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Alibaba's Jack Ma drops out of IACC conference in spat over anti-counterfeiting efforts

Haze Fan | Special to CNBC
Anti-counterfeiting group suspends Alibaba
Anti-counterfeiting group suspends Alibaba

Alibaba has hit out at the U.S.-based International Anti-Counterfeiting Coalition (IACC) for scrapping its membership, pulling the plug on founder Jack Ma's high-profile appearance at the anti-fakes group's summit.

The Chinese e-commerce giant also embarked on a media campaign in China, in which it trumpeted its fakes-busting success and accused the IACC of being "kidnapped by the personal interests" of some of its members.

In an English-language statement, Alibaba's head of international corporate communications Jennifer Kuperman called the decision to drop Alibaba from the IACC, just a month after it was offered membership to the global fakes-fighting group, a "step in the wrong direction and regrettable."

In the statement, Kuperman said intermediaries such as Alibaba had an integral role to play in preventing the sale of fake branded goods, and that its sales platforms had a "zero-tolerance policy" on counterfeit products.

"Unfortunately, those who pressured the IACC on this decision prefer a confrontational approach: pitting brands against Alibaba and other industry participants in the hopes of prolonged litigation," she said.

An employee walks past the Alibaba logo at the company’s headquarters outside of Hangzhou, China.
Buying counterfeit goods on Alibaba's platforms is easy, proving it is harder

Kuperman was referring to high-profile brands including Michael Kors Holdings, Gucci America and Tiffany & Co, that quit the IACC in protest of Alibaba's membership. The IACC backed down on Friday on its decision to allow Alibaba to join, after reportedly being threatened with further departures.

In the statement, Kuperman said that as a result of the IACC's decision, Alibaba felt it was best that founder and executive chairman Ma did not appear at the IACC's Spring Conference, which is due to kick off in Orlando, Florida, on Wednesday. Ma had been due to deliver a speech at the conference, with his attendance promoted prominently on the IACC's website.

"We have informed the IACC of our decision, and are pleased to announce that the president of Alibaba Group, Michael Evans, will represent Alibaba at the conference," Kuperman said.

A Chinese-language statement from Alibaba, which appeared widely in Chinese media on Wednesday, was more strongly worded. Chinese media had described the episode as "humiliating" for one of the country's corporate giants.

"No organization should be controlled by internal political struggles, and no organization should be kidnapped by the personal interests of some individual enterprises," the statement said.

"In fact, Alibaba has become the most important and advanced anti-counterfeiting force worldwide. Today the counterfeits groups may be afraid of the police the most, but what they hate the most is actually Alibaba," it added.

Alibaba vows to keep fighting fakes despite IACC snub

Chinese media outlet also ran a question-and-answer interview with Zheng Junfang, Alibaba's deputy chief financial officer and the head of the company's intellectual property rights protection and anti-counterfeits division.

Zheng told that in past year Alibaba had identified 3,518 suspicious groups making or selling fakes, helping the police to nail 300 suspects and seize counterfeit goods worth 816 million yuan ($125.5 million).

"It's fair to say that Alibaba is devoted itself in anti-counterfeiting even with extremely high cost," she said, according to the report. "The fake products we have intercepted or eliminated in a year far exceed the total amount of all kinds of offline operations combined for the past 30 years."

On April 13, Alibaba became the first internet retailer to join the group under a new membership category designed for intermediaries.

But in a letter to the IACC, cited in a Wall Street Journal report on April 28, Michael Kors' legal counsel Lee Sporn described the decision to admit Alibaba to the IACC as giving "cover to our most dangerous and damaging adversary." The WSJ reported that as many as two dozen other IACC members had supported Michael Kors' stance.

The retailers claimed that Alibaba has failed to prevent the widespread sale of counterfeit branded goods on its platforms, Taobao and Tmall.

Gucci, Yves Saint Laurent and other brands held by Paris-based Kering filed a suit in New York in May 2015, alleging that Alibaba had knowingly made it possible to sell fake products, Reuters reported.

Announcing the suspension of Alibaba's membership on May 13, the IACC's board said that the move was "in consideration of some of the concerns raised by our membership." The IACC did not immediately respond to a request for comment on Alibaba's latest statement.

Ma has repeatedly pledged to crack down on the fakes trade, which he has said was a problem across China, not just on Alibaba's platforms.

Before its suspension from IACC, Alibaba announced a new measure to crack down on fake products on Taobao, its largest sales platform. Alibaba said it would "re-regulate" stores that sold luxury brand products by requiring them to provide specific proof, such as invoices and letters of authorization from the brand, that the goods were legitimate.

Taobao would independently verify this evidence and only then grant stores the right to sell, Alibaba said, while non-compliant sellers would face punishments including forced product removals and even store closures.

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