Dive Brief:

• United States Trade Representative Michael Froman on Wednesday announced that Chinese e-commerce giant Alibaba's Taobao marketplace has been added to its list of so-called Notorious Markets for 2016.

• Taobao "is an important concern due to the large volume of allegedly counterfeit and pirated goods available and the challenges right holders experience in removing and preventing illicit sales and offers of such goods,” according to the USTR report.

• “We are very disappointed by the USTR’s decision to include Taobao on its ‘notorious markets’ list, as we are far more effective and advanced in [intellectual property rights] protection than when the USTR took us off the list four years ago,” Michael Evans, president of Alibaba Group, said in a statement emailed to Retail Dive. “The decision ignores the real work Alibaba has done to protect [intellectual property] rights holders and assist law enforcement to bring counterfeiters to justice.” Evans attributed the decision to U.S. politics.

Dive Insight:

The Notorious Markets List aims to pressure companies to institute reforms and to arm authorities with information to pursue legal action where appropriate, the report states. In the past, companies named to the list have stepped up efforts to combat the problem. “Following the release of the 2015 List last December, some market owners and operators have made notable efforts to address the widespread availability of pirated or counterfeit goods in their markets,” according to the report. “The United States commends these efforts and urges all relevant markets and governments to build on this progress.”

Last year, the trade representative’s office warned Alibaba that its marketplaces Tmall and especially Taobao needed to work harder to excise counterfeits, but didn’t name Alibaba on its blacklist. “Brands continue to report that Alibaba Group’s enforcement program is too slow, difficult to use, and lacks transparency, the 2015 report said. “Brand owners continue to report Alibaba platforms, particularly Taobao, are used to sell large quantities of counterfeit goods.” 

In its latest report, the USTR noted that Alibaba had taken some steps to address rights’ holders concerns, but said the moves failed to adequately stem the problem. “While recent steps set positive expectations for the future, current levels of reported counterfeiting and piracy are unacceptably high,” the report states. “Not only do counterfeit and pirated goods pose a grave economic threat to U.S. creative and innovative industries, undermining the Chinese and global market for legitimate U.S. products, substandard counterfeits such as auto parts pose a potential public health threat to unsuspecting consumers.”

The USTR is not the only force dialing up pressure on Alibaba. This year several brands complained that counterfeits remain rife on its sites, and that Alibaba’s systems to lodge complaints are cumbersome and ineffective. Global trade groups also lobbied the USTR to return Alibaba to the Notorious Markets List.

“We are encouraging this step because of the enormous number of counterfeits that persist on Alibaba platforms, most notably [online marketplace] Taobao, but also on other platforms such as AliExpress,” a collective 18 trade groups (including the Federation of the Swiss Watch Industry, the Council of Fashion Designers of America and the Travel Goods Association) said in a recent letter. 

President-elect Donald Trump also has criticized China generally over currency manipulation and other matters, and Evans implied Wednesday that has much to do with Taobao’s listing. “In 2016 alone, we proactively removed more than double the number of infringing product listings than in 2015,” Evans said. “It is therefore unreasonable for the USTR to have concluded that Alibaba is less effective in anti-counterfeiting than when it reviewed our efforts in 2015 and when it removed us from its list four years ago. 

“Unfortunately, the USTR’s decision leads us to question whether the USTR acted based on the actual facts or was influenced by the current political climate,” Evans continued. “Nevertheless, the decision sends the wrong message and is inconsistent with the effective collaborative approach we have taken with brands and governments around the world in our fight against counterfeiting.”