Alibaba's Thieves Threaten Yahoo!

[HenryTo]

Did Yahoo just bit off more than they can chew? Is spending $1 billion on a Chinese company with slightly under $70 million in revenues a sign of an impending top in the recent craze surrounding Chinese stocks? Until China develops a legal system with strict enforcement of intellectual and property rights, it will not come close to being the dominant economic force in the world.
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Alibaba's Thieves Threaten Yahoo!
Zachary M. Seward, 08.15.05, 5:30 PM ET

NEW YORK - Yahoo! may have taken on more than it bargained for when it said it was paying $1 billion for Alibaba.com. China's leading online retailer, it seems, may also be one of the leaders in aiding and abetting wholesale counterfeiting.

Indeed, Yahoo!'s (nasdaq: YHOO - news - people ) aggressive push into China's loosely regulated e-commerce market, where bogus American goods are traded with impunity, could expose the company to liability under U.S. counterfeit laws, industry experts say.

Lawyers and officials monitoring China's counterfeiting industry say the alliance with Alibaba may even make Yahoo! effectively a partner in what several advocacy groups and analysts say is a burgeoning marketplace for counterfeit American merchandise--from knock-off Duracell batteries to phony Marlboro cigarettes.

When the deal was first revealed by Forbes.com Aug. 7, it was described by all concerned as a major breakthrough into China by one of the global Western Internet leaders--a unique, landmark deal.

And indeed, Alibaba's flagship Web sites, which booked more than $4 billion in trade last year, facilitate typically high-volume sales among businesses registered with the company.

Most of the products listed on Alibaba appear legitimate, but anticounterfeit groups have repeatedly documented sales on the Web site of fake goods posing as authentic American products.

A February report by the International AntiCounterfeiting Coalition, an alliance of more than 60 American brand owners, cited offers on Alibaba for counterfeit cigarettes "98% close to original." And a quick search on the Web site turns up several products claiming to be "imitation famous."

A spokeswoman for the House subcommittee on commerce, trade and consumer protection, which heard testimony in June that berated Alibaba for trafficking counterfeit goods, said the company and its partnership with Yahoo! was on the committee's "radar screen."

Hangzhou-based Alibaba has faced few legal challenges in China, where enforcement of piracy laws is notoriously lax, but Yahoo!'s involvement may make it easier for American brand owners to sue both companies for trademark infringement in U.S. courts, according to legal analysts.

"If Yahoo! is involved with counterfeiting and smuggling, their exposure is not only in China, but also in the United States if American consumers are buying those products," said Daniel Chow, a professor of law and expert in Chinese counterfeiting at Ohio State University.

Yahoo!'s own retail Web sites, along with rivals such as eBay (nasdaq: EBAY - news - people ), have also drawn criticism for facilitating the trade of counterfeit goods. But Alibaba has emerged as a chief target of advocacy groups, which say the company has been less willing than its competitors to weed out phony products from its sites.

"Counterfeiters from all over the world converge on the Alibaba.com site," concluded a February report by the anticounterfeiting coalition. Timothy Trainer, former president of the coalition, said Alibaba had been singled out in the report because of the sheer volume of knock-offs traded on the site.

Several studies by the U.S. government have identified China as the world's leading manufacturer of counterfeit goods, though exact figures are unknown. Morgan Reed,a spokesman for the Association for Competitive Technology, a Washington, D.C.-based advocacy group representing nearly 3,000 technology firms, estimated that at least 10% of all counterfeit goods in China are traded on Alibaba Web sites.

Online retailers such as Alibaba and eBay have complicated matters for companies and regulators attempting to combat piracy. The sites do not sell products themselves, merely facilitating transactions though their Web sites. But legal analysts say that alone is enough to qualify as trafficking in counterfeit goods.

Like its competitors, Alibaba's official policies prohibit the posting and sale of counterfeit items. And Joseph Tsai, chief financial officer, says those regulations are enforced by the company's fraud prevention and investigation team.

"It is inevitable that unscrupulous people will take advantage of a free platform," Tsai said, "but we have a strict take-down policy" when brand owners alert Alibaba to knock-offs posted on the site.

Tsai said his company's problems with counterfeit goods were no different than eBay's. In fact, he mentioned eBay 14 times in a 20-minute interview. "My wife just bought a Balenciaga bag off of eBay," he said. "It's totally fake. So they face the same issues we do."

But whereas eBay's auction and retail Web sites have traditionally catered to consumers, Alibaba emerged in China as a business-to-business retailer, with goods often traded by the 40-foot shipping container rather than by individual handbags. Alibaba also maintains China's most popular consumer-to-consumer trading site, Taobao, with more than 7 million registered users.

Yahoo! declined to comment through a spokeswoman. "That's not a question that we're in a position to address right now," she said.

Analysts and advocates say that while Yahoo!'s 40% stake in Alibaba could open up both companies to liability in U.S. courts more friendly to claims of trademark infringement, Yahoo!'s stake could also lead to greater self-policing on the Alibaba sites.

Yahoo!'s "presence will do more to eliminate than proliferate counterfeit goods on the Alibaba Web site," said Patrick Mahoney, an analyst at Yankee Group.

And Reed, vice president for public affairs at the Association for Competitive Technology, said Yahoo!'s previous efforts in protecting trademarks could bode well for brand-owners concerned about Alibaba's growing business.

"Yahoo! has a pretty rigorous set of protections against counterfeit goods on its existing Web sites," Reed said. "So we hope that what Yahoo! will bring to the table is its traditional respect for intellectual property."

[rffrydr]

The "thieves" have turned out to be more like parasites--now keeping the body alive:

http://dealbook.nytimes.com/2011/03/01/yahoo-holds-talks-to-shed-stake-in-japan-venture/?src=dlbksb
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

This is one area where the US defense bloat (Carnivor, Cold Warriors, etc.) helps american business. Corporate espionage cuts to the heart of our globalized platform economy model and the very precedence economics has taken in our modern world. France, the "egalitarian" one is of course the most vulnerable.

http://www.time.com/time/world/article/0,8599,2041346,00.html

Imitation being the sincerest form of flattery it is no surprise that the "BRICs" would be breaking into the jobs bank, the auto sector. That we could still maintain their "interest" shows the china ascendancy we all assume is still a steep grade ahead.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

"Canosonic"

http://www.theatlantic.com/technology/archive/2011/01/best-brand-name-for-a-camera-company-ever-cansonic/69028/
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Today is the Tomorrow you worried about Yesterday!