Alibaba Sues Taobao Merchant For Fake Mars Food

Alibaba sues counterfeit Mars pet food merchant on its own platform

Alice Dong, Intellectual Property Department   

On March 8th 2017, the Chinese e-commerce company Alibaba Group filed a lawsuit against one Taobao merchant at the People’s Court of Fengxian District, Shanghai. Alibaba claimed that the merchant selling counterfeit Mars pet food on the Taobao platform constituted a breach of contract and a violation of goodwill, demanding RMB 2.67 million ($0.38 million) and a written public apology.

This is not the first time that Alibaba took merchants to court for selling fakes on Taobao. Earlier this year, Alibaba sued two sellers allegedly selling fake Swarovski watches on its platform, and asked for RMB 1.4 million ($0.2 million) in damages.

Background of the Case

Global e-commerce giant Alibaba has long faced criticism over an astronomical number of counterfeit and infringing products offered for sale and sold on its platform. Last May, Alibaba was shamefully forced to leave the International Anti-counterfeiting Coalition (IACC) only one month after joining it, because of dissatisfaction, complaints, and protest of other member brands. Moreover, just before Christmas 2016, the United States Trade Representative added Alibaba Group’s Taobao Marketplace to its “Notorious Markets” list, four years after removing it from the list of IPR Infringing marketplaces. 

On January 16th 2017, the Alibaba Group launched the world’s first “Big Data Anti-counterfeiting Alliance” and invited 20 big companies to be the first batch of brand members and co-founders of the Alliance, including Dulux, LVMH (Moët Hennessy Louis Vuitton), and Swarovski. In addition, this Alliance has acquired the support of several governmental organizations, such as the Public Security Department and the Industrial and Commerce Bureau of Zhejiang Provence. 

History of the Case

In May 2016, with the support of “big data analysis and internet technology”, Mars Incorporated, an American global manufacturer of confectionery, pet food, and other food products, working jointly with Alibaba’s platform governance team, detected a merchant suspected of selling counterfeit cat food under Mars’s Royal Canin brand on Taobao. Alibaba used a “mystery shopping” (or “test shopping”) approach and purchased a bag of cat food from the merchant at the cost of RMB 99, which was later verified and confirmed by Mars to be counterfeit. Alibaba located the seller in Shanghai and reported him to the police.

On October 12th 2016, in a joint exercise with Mars and Alibaba, the Shanghai Baoshan District Public Security Bureau arrested the suspect merchant Mr. Yao and seized fake goods to the value of RMB 50 million ($7.3 million).

For an easy understanding of the case, we have summarized the steps below:

• Step 1: Detect, Identify and Locate the Merchant
• Step 2: Test Purchase
• Step 3: Report to Police
• Step 4: Police Action
• Step 5: Alibaba Files Lawsuit

Enlightenment of the Case

1. For internationally well-known brands, there is a good chance of cooperation with Alibaba in terms of joint exercises or actions, using its “big data and technology” in order to be faster and more accurate in identifying suspects. What’s more, if the case is of high value and important in terms of social influence, Alibaba can support the conduct of police actions against the manufacture and sale of counterfeits. As can be seen from this case, Mars entered a “Global Strategy Co-operation Agreement” with Alibaba in 2016, and benefited its brand protection more entirely and efficiently. 

1. For SMEs, it is less likely one will obtain strong support from Alibaba against counterfeits in comparison with those well-known brands. In other words, SMEs themselves would expend much more effort to detect and identify suspects. However, there exist other possible approaches. For example; making complaints of the online counterfeiters to the Alibaba Intellectual Property Protection Platform. This method can be an effective and efficient way to deal with the problem of counterfeits. In the past few months, the A&Z IP team helped several European clients in making complaints against counterfeits. The results were positive, with sale links successfully deleted from the platform, and the offending merchants punished according to Alibaba Platform Regulations.