5,137 . . . is the number of shops on Alibaba’s Taobao ecommerce platform that claim to sell Lego — a favourite toy of a pushy Chinese middle class convinced that the Danish bricks will make their children creative, inventive and generally more brilliant.
The prices offered at many of the Lego-selling online stores are often ridiculously and suspiciously cheap. The Taobao trading system, one of the shinier jewels in Alibaba’s crown as the internet titan seeks what could be the world’s biggest tech listing in America, allows customers to haggle directly with the vendor. An aggressive-enough negotiation can land you a substantial bag of Lego-esque bricks for the equivalent of a couple of quid.
Alarms bells rightly ring. Not all of these 5,137 Taobao-based Lego stores, needless to say, are selling genuine Lego. Lego itself does not publicly guess at the extent to which its product is ripped off: lawyers with the battle scars of Chinese infringement suits suspect the proportion of those 5,137 selling fake Lego may be as high as 80 per cent.
The notion that China is a seething, nest of counterfeiting, trademark infringement and fraudulence is not new; nor is the fact that the stratospheric growth of ecommerce in China has significantly enlarged the speed and volume at which fake goods change hands.
The big question, as lawyers and companies arrive in Hong Kong this week for the world’s biggest intellectual property convention, is whether anything much is changing. Jack Lew, the US Treasury Secretary, will arrive today in Beijing and demand greater protection of intellectual property. It is unclear whether that will change much either.
The signals are not great. Last week, the Chinese food and drug authority warned that 75 per cent of foreign-branded drugs sold online (though mostly not through Taobao stores) in China were fake. The extent of the problem was especially grisly for cancer sufferers, whose online pursuit of cheap generic oncology medicine will, eight times out of ten, land them with fake drugs.
The difficulty here is that Taobao’s greatest quality — its huge accessibility for vendors — is also the source of the problem. Even if a store selling counterfeited goods is closed down, there are no barriers to prevent its owner opening a new one, under a new name, hours later. As the operator of Taobao, Alibaba has undertaken a limited range of regulatory functions. But on one critical issue it does not step in: if a company such as Lego believes that fake bricks bearing its brand are being sold from a Taobao store, Lego bears the burden of proving that the product is fake. Crucially, Lego cannot use the laughably low prices of the fake Lego as evidence.
A recent experiment by Taobao to designate all versions of a particular product (not Lego) fake if they fell below a particular price resulted in 42,000 stores being immediately closed. Six months later, almost all had re-opened.
The problem for Beijing is that Alibaba and Taobao are arguably too big to fail. The public cannot live without ecommerce any more and the authorities have identified the encouragement of innovation and the release of entrepreneurial spirits (of the sort being vigorously nurtured on Taobao) as the keys to building a sustainable economy.
As a listed company and as a provider of the medium for immense, minute-by-minute infringement of intellectual property, Alibaba may soon find itself under greater pressure to play the policeman. It may be able to resist that as long as the the plaintiffs are foreigners: it may not find that so easy when the brands being ripped off are Chinese and the complaints are domestic.
via China in numbers: building a trading empire, brick by imitation brick | The Times.
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