Alibaba's Controversial Plan To Fight Counterfeiters

Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE: BABA) has been widely criticized for the amount of counterfeit goods sold on its site.

According to Reuters, Alibaba now has a controversial new plan to alleviate counterfeiting, but critics are skeptical.

The Plan

Counterfeit trade on Alibaba’s site has gotten so bad that the company has been the subject of lawsuits by brands such as Gucci, but Alibaba’s latest plan focuses more on eliminating the source of counterfeit sellers rather than trying to police the site’s counterfeit listings.

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According to Reuters, Alibaba has been working closely with 17 shoe manufacturers in Putian, China to develop home-grown Chinese shoe brands. Alibaba hopes that the creation of domestic Chinese brands will provide an alternate, legitimate source of livelihood for Chinese counterfeiters.

Counterfeiting Capital

Putian is a hub for the Chinese footwear manufacturing business, both legal and counterfeit. Counterfeiters in Putian produce rip-offs of name brands such as Nike Inc (NYSE: NKE), Adidas AG (OTC: ADDYY) and New Balance that are nearly identical to name-brand products but that sell for a fraction of the price.

The local government has made efforts to crack down on counterfeiting, arresting 156 people and confiscating about 2 million pairs of counterfeit shoes since 2014.

Critics Not Impressed

Critics believe that this indirect approach to fighting counterfeiters is misguided and that Alibaba should focus more on a traditional approach of identifying and removing counterfeit listings.

Among the critics of Alibaba’s new plan is Shaun Rein, managing director of marketing firm CMR China.

“It’s kind of unlikely to be successful because it’s not so easy just to create a brand out of nowhere. For Alibaba, the key is to make a show that they’re trying to crack down on fakes,” Rein explains. Rein notes that Alibaba profits off the sales of all products sold on its marketplace, both legitimate and counterfeit.