takedown requests. In April, AAFA sent formal complaints to USTR and the Securities and Exchange Commission calling attention to the issue. In July, the Association wrote to Alibaba Executive Chairman Jack Ma and called on him to work with AAFA on new, transparent, and easy-to-use takedown procedures - Alibaba did not respond to that call.
"The size and scope of the counterfeit problem for our industry is why we've taken such a stand on this issue, and why we will continue to assert pressure on marketplaces that sell, encourage, or advertise fakes," said Duggan. "Theft of these products inflicts both reputable and financial harm to our companies, and the apparel/footwear industry is the number one victim - approximately 80 percent of Customs seizures are fashion-related."
AAFA also called out several other marketplaces, both online and physical markets, including in China, Mexico, Uruguay, Thailand, Ukraine, Spain, Turkey, United Arab Emirates, India, and Vietnam.

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