The Office of the United States Trade Representative Releases 2022 Review of Notorious Markets for Counterfeiting and Piracy Naming 6 Chinese Online Markets
On January 31, 2023, the Office of the United States Trade Representative (USTR) released the findings of its 2022 Review of Notorious Markets for Counterfeiting and Piracy (the Notorious Markets List). The Notorious Markets List highlights online and physical markets that reportedly engage in or facilitate substantial trademark counterfeiting or copyright piracy. The List named 6 Chinese online markets including AliExpress, Baidu Wangpan, DHgate, Pinduoduo, Taobao and the WeChat ecosystem. The List states that while Taobao has made significant improvements, Pinduoduo and WeChat retain large volumes of counterfeit goods.
Excerpts from the List follows.
AliExpress is a business to consumer e-commerce platform that connects China-based sellers with buyers around the world. AliExpress is owned by Alibaba and shares certain anti counterfeiting tools and systems with other Alibaba platforms. As a whole, owner Alibaba is known for anti-counterfeiting processes and systems that are among the best in the e-commerce industry, in particular its significant support for law enforcement and brand owners’ investigations and enforcement actions against counterfeiters. Despite these efforts, right holders report the continued lack of effective seller vetting and repeat infringer controls, such that AliExpress is a dominant upstream distributor of counterfeit goods in wholesale quantities f or online markets in the United States and other countries. Alibaba notes that, notwithstanding disclaimers on the AliExpress website that it does not guarantee the authenticity or accuracy of seller information, it requires business license or national identification information in order to sell on the platform and checks such information against official government databases. However, right holders express concerns accounts fraudulently by using an unrel that counterfeit sellers have been able to obtain ated business license. Another key concern of right holders is that penalties for repeat infringers do not stop known counterfeit sellers on AliExpress from remaining on the market, such as by operating multiple accounts.
This cloud storage service is operated by Baidu, the largest search engine provider in China. Users of this service are able to share links to files stored on their accounts with other users. Although Baidu has several tools to take down unauthorized content, according to right holders, infringers widely share links to pirated movies, television shows, and books stored on Baidu Wangpan. Additionally, takedown times are reportedly lengthy, and right holders often have to repeatedly follow24 up with Baidu to ensure that pirated content does not reappear on the platform. Right holders report little progress in Baidu’s actions to suspend or terminate repeat infringers.
DHgate is the largest business-to-business cross-border e-commerce platform in China, although it primarily serves purchasers outside of China. DHgate is reported to be the most popular online market for purchasing bulk counterfeit goods that are then resold on other markets, including the online and physical markets listed in this year’s NML. DHgate has reported efforts to enhance procedures for seller screening and proactive monitoring of counterfeit listings, and this year, right holders noted some improvements to DHgate’s proactive enforcement efforts. However, right holders continue to express concerns with DHgate’s inadequate seller vetting and high levels of recidivism on the site. In 2021, DHgate changed its site policies to require seller businesses to provide business identification information prior to being admitted to the platform. Given continuing right holder concerns, DHgate should further explore whether the information it requires of sellers and the vetting performed on that information is sufficient to deter and prevent repeat infringers from selling on the site. Regarding, proactive anticounterfeiting processes, DHgate has been working to improve its artificial intelligence (AI) technology to screen text and images for evidence of counterfeits, including adding images for over 180 brands to its AI image recognition model. However, as sellers of counterfeit goods grow increasingly proficient at evading detection by altering product images, blurring logos, and using code words to conceal the counterfeit nature of the goods they offer, the processes used to proactively keep counterfeit listings off the DHgate platform will likely have to grow and evolve. Finally, while DHgate has reported efforts to increase engagement with right holders, commenters note that further engagement to address the scale and volume of reported counterfeit products on the site will instill confidence that DHgate recognizes and embraces its role in combating the global trade in counterfeit goods.
Pinduoduo, a “social commerce” app, is the second largest e-commerce platform in China as measured by the number of users. According to some right holders, Pinduoduo has improved its anti-counterfeiting efforts in the past few years. However, other stakeholders indicate growing concerns about Pinduoduo’s unresponsiveness and the ineffectiveness of current tools against the large volumes of counterfeit goods that remain on the platform. Although the platform continues to add brand partners, right holders convey that the same issues remain or have been exacerbated, with delays in takedowns, lack of transparency with penalty mechanisms and decisions rejecting takedown requests, burdensome and expensive processes, ineffective seller vetting, diverging tools for the web platform and the app, and reduced engagement with some right holders. Right holders also report difficulties in receiving information and support from Pinduoduo in pursuing follow-on investigations to uncover the manufacturing and distribution channels of the counterfeit goods.
