Dive Brief:

• Washington, DC-based International AntiCounterfeiting Coalition (IACC) Friday suspended Alibaba Group's membership after an outcry from global brands and members over its inclusion.

• Gucci America, Michael Kors, and, more recently, Tiffany & Co. left the group after Alibaba joined, saying it was providing cover to the Chinese e-commerce giant’s marketplaces, where counterfeits are rife. Alibaba founder Jack Ma was also scheduled to give the keynote address at the group’s spring conference this month.

• After the flap, several member brands have questioned the group’s corporate governance procedures, including the fact that its board president has significant ties to Alibaba, which wasn’t disclosed. Its board said it will hire an independent review.

Dive Insight:

The IACC has more than 250 members, including Apple and Chanel, and at first remained steadfast about Alibaba’s inclusion in the group, saying that marketplaces, including any with problematic counterfeit records, need to be “part of the solution.”

But any value in that notion has been undermined by disclosures that the IACC’s president, Robert Barchiesi, has invested in Alibaba since its 2014 IPO and has close ties to an Alibaba executive. The revocation of its IACC membership is largely a symbolic setback for the company, but a sign nevertheless of how troubling its counterfeit sales are.

Avoiding the United States Trade Representative’s blacklist of notorious markets last year was a victory of sorts for Alibaba, especially since the agency noted then that the company has taken “meaningful” steps to address the problem. But the agency also clearly wants to keep pressure on the Chinese retail company to improve its record in battling counterfeits on its sites.

The problem continues even as Alibaba has worked to increase the number of American brands that sell on its marketplaces. While selling through Alibaba has been a handy way for brands to reach the huge Chinese consumer market, the prevalence of counterfeits is a major concern.

“Tens of millions of American jobs and several trillion dollars of our gross domestic product rely on American creative and innovative industries,” U.S. Trade Representative Michael Froman said in a statement in December.  “Our Notorious Markets List is a unique tool that highlights key examples of markets all over the world - increasingly digital markets - that are linked to significant infringement of American businesses’ intellectual property rights. The 2015 List has a special emphasis on emerging marketing and distribution tactics in Internet-based counterfeiting, which reportedly not only harms legitimate trade but poses risks to consumer health and safety.”