Alibaba turns to tech to tackle counterfeit controversy

Alibaba logoAs Gucci owner Kering sues Alibaba over counterfeits, the Chinese company is hoping technology could restore confidence in its online marketplaces.

Alibaba has been fighting a rear guard action for months over the appearance of listings peddling counterfeit goods and in the latest development is taken to task by Kering - which also owns brands such as Yves Saint Laurent and Puma - for not doing enough to curb the problem.

This is the second time Kering has resorted to legal action against Alibaba. It sued the Chinese firm last year but withdrew the complaint after reaching an agreement to cooperate on measures to disrupt the illegal activity.

The resumption of legal action suggests Alibaba's promises to set its house in order - which include hiring a 2,000-strong team devoted to counterfeit listing takedowns and a system of random checks - are no longer convincing some of its trading partners.

Just last month, the American Apparel & Footwear Association (AAFA) has sent a letter to US Trade Representative (USTR) Michael Froman, complaining of "rampant proliferation" of counterfeit goods on Alibaba's TaoBao site. The online retailer insists it is putting the effort into the programme, which it says cost it $160m in 2013-2014.

Kering's suit accuses Alibaba of mail fraud and racketeering by processing payments for merchants on its sites even if they openly trade in knock-off items.

Alibaba chairman Jack Ma told a news conference earlier today of his "regret about [Kering's] choice to sue us and not to cooperate with us to fight against counterfeit goods," while a statement from the company described the action as "wasteful litigation."

Technological solution?

The company has just announced its intention to roll out smart labels - akin to QR codes - that can be applied to goods sold by vendors on its platforms. The codes are being supplied by Visualead, an Israeli start-up in which Alibaba bought a minority stake earlier this year, and will be supplied to merchants who request them at no cost.

Visualead's 'visual QR codes' are generated on top of images and are already being used by companies including Coca-Cola, McDonalds, Unilever and YSL, according to its website. The company recently launched a variant of the approach known as a 'dotless visual code' that will be used in a consumer engagement and anti-counterfeiting programme at Alibaba known as Blue Stars.

"When consumers scan the Blue Stars codes with Alibaba's … Taobao app they receive information about the specific product, such as feedback on the authenticity of the product they are holding or targeted online promotions directly from the product brand," said the Israeli company in a statement.

Each code is unique to each product, and scanning the code terminates it so it cannot be used more than once, according to the firm.

A movie illustrating how Visualead's platform operates can be viewed below:

Alibaba is launching the platform in partnership with brands such as cosmetics maker L'Oreal and chocolatier Ferrero, creating millions of packages with the code.

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