Exhibit 4

Case: 1:20-cv-03542 Document #: 1-2 Filed: 06/17/20 Page 1 of 48 PageID #:18
Northwestern Journal of International Law & Business 

Volume 40 

Issue 2 Winter 

Article 1 

Winter 2020 

Alibaba, Amazon, and Counterfeiting in the Age of the Internet 

Daniel C.K. Chow 

Follow this and additional works at: https://scholarlycommons.law.northwestern.edu/njilb 

Part of the International Trade Law Commons, and the Internet Law Commons 

Recommended Citation 

Daniel C.K. Chow, Alibaba, Amazon, and Counterfeiting in the Age of the Internet, 40 NW. J. INT'L L. & BUS. 

157 (2020). 

https://scholarlycommons.law.northwestern.edu/njilb/vol40/iss2/1 

This Article is brought to you for free and open access by Northwestern Pritzker School of Law Scholarly 

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authorized editor of Northwestern Pritzker School of Law Scholarly Commons. 

Case: 1:20-cv-03542 Document #: 1-2 Filed: 06/17/20 Page 2 of 48 PageID #:19
157

ALIBABA, AMAZON, AND 

COUNTERFEITING IN THE AGE OF 

THE INTERNET

Daniel C.K. Chow

Abