Alibaba's Jack Ma Wants Serious Jail Time for Counterfeiters

(Bloomberg) -- Billionaire Alibaba-founder Jack Ma wants China's top lawmakers to come down harder on fake goods -- the very same plea voiced by global brands that have accused the e-commerce service of harboring knock-offs.

The Alibaba Group Holding Ltd. chairman appealed to the National People's Congress convening in Beijing this week to penalize counterfeiters as harshly as drunk drivers. In an open letter published on his Weibo account Tuesday, Ma said enforcement had been too lax and the authorities should raise maximum prison sentences and other penalties to deter illegal profiteers.

The unusual public entreaty follows persistent criticism that Ma and his company haven't done enough to swat copycats. In a major embarrassment, Alibaba was again labeled a "notorious market" last year by the U.S. Office of the Trade Representative -- just four years after escaping the label. It's a list that includes torrent website Pirate Bay and flea markets from Brazil to Nigeria.

“We need to fight counterfeits the same way we fight drunk driving,” Ma wrote in his letter. “No one company can do it alone. The existing laws are lagging, failing to impose actual threats on the behavior of counterfeiters and leave far too much room for cheating.”

Winning the trust of foreign brands is key to realizing Ma's ambitions of global expansion. But Alibaba still fends off accusations about its unwillingness or inability to eradicate fakes from its platforms, the subject of a lawsuit filed in 2015 by Kering SA. The Chinese e-commerce giant has countered by saying it's doing all it can to take down fakes. It removed 380 million product listings and closed about 180,000 stores on its Taobao platform in the 12 months to August, the company said in a letter to the USTR.

In this week's missive, Ma says there's been plenty of rhetoric but little decisive action from authorities on combating fake goods, which he compared with the hazardous smog infamous for enveloping Beijing and other Chinese cities.

Knock-offs remain rampant throughout the country as a result, he said. He even compared ridding China of fakes to fighting the famed Battle on Shangganling Mountain, where Chinese forces were said to have beaten back the U.S. and South Korean military during the Korean War.

“Alibaba's shifting the burden to lawmakers, and it might help drive some changes in China's criminal legal system,” said Cao Lei, director of the China E-Commerce Research Center in Hangzhou. “They hope to use a few cases to kill a chicken to scare the monkeys.”

Outdated laws -- such as ones dismissing criminal responsibility for manufacturers who produce goods worth less than 50,000 yuan ($7,200) -- render Alibaba's own efforts to curb counterfeits futile, Ma argued. Fewer than 10 percent of the leads the company has provided to authorities led to a successful criminal prosecution, he added.

“There is a lot of bark around stopping counterfeits, but no bite,” Ma said. “This reality only encourages more people to produce and sell fake goods.”

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net.

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan