The USTR finally got around to blacklisting Alibaba.
That’s right, Alibaba’s Taobao flea-market boomeranged back onto the U.S. Trade Representative’s Notorious Markets List, a Scarlet-A register of websites and marketplaces accused of cozying up to counterfeiters.
Is the news a shock? Not really. Capitol Hill has been grumbling — loudly — about the site’s perceived piracy problems for years. (Actually, this is the second time Alibaba made the list.)
Alibaba: We Do A Lot To Fight Counterfeiting
Predictably, Alibaba isn’t thrilled. A company president admonished:
“We are far more effective and advanced in [intellectual property rights] protection than when the USTR took us off the list four years ago. The decision ignores the real work Alibaba has done to protect IP rights holders and assist law enforcement to bring counterfeiters to justice.”
Last year, Alibaba did expand anti-counterfeit efforts. And as it happens, because of those efforts, people are questioning this latest development (which we’ll get to below). But, according to the USTR, the company hasn’t done enough, explaining:
Will Alibaba’s Spot on the Notorious Markets List Affect Online Sellers?
So, what does “blacklisting Alibaba” mean for FBA and other online sellers? Very little, actually.
Yes, the Notorious Markets List is a government production — and we use the word “production” purposefully, because it’s really just a political theater prop; listed parties don’t suffer sanctions. Essentially, the Notorious Markets List is the USTR’s version of Santa’s naughty list.
That said, it is a reputation blow. If customers grow leery of regional products, it could effect folks who manufacturer products in China, or buy from Alibaba vendors.
Blacklisting Alibaba: Fair or Shortsighted?
Not everyone is praising the USTR’s decision.
On Forbes.com, Michael Zakkour explained why the decision might have been wrong.
While the designation does not carry any official sanction or penalty[,] it does have the effect of muddying the truth about Alibaba’s marketplaces and the important role the company is playing in the evolution of cross-border commerce and the re-imagination of the retail model.
First we must clarify that Alibaba has two major platforms for selling brands to Chinese consumers. Taobao is a platform for individuals and third party companies to sell merchandise on a C2C basis. The company’s B2C marketplace, Tmall, is the platform where global and Chinese brands create flagship stores to sell direct to consumers. Tmall, the more important platform to global retailers and brands, is virtually counterfeit-proof.
Zakkour also outlines his three arguments for why the USTR erred in blacklisting Alibaba.
Zakkour’s article is worth the read for anybody involved in cross-border e-commerce. For similar news, head to our online retail section.
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The Amazon counterfeit outbreak may improve! The online retailer has rallied the troops! After a whole lot of grumbling — and A-to-Z reporting — the online retailer is finally coordinating a campaign against counterfeiters. That’s right, e-commerce impresarios: Bezo’s behemoth has vowed to make “fighting phonies a major goal for 2017.” (And the crowd cheers, “HUZZAH!”)
The worldwide counterfeit crisis has hulked into a $500 billion epidemic, so Amazon’s efforts are welcome. But will it work? Can Amazon efficaciously fight product fraud? Moreover, what’s the attack plan? Is beefing up fraud departments — and vowing “zero tolerance for the sale of counterfeit items” — really going to work? Or is Amazon just tossing around PR platitudes to placate the people?
Why Is The Amazon Counterfeit Problem Growing?
Before we analyze Amazon’s counterfeit situation, let’s look at why the platform is morphing into a knockoff bonanza.
- Easy Signup: Online retail is fertile entrepreneurial soil, in part because the low barrier to entry. You don’t need a round of VC funding to start a private label e-commerce company. All it takes is hard work, a minimal cash outlay, and, in most cases, an Amazon account. (I say “in most cases” because Amazon is the largest online retailer in the country, but other platforms do exist. Amazon just happens to be the most popular.) Consequently, easy signup also attracts ne’er-do-wells. And since fraudsters tend to hop from account to account, catching counterfeiters can become a frustrating game of whack-a-mole.
- Where The Shoppers Are: Counterfeiters don’t make money unless people actually buy what they’re hawking. In other words, they need to be where people are shopping. Right now, that’s Amazon.com, Alibaba.com, Jet.com, eBay, Etsy, (and yes, we see you Walmart.com, climbing up the third-party online retail ranks).
Analysis: Will Amazon Be Able To Effectively Tackle Its Counterfeit Problem?
Vowing to war with fraudsters is fine — encouraging, even. But will the talk give way to tangible results? Will Amazon be able to shoo counterfeiters off its platform?
As we mentioned above, Amazon’s platform is both a blessing and a curse. Though startup costs are low, which is ideal for honest entrepreneurs, rakes are also drawn to the platform’s open borders — because evading capture becomes that much easier when you can duck and run without much monitoring.
Now, does that mean Amazon’s open platform is prohibitive when it comes to a counterfeit crackdown? No. If the company appropriately directs resources to account monitoring, inquiry research, user education, and customer service, change is possible. And, according to reports, it appears the online retailer is doing just that. Amazon announced plans to bolster its fraud departments and develop better ways to process counterfeit complaints and inquiries.
The Importance of Educating Consumers
Educating users about counterfeit issues is imperative. Studies have proven it time and again: When people know better, they do better. In other words, if it’s drilled into the public discourse that a) knockoffs weaken the economy and b) counterfeit products are more dangerous, then people will stay away. Educate consumers on the tell-tale signs of knockoff artists (sketchy return policies, rock bottom price, etc.).
Did A Failed Sport Merch Deal Spawn The Knockoff Task Force?
The chat on the street is that failed negotiations between Amazon and a pair of professional sports leagues kicked the online retailer into anti-counterfeit gear. Apparently, knockoff concerns stalled merchandise deals with the NFL and MLB.