Taobao is Alibaba’s platform for Chinese consumers and one of the largest e-commerce platforms in the world. Alibaba has proactively engaged with right holders and the U.S. Government to improve its anti-counterfeiting processes and tools across its platforms, including Taobao, resulting in a reduced number of NML nominations from past years. Some right holders have indicated that Taobao improved its response time for takedown requests, but many right holders continue to raise concerns about the pervasiveness of counterfeit goods on the platform. For example, right holders report that Taobao’s proactive screening tools use keywords to remove counterfeit listings, but do not analyze prices to reduce the volume of counterfeits being offered far below market rates for purported luxury items. Some right holders also complain about the lack of compliance with its evidence-required notice-and-takedown mechanism, which raises questions about whether there is consistent and transparent application of policies on seller removals. Concerns remain about stringent criteria for takedown notices. For example, some right holders have expressed frustration about not being able to enjoy the same advantages as members of Alibaba’s brand protection programs, who reportedly receive the benefit of relaxed evidentiary standards. Alibaba contends that Taobao’s evidentiary requirements are required by law, notwithstanding differences with what other Chinese e-commerce platforms require or what it requires of members in its bran d protection programs. 35 USTR will continue to monitor the transparency and effectiveness of Taobao’s anticounterfeiting efforts, including the evidentiary requirements for takedown requests.
WECHAT (WEIXIN) E-COMMERCE ECOSYSTEM
WeChat, together with its China-facing “sister app” Weixin, continues to be regarded by right holders as one of the largest platforms for counterfeit goods in China. Although described by owner Tencent as a “social communication tool and information publishing platform,” WeChat provides an e-commerce ecosystem that facilitates the distribution and sale of counterfeit products to users of the overall WeChat platform. For example, right holders highlight the growing popularity of WeChat’s “Channels” short video functionality to advertise counterfeit goods directly to consumers, who can purchase the counterfeits featured in such short videos via a “shopping cart” functionality in the WeChat app. Sellers of counterfeit goods also allegedly attract potential buyers to their counterfeit product offerings on WeChat through livestreams, the Moments feature, or the scanning of QR codes at physical stores, which then lead to transactions conducted through the profile page of an Official Account or through a “Mini Program.” Official Account pages and Mini Programs can feature traditional e-commerce functionalities like an integrated product catalog, shopping cart, and payment processing features, and counterfeit goods are reportedly prevalent within search results across Official Accounts and Mini Programs.
Tencent’s efforts to combat counterfeiting with respect to the WeChat e-commerce ecosystem have been inadequate. For example, Tencent explains that anyone can search public accounts and public features, and it encourages brand owners to conduct searches and to supply keywords for WeChat’s brand protection database or its “Trademark Database” for Channels. However, Tencent appears to apply such keywords only to account name registration or name change requests, rather than the full scope of public content on Official Accounts, Mini Programs, and Channels, notwithstanding Tencent’s description of these features as “public communication services.” Tencent also explains that WeChat provides a shopping cart function for users to purchase products promoted via Channels, but then contends that it cannot provide seller information because the shopping cart function is not a “platform-wide” feature.
Right holders continue to raise concerns about the weaknesses in WeChat’s seller vetting, such that counterfeiters are able to easily set up their own Official Accounts and Mini Programs despite WeChat’s verification of required documentation. Right holders describe WeChat’s brand protection portal as “overly bureaucratic” and the process of registration and submitting complaints as “often prohibitively difficult.” Tencent has explained that it provides “crowd sourcing” leads and evidence voluntarily submitted by WeChat users to brand owners, but this places the onus on brand owners to sift through many user-generated complaints instead of WeChat providing sufficient assistance to combat counterfeit sales. Furthermore, right holders complain about the lack of transparency regarding penalties for violations. Many counterfeit sellers face only brief suspensions, and sellers with terminated accounts can re-register for new accounts with ease.
Finally, right holders complain about the lack of cooperation from WeChat in supporting criminal investigations of counterfeit sellers. WeChat points to collaboration with law enforcement and regulatory authorities but asserts privacy and data security laws prevent certain disclosures of information. However, the number of investigations WeChat assisted in appears to confirm right holders’ impression that Wechat provides less cooperation and information sharing than other e-commerce companies operating under the same laws.
The full report is available here.
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