The United States Labels Alibaba’s Chinese Ecommerce Website Taobao A Notorious Market
In December 2018 I asked whether Alibaba has done enough to avoid being included on the US Notorious Markets List.
On April 25th, the Office of the United States Trade Representative provided the answer. Alibaba’s flagship marketplace “Taobao.com”, for the third-year running, is a ‘notorious market’. For those in the United States at least.
Previously I related the ongoing trade war between the US and China as the motivating factor behind Taobao’s inclusion. The trade war association is obvious given the source and purpose of the List, however, the prevalence of counterfeits and knock-offs on Taobao is well-known, remaining a stubborn issue for Alibaba to counter despite their claim of being “an industry leader in the protection of intellectual property”. The report does justify the inclusion of Taobao with examples from the US automotive industry and SMEs, and Alibaba’s apparent failure to address issues highlighted in the 2017 List.
Now the 2018 out-of-cycle review is complete I will re-examine my own assertion and ask – does citing highly-publicised political puffery as the cause of inclusion gloss over genuine harm suffered by brands and rightsholders?
What Is A Notorious Market?
The Notorious Markets List is part of the yearly review of piracy and counterfeiting trade-related activity impacting the US economy “by undermining the innovation and intellectual property rights of U.S. IP owners in foreign markets.” as stated by the accompanying press release to the report. The report makes it clear that the findings or inclusion on the List is not an identification of legal violations, however, Alibaba does not dispute that fact IP violations do occur across their platforms, including Taobao. Therefore, the List aims to use the spotlight of transparency to influence changes from the shamed platforms to improve brand enforcement mechanisms and digital rights protections.
In terms of scope, the approach of the List is broad, covering platforms such as digital marketplaces, torrent indexes, technology designed to circumvent digital rights management, state-backed operations engaged in satellite piracy and technical intermediaries facilitating illicit trade of fake medicines. The benefit in casting a wide net is to capture the full spectrum of counterfeit and piracy issues reported by rightsholders of all size and sectors. A narrower approach would likely exclude smaller rightsholders, which typically have less access to resources designed to facilitate the removal of online IP infringements. The only real exemption is US-owned platforms, given the report scope focuses on issues relating to international trade.
Mixing examples of criminality with legitimate online platforms within a single list inevitably leads to intra-cohort comparison – platforms will distinguish their behaviour from the worst offenders to demonstrate the injustice of their inclusion. In the words of Alibaba “The credibility of the Notorious Markets report depends on ensuring that the list differentiates between enterprises that were conceived to promote illicit trade and those that are legitimate marketplaces.”. However, the List does not differentiate platforms by type or purpose, bundling Taobao alongside beoutQ and The Pirate Bay. Neither does the List categories in terms of priority, unlike the Special 301 Report (focused on countries which “do not adequately or effectively protect and enforce intellectual property (IP) rights)”, which splits countries into either the ‘Watch List’ or ‘Priority Watch List’. As such, the credibility of the platform depends on careful evaluation of information provided during the public consultation and credible analysis contained in the report regarding each platform.
The Taobao Question
For those not aware, Taobao is part of the Alibaba Group, the Chinese technology giant, which also owns the international ecommerce platforms “Alibaba.com” and “AliExpress.com”. Furthermore, the Group also owns and invests heavily in ecommerce platforms in South East Asia, including the management-troubled Lazada Group and Tokopedia, also of 2018 Notorious Markets List fame. The Chinese tech conglomerate is more than just a collection of ecommerce platforms, other leading services are Alibaba Cloud and Alipay, both market leaders in China.
Taobao focuses on the domestic market with limited support for shipping outside of mainland China. Taobao is not only the biggest ecommerce platform in China, but the biggest globally and has orchestrated the largest online shopping event – Double 11 Day.
So how has the world’s largest ecommerce platform ended up side-by-side with the world’s most outspoken pro-piracy platforms such as Sci-Hub and The Pirate Bay?
Counterfeits, Counterfeits Everywhere
Through the consultation process brands and rightsholders cited the proliferation of counterfeits on online marketplaces being the major concern impacting their digital IP strategy. It was noted consumer-to-consumer platforms, such as Taobao, are particularly problematic. In terms of Taobao specifically, the report refers to press coverage claiming the platform features large volumes of infringing product.
The press reports are cited to support the claims of SMEs “who continue to express concerns over ineffective takedown procedures, burdensome enrollment requirements for a Good Faith program that reduces the evidentiary burden for takedown requests, and Alibaba’s delays in responding to SMEs.”. Larger rightsholders also contributed to Taobao’s notorious market designation, with the automotive industry continuing to raise issues of counterfeit parts being listed for sale. Most worryingly this includes safety components such as air bags which raise a serious consumer-safety element which must be taken into consideration.