Are We In The Midst Of An Amazon Exodus? Not Quite Yet.
Are brands leaving Amazon is droves? No. Not in droves. But the troops are growing restless, and some brands have jumped ship. To wit: Hippie footwear favorite, Birkenstock, recently peaced-out of Amazon, citing counterfeit concerns. Another example? At the end of 2016 — after a well-executed sting operation — Apple sued third-party sellers over branded power supply knockoffs.
Amazon Counterfeit: Tips for Fending Off Thieves
Since catching counterfeiters can prove taxing, are sellers struck by scammers automatically screwed? Not at all. Brands have successfully litigated against — and shut down — fake product purveyors.
But what’s better than winning an Amazon counterfeit lawsuit? Avoiding one altogether.
Certain tactics repel counterfeiters like citronella repels mosquitoes — (in other words, yeah, they mostly work; but a determined fraudster / mosquito will find a way).
Four Anti-Counterfeit Tactics
So, what’s the trick to shooing scammers? Well, counterfeiters prey on easy targets; so, become unattractive to crooks. How? Some suggestions:
- Vet the supply chain like your business depends on it, because it does! Find reliable manufacturing, design, and shipping partners. This is one of those times, in life, when paying a little more for a reputable manufacturer, will, in the long run, be more cost effective than the cheaper option (which will inevitably devolve into costly headaches).
- Use Amazon’s brand registry, even if you don’t sell on Amazon. Since it’s the world’s largest retailer, Amazon has its own brand registry program. Businesses can register brands directly with the site, which better allows Amazon to recognize and handle product hijacking issues if they arise. Moreover, brand registry gives sellers considerable control over the product page — another counterfeit deterrent.
- Customize the product packaging. Not only do people notice and appreciate a special “wrapping” effort, but the differentiation comes in handy for A-to-Z claims and counterfeit lawsuits. Moreover, customized packaging also works as a deterrent. Fraudsters prefer vulnerable targets, and it’s easier to copy something basic and nonspecific. (Hey, counterfeiters consider costs, too!) This is not to say that packaging must be expensive, just unique.
- Educate buyers. On websites and product pages, list the legitimate re-sellers and extol the dangers of cheap knockoffs. Heck, if you’re so inclined, point out counterfeiter’s slagging effect on the economy. Also, remind buyers that going cheap can be costly in the long run — because knockoffs are more likely to break or not work as advertised — (and try getting a refund from a fraudster).
Our Team Is Here To Help Your Team
The online retail market is exploding, which is fantastic. But with expansion comes new schemes, frauds, and business challenges.
That’s where we come in.
Our team — Aaron, Daniel, Raees, Hansen, and Rachel (a.k.a., Kelly / Warner Law) — help online sellers (both individuals and brands) overcome business impediments. In the past, we’ve successfully helped clients:
- Establish business entities for e-commerce ventures;
- Revive suspended merchant accounts;
- Remove defamatory reviews;
- Rectify payment processing issues; and
- Shutdown counterfeiters;
And yes, we’re priced with the online entrepreneur in mind. Give us a call. We may know the exact move to solve your problem quickly.
Politicians gavel’d H.R. 5111, the Consumer Review Fairness Act (CRFA), into federal law.
What does ratification mean for small businesses? Well, as a whole, not much, because the law only affects folks who use “gag clauses” to prevent defamatory reviews.
The Consumer Review Fairness Act = No More “Gag Clauses”
What the Act doesn’t say is this: “It’s perfectly legal to post defamatory online reviews.”
Instead, the statute invalidates contract provisions transferring copyright ownership of online reviews.
What do intellectual property rights have to do with online review defamation?
Well, over the past several years, to mitigate the impact of inaccurate, business-crushing rants, some businesses used contracts with online review parameters.
Here’s a hypothetical example of how it typically worked:
Dentist Amy performs patient Todd’s root canal. Before the procedure, Amy makes Todd sign an agreement — which is standard practice. But what makes Amy’s contract different is the intellectual property clause. You see, Amy’s agreement confers copyright ownership, of any future online reviews about her dental practice, from Todd to Amy. So, let’s say, in a fit of expected discomfort the day after the procedure, Todd posts lies about Amy’s work, despite her having done a perfect job. On account of the agreement, Amy could, theoretically, have proven herself “owner” of the comment and gotten it removed.
But the Consumer Review Fairness Act changes all that. Amy’s (hypothetical) contract — and countless others out there just like it — are no longer valid because the CFRA renders “certain clauses of a form contract void if it prohibits, or restricts, an individual from engaging in a review of a seller’s goods, services, or conduct.”
Reactions to the Consumer Review Protection Act
In praise of the new law, Hawaiian Senator Brian Shatz said:
“Reviews on where to shop, eat, or stay on websites like Yelp or TripAdvisor help consumers make informed choices about where to spend their money. Every consumer has the right to share their honest experiences and opinions of any business without the fear of legal retaliation, and the passage of our bill brings us one step closer to protecting that right.”
Yelp also seems pleased with the Consumer Review Fairness Act. Laurent Crenshaw, the company’s Director of Public Policy, enthused:
“While these clauses aren’t everywhere, when people hear about them, it does create a chilling effect and that’s something we’ve been concerned about and were very glad that Congress has taken steps to eliminate.”
You Can Still Sue Over Defamatory Online Reviews
The Consumer Review Fairness Act doesn’t prohibit small business owners from suing over genuinely defamatory reviews. Comments featuring false statements of fact, which materially harm businesses, may still be actionable. So, if you’re the victim of a libelous review, don’t throw your hands in the air and give up. You may be able to remedy the situation, legally.
Speak with a consumer review defamation attorney to discuss your situation and explore solutions.