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China Lifts Lid on Sale of Fake Goods Online


FILE - People walk past an advertising billboard showing the mobile app of Alibaba’s Taobao consumer-to-consumer site at a subway station in Beijing.

FILE - People walk past an advertising billboard showing the mobile app of Alibaba’s Taobao consumer-to-consumer site at a subway station in Beijing.

A newly released Chinese government industry survey has found that nearly half of the products sold by online stores in China are fakes. The survey said that Taobao.com, which is owned by Alibaba, is leading the way.

The survey, which was commissioned by China’s State Administration for Industry and Commerce and carried out by the China Consumers Association, found that only 19 of 51 items bought from Taobao were genuine. In other words, nearly 60 percent are fake.

In samplings taken between August and October, the China Consumers Association found that 54 out of 92 items purchased from online shopping sites such as Taobao.com, JD.com, 360buy and others were authentic.

The official Xinhua news agency quoted the State Administration’s survey to say that six out of seven items from Tmall.com; 18 of 20 from JD.com and 9 of 10 from Yhd.com have proved genuine.

Tabao.com quickly took issue with the findings, publishing a rebuttal letter online. In it, the company argued that the survey only selected 51 of the more than a billion products on sale on the website. The letter also raised questions about why the survey results were released before giving online shop owners a chance to appeal.

E-commerce analysts say Alibaba's Taobao and TMall online shopping sites control about 50 percent of the market in China.

But it is clear the government is preparing the ground for a crackdown on the e-commerce industry because of rising complaints from consumers.

Big losses

Online sales in China is a multi-billion dollar industry. Late last year, on Singles Day, Alibaba raked in more than $9 billion in just one day. Singles Day, a one day online sale, is similar to Cyber Monday in the United States.

But even as e-commerce expands in China, the survey’s release comes amid growing concerns about a range of practices online that have resulted in huge losses. The China Electronic Commerce Association recently said that losses suffered by consumers buying fake and defective goods from online stores amounted to $4.7 billion in 2014.

“There are serious questions of ethics in the manner in which Taobao and other ecommerce platforms are run in China. Second runs and counterfeit products are on offer. Taobao also has rejects from factories. These things would be illegal in other countries,” said Jacob Cooke, CEO of the consulting firm Web-Presence-in-China.

Even so, the market continues to grow. But, at the same time, China’s image has become increasingly important, especially in the wake of Alibaba’s record debut at the New York Stock Exchange last year. Meanwhile, other Chinese e-commerce companies are looking to follow in its footsteps.

Tightening the net

In a bid to address the problem, China recently established an e-commerce union to protect the burgeoning industry from dishonest players. The union will bring together e-commerce firms on one platform, and identify companies that deserve to be blacklisted, according to China's General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ).

Beijing is also establishing a China E-Commerce Protection Task Force to encourage banks, payment service providers and brand owners to share information on payment fraud and intellectual property infringements. It is also planning to build a database to select and analyze information about online shopping fraud, officials said.

“Without safeguards against the peddling of counterfeit goods, bogus websites, stolen payment card data and other tricks of the trade, cyber-crime can erode consumer confidence and stifle legitimate online business,” Jeff Liao, the country manager of Visa China said in a recent article published by the official Xinhua News Agency.

But some wonder whether the e-commerce union is a protectionist move to help local companies handle the competition from foreign firms. Other questions being debated, industry sources say, is what actions regulators may take against e-commerce companies named in the government sponsored survey and whether they will be asked to close down stores that sell fake goods or reprimanded for not filtering out such sellers.

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