E-COMMERCE: Gucci Scorns Alibaba’s Peace Offering

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Bottom line: More big global brands are likely to leave a major US anti-piracy group after its admission of Alibaba, which will suffer some negative publicity as it tries to clean up its sites of trafficking in fake goods.

Gucci quits US anti-piracy group after Alibaba joins

How would you feel if your former foe who constantly stole from you suddenly applied for membership in one of your favorite clubs? The answer is “probably not very happy”, which has led luxury goods giant Gucci to abruptly resign from a global anti-counterfeiting group after it admitted Chinese e-commerce leader Alibaba (NYSE: BABA) as its newest member.

This pair of companies have plenty of bad blood between them due to Gucci’s allegations of pirated goods being sold over Alibaba’s popular online marketplaces. Gucci parent Kering has sued Alibaba twice over the issue, most recently a year ago in New York, accusing the Chinese company of knowingly assisting in trade of counterfeit goods over its platforms and profiting from the process.

Kering, whose brands also include Yves Saint Laurent isn’t the only one accusing Alibaba of insincerity in its previous claims that it is an active participant in the fight against piracy. Last year the company became embroiled in a high-profile scandal with one of Beijing’s top commerce regulators that accused it of allowing rampant trade in pirated goods on its Taobao site.

Washington has also warned Alibaba to clean up its act, though it stopped short of adding the company to the latest version of annual list of “notorious” marketplaces for trafficking in pirated goods. (previous post) Another major Alibaba foe on the issue is the American Apparel  & Footwear Association (AAFA), which has used its influence in Washington to pressure Alibaba to clean up its act.

In response to the pressure Alibaba has made a wide range of moves to show it intends to improve its anti-piracy performance, including its joining of the US-based International Anti-Counterfeiting Coalition (IACC) last month. The group’s decision to accept Alibaba prompted Gucci America to leave, becoming the second high-profile defection. (English article) Shortly after Alibaba joined, Michael Kors also walked out of the group, labeling the Chinese company “our most dangerous and damaging adversary”.

Unhappy Member

An IACC official acknowledged that officials at Gucci “were not happy about Alibaba joining”, which seems like a huge understatement. The IACC said in a separate statement that it stands by its decision to admit Alibaba, and “is committed to lean into the future and lead a coalition of the willing.”

I do expect we’ll see some more luxury goods makers defect from the IACC in the next few weeks, and that a heated battle is probably now taking place behind the scenes as IACC officials try to calm the furor over Alibaba’s admission. We could also see defection by the AAFA and its member companies if they also belong to the IACC.

As a relatively neutral observer, I can certainly understand the frustration being felt by the luxury goods makers. After all, allowing Alibaba into the coalition will effectively neutralize one of their main platforms for criticizing the Chinese company, since such an industry association is highly unlikely to criticize one of its own members. But the IACC apparently sees this move as the way forward, acknowledging that it will be easier to work with Alibaba as one of its members rather than as a perpetual outside adversary.

On the other side of the fence, I also suspect that Alibaba lobbied very hard to gain admission to the IACC, which must have been convinced that the e-commerce giant was finally making a serious commitment to stamp out piracy. I actually believe that Alibaba is making such efforts, since it would face very real risks to its future by defying Beijing, Washington and some of the biggest merchants on its Tmall B2C platform. But perhaps the IACC should have waited another year or two before allowing this reformed fox into its chicken coop, giving everyone a chance to get to know the new and improved Alibaba.

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