Alibaba quashes counterfeit cosmetic racket with tip off

China's e-commerce giant Alibaba has tipped off the country's police to a suspect counterfeit cosmetic racket resulting in the seizure of fake products worth more than $2.9m.

Police busted the counterfeit ring operating out of a warehouse in Nanjing, seizing 4,000 fake luxury-brand cosmetics, including Jo Malone and CK look-alikes, and arresting four people on suspicion of illegal activity. A further six people are being sought for their involvement.

The authorities found a selection of creams and serums that were being manufactured and packaged in unhygienic conditions at the warehouse. Some products were completely fake, with bogus contents and packaging, while other products reused original packaging, passing the fake contents off as authentic.

"They would take the recycled bottles and soak them in a bucket on top of the toilet, use their hands to scoop product into the containers and package that as their 'product'," a Nanjing hygiene department investigator told WWD.

WWD claims many of the products bought off the online store were resold.

The raid follows information Alibaba shared with police based on suspect online activity it had picked up. The first suspicions tipped to the police were aroused in October 2016 when one online store appeared to possibly be dabbling with the counterfeiting of high-end skincare products. Further big data analysis by Alibaba unveiled an operation that was counterfeiting premium brands including La Mer, Jo Malone, CK and SK-II.

Alibaba has received a raft of criticisms over the prevalence of counterfeits sold on its platform but in recent times it has ramped up efforts to address the issue. This has seen the establishment of an anti-counterfeiting operation using big data to not only identify sellers of fake products but to also trace production back to its source. The information is then shared with authorities and counterfeit operations can be closed down.

The firm believes the use of big data and analytics is one of the main tools to fight counterfeits. Through its anti-counterfeiting operation, it is using a variety of technologies, including complex algorithms, machine learning, optical character recognition and mapping technologies to identify conmen and scan 10 million product listings a day.

Last year, the online marketplace celebrated success of the endeavour when, as a result of Alibaba information, more than 400 suspected counterfeit rackets were busted, arresting 332 suspects and seizing fake goods worth $207m.

This isn't the only measure the e-commerce site is employing to fight fakes on its platforms. In January, it joined forces with 20 brands including Louis Vuitton and Samsung in the Alibaba Big Data Anti-Counterfeiting Alliance, which aims to collaborate and use technology and big data to bring down counterfeiters.

Earlier this month, brands involved in the Alliance initiative spoke of the progress already being made. According to Bioderma, more than 15 per cent of links on Alibaba's Taobao suspected of selling knock-offs of the skincare products were confirmed as fakes. "We believe the accuracy rate will keep rising under the mechanism of the alliance when we share more information of our products with Alibaba to help it build a more holistic big data model to distinguish counterfeit goods," Wang Liping, chief legal officer of Bioderma said.

Alibaba has also sued several vendors alleged to be selling counterfeits online in the hope that sustained court action will act as a deterrent.

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