Will Alibaba’s Counterfeit Problem Hurt Small Businesses?

Alibaba counterfeit Another company sued Alibaba over counterfeit products. Eldie Fire Ball Pro — a flame extinguisher that can be thrown into a blaze — is not happy about frequently malfunctioning knockoff extinguishers for sale on Alibaba.

Why Are Knockoff Products A Problem?

Why are counterfeit products a problem for brands? Knockoffs are typically lesser quality and don’t work properly, which ultimately saddles the original brand with a bad reputation. In the case of Eldie, the company estimates that this Alibaba-adjacent counterfeiting has cost the company $86 million.

International E-Commerce Considerations

The Organisation for Economic Cooperation and Development estimates that 60% of product knockoffs come from China. It’s becoming a big problem for small- and mid-sized U.S. brands that are now finding their designs for sale, around the world, at a fraction of the price.

So, who is responsible for China’s rampant counterfeiting problem? The answer depends on who you ask. Jack Ma, Alibaba’s founder, thinks the government is to blame. The online mogul even called on the National People’s Congress to increase jail time for product pirates. Ma also publicly opined that China needs “to fight counterfeits the same way we fight drunk driving.” Alibaba’s head has explained that “No one company can do it alone. The existing laws are lagging, failing to impose actual threats on the behavior of counterfeiters and leave too much room for cheating.”

Will Counterfeiting Hinder Planned Cross-Border E-Commerce Partnerships?

The widespread sale of counterfeit goods on Alibaba presents a conundrum.

Several months ago, Jack Ma was one of the international business luminaries that met with President Trump during the transition. After a closed-door meeting, Alibaba’s founder pledged to help Midwestern businesses take advantage of the rapidly expanding Chinese middle class’s thirst for American products, by making it easier for U.S. companies to sell on Alibaba.com.  In fact, next month Alibaba will roll out a new program, meant to help stateside brands sell into China, at a two-day conference in Detroit.

You can probably already see the speculation on the wall: If knockoffs become an international e-commerce plague, then what’s to stop overseas manufacturers from ripping off U.S. product designs and selling them at a fraction of the cost? Which raises a vital question:  How can small businesses fend off product fraudsters?

Contact An E-Commerce Lawyer

Kelly / Warner works with e-commerce companies and entrepreneurs on everything from business formation to hijacking issues to account suspensions — and more. Need assistance? Get in touch; we’d love to help.

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