SHANGHAI -- The prospect of sitting in a Hyatt Regency ballroom in Florida and listening to Jack Ma, founder of Chinese e-commerce giant Alibaba, deliver the keynote for the International Anti-Counterfeiting Coalition's conference this month did not sit well with Michael Kors' general counsel.
In fact, Ma's imminent speech -- and the coalition's April decision to welcome Alibaba as a new member -- so incensed the U.S. luxury brand that it severed its longstanding connection with the Washington-based industry group.
"[The coalition] has chosen to provide cover to our most dangerous and damaging adversary," Lee Sporn, general counsel for Michael Kors, wrote in an April 21 letter to the coalition's executive board. Sporn said employees would be banned from attending coalition events as long as Alibaba is a member and ordered the brand's name scrubbed from all coalition materials.
The uproar sparked by Alibaba's inclusion in the coalition, which counts Apple, 21st Century Fox and Procter & Gamble among its more than 250 members, calls fresh attention to the role Alibaba plays in the multibillion-dollar global counterfeiting industry -- a question that has become more pressing as the company pushes to take its e-commerce juggernaut global.
Supporters of Alibaba defend the company by arguing it provides livelihoods to multitudes of entrepreneurs who set up shop on the company's e-commerce platforms.
For many, Ma is a folk hero, a self-made billionaire who couldn't get a job at Kentucky Fried Chicken but managed to transform an idea hatched in his modest living room into the largest public stock offering in history. Detractors, however, say he built his empire on a foundation of fakes, and that his U.S.-listed company continues to facilitate large-scale, global criminal enterprise.
"Alibaba's strategy has consistently been to provide lip service to supporting brand enforcement efforts, while doing as little as possible to impede the massive flow of counterfeit merchandise on its platforms," Sporn wrote in the letter, first reported by The Wall Street Journal last week and obtained by The Associated Press.
"By admitting Alibaba as a member and applauding Mr. Ma's appearance at the Spring Conference, you give Mr. Ma a powerful tool to speak to brand owners and regulators about his efforts to work collaboratively and effectively with brand owners -- in the experience of many of your members a shockingly brazen lie," Sporn continued.
Alibaba on Thursday reported $3.7 billion in quarterly revenue, a 39 percent jump from the prior year period, and 423 million active buyers a year. It maintains that it diligently fights fakes, employing hundreds of full-time anti-counterfeiting staff and spending tens of millions of dollars to purge its platforms of counterfeit goods.
Alibaba said in an emailed statement that coalition membership would allow it to work more closely with brands to enforce intellectual-property rights.
"The war against counterfeits can only be won when all industry players join forces," Alibaba said. "We are part of the solution."
But frustration with Alibaba's anti-counterfeiting efforts has been building.
In December, the United States Trade Representative warned it was "increasingly concerned" that large quantities of counterfeit goods are still sold through Alibaba's platforms and that enforcement operations are too slow, difficult and opaque.
Some brand owners go even further. Gucci America -- also a member of the coalition -- alleges in a lawsuit that despite Ma's tough talk on fakes, the sale of counterfeit goods is, in fact, part of Alibaba's core business. Alibaba dismisses the case as "wasteful litigation." The Kering Group, which includes Gucci, declined to comment.
"Alibaba can be a force for evil or a force for good," said Dan Plane, a director at Simone IP Services, a Hong Kong intellectual property consultancy that is also a member of the coalition. "If you don't let them in the room and hold their feet to the fire," he added, "you're missing an opportunity."
Still, he conceded, "It's taking a risk. You can imagine people bringing rotten eggs and tomatoes to the event with Jack Ma and saying, 'Do you know how much you're costing us each year?'"
The coalition's board, in an April 29 letter to members obtained by the AP, noted that it created a special category of membership for Alibaba, which is subject to annual review and is barred from holding leadership roles or voting.
The board wrote that the intellectual-property community and Alibaba "are keenly aware that the platforms' problems remain severe." It said Alibaba's membership "is an acknowledgement of a mutual commitment by the [coalition] and Alibaba to continue their engagement to find effective solutions to rights-holders' concerns."
Alibaba is already a member of the International Trademark Association, which says it has more than 6,700 members -- including Michael Kors, which declined to comment for this story.
Alibaba "hired a lobbyist and are giving speeches, they're joining organizations. That's progressive, but it's also smoke," said Rick Helfenbein, president of the American Apparel and Footwear Association, which has lobbied U.S. authorities to sanction Alibaba. "They have yet, in our eyes, to exhibit the will" to fight counterfeiting, he said. "Anything else they do really doesn't much matter."
Business on 05/06/2016