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Alibaba Accused of Selling Fake Items by Kering in Lawsuit - Analyst Blog

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In a lawsuit filed on Friday, luxury brands maker, Kering, accused Alibaba Group Holding Ltd BABA of scheming in the manufacture and sale of imitations of its products all over the world.

According to U.S.A Today, the suit, which was filed in a federal court in New York, accused Alibaba of “trademark infringement, counterfeit, false representation, trademark dilution and racketeering by marketing, processing payments for and shipping goods such as counterfeit Gucci watches, bags and shoes and Yves Saint Laurent shirts.”

History of this Case

Friday's lawsuit was the second time in less than a year that Kering brands sued the Chinese e-commerce giant over the supposed sale of fake products.

According to court records, the first lawsuit was filed in July but was withdrawn the same month with the option to re-file it while Kering worked toward a resolution with Alibaba.

The lawsuit stated that Alibaba continued with the sales even when it had been explicitly informed that merchants were selling fake products.

So What Does the Plaintiff Seek?

Kering appealed for a court order that, among other things, would prohibit Alibaba from offering or assisting in the sale of fake products, and an unspecified compensation that could comprise $2 per counterfeit item under a statutory regime.

The Defendant Speaks

Alibaba spokesman Robert Christie issued the following statement in response to the suit, "We continue to work in partnership with numerous brands to help them protect their intellectual property, and we have a strong track record of doing so. Unfortunately, Kering Group has chosen the path of wasteful litigation instead of the path of constructive cooperation. We believe this complaint has no basis and we will fight it vigorously."

Last Word

Alibaba says that it has a “zero-tolerance policy” toward counterfeit goods on its platform, and has in fact cooperated in more than 1,000 counterfeiting cases last year. 

Though the Chinese company has long been criticized by others for not doing enough to stop the sale of counterfeits, it has also signed deals with many top multinational sellers (the most recent one being with Disney).

In March this year, The Wall Street Journal had stated that the Chinese e-commerce giant is being beleaguered by "brushers." Following the report, shares of the company, dipped as low as $80.03, the lowest since its record breaking IPO in September.

Whether this news will affect the share price adversely or will the shares continue to gain due to the better-than-expected revenues it announced on May 5? Let’s wait and see.

Better-ranked stocks in this industry include Synacor, Inc. SYNC, MeetMe, Inc. MEET and Facebook Inc. FB. While Meetme and synacor sport a Zacks Rank #1 (Strong Buy), Facebook carries a Zacks Rank# 2 (Buy).

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