Given the feedback from the 2018 consultation process and previous issues raised which rightsholders do not feel Alibaba adequately addressed over the past year, the List provides five action points for Alibaba to implement:
- Extending the ban on automotive air bags and components to Taobao.
- Enforcing existing policies on automotive parts.
- Improving the repeat-infringer policy effectiveness.
- Seeking input from SMEs directly, rather than via trade associations.
- Improving tools to prevent unauthorised use of images.
“Alibaba is a global leader in IP protection, not a notorious market.” – Alibaba
Whilst the case for inclusion of Taobao on the List is clearly set out, the five points of action are troubling. A careful assessment of Alibaba’s measures to reduce the level of IP infringements and improve brand enforcement capabilities on Taobao must be considered.
Points 2-5 relate to existing policies or practices Taobao already undertake. Taobao, as with all Alibaba platforms, have the clearest published repeat-infringer policy of all the major ecommerce platforms, applying a “tough, consistent three-strikes penalty” to permanently ban merchants found to be infringing IP rights. Across all Alibaba platforms the three-strikes policy is clearly set-out, for Taobao, in Chinese, but available in English for the international Alibaba and AliExpress websites. Major US counterparts Amazon and eBay both refuse to publish an equivalent policy, with merely outline statements about applying a repeat-infringer policy available online. Other highlighted concerns such as improving the unauthorised use of image also raises cause for concern, given the demonstrated levels of pro-active takedowns by the platform applying market leading algorithmic approach to identifying potential listings which contain IP infringements before the listing is made publicly available.
The report’s action points are revealing in a few ways, firstly regardless of Alibaba’s outreach program, the company has more to do in terms of reaching SMEs and even large rightsholders to explain their digital rights protection tools and options. Secondly, Taobao is being held to an unreasonable standard whereby all US rightsholders seek to have the ability to remove any listing without providing an evidential basis.
Having tiers of evidential requirements for IP owners based on their submission track-record provides assurance the brand enforcement tools and lower burden of proof will not be abused. Amazon’s recent announcement of Project Zero attests to this point, which is a welcomed extension of the standard ecommerce practice in offering and operating a ‘good-faith’ or ‘trusted reporter’ system. Alibaba’s extended access to their good faith program via trade associations enabling SMEs the benefits of the program prior to the rightsholder reaching the acceptance criteria in terms of submission history. This approach was to facilitate efficient removals for smaller rightsholders whilst maintaining the integrity of the good-faith program. However, it has backfired on Alibaba, being used as a point of inclusion for Taobao on the List.
Effective Brand Protection Measures
Addressing the five action points from the report is unlikely to significantly offer brands greater rights enforcement mechanisms. But Taobao can, and should, continue to improve IP rights protections given the scale of counterfeits and knock-offs available on the platform. As the world’s largest ecommerce platform, it has a responsibility to create an online environment where the rights of brands and merchants are respected.
Some alternative action points:
- A general ban items with obvious consumer safety element, with the exception of verified merchants using a higher standard of due diligence such as applied to merchants on Tmall, along with stricter enforcement penalties for verified merchants.
- Improve training for brand owners to ensure they can effectively protect their brand across all Alibaba platforms. Whilst Taobao is a domestic ecommerce platform, Alibaba recognise the value of foreign brands being made available and should provide translated versions of Taobao’s policies, including repeat-infringer policy and enforcement reason codes for submissions of IP complaints.
- Simplify the IP infringement submission process by reducing the number of infringement reasons from over 30 to a reasonable level in line with comparable platforms i.e. Amazon or eBay. The excessive number of submission reasons is burdensome and causes errors in submissions, which is then expressed as in terms of the Taobao has having ineffective takedown procedures or not enforcing their own stated policies.
Political Scapegoat Or Notorious IP Infringer
As per the process undertaken by the USTR in compiling the List, much like the European Commission’s version, it is impossible to conclude whether the inclusion of any platform not obviously illegitimate is fair, or motivated by other influences. The report asserts deficiencies in Alibaba’s statistics, as they are non-US specific and are not isolated to Taobao but cover all Alibaba platforms. However, Taobao could easily make similar accusations of poor data collection underlying the specific concerns raised in the report.
The List would do well to start differentiating between included platforms in terms of type and purpose, or at a minimum, priority level. Otherwise the credibility of the List does face being undermined with the inclusion of legitimate, US publicly traded companies such as Alibaba included alongside clear examples of criminality. The report also states an approach of raising concerns to certain platforms on a bilateral basis if they are not included on the List but still require improvements in digital rights protection. Given the willingness of Alibaba to implement strong IP policies, create their own anti-counterfeiting alliance including over 130 brand owners and even litigating against IP infringers across their platforms, the inclusion of Taobao stands out.
To read the full report from the USTR:
https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/april/ustr-releases-annual-special-301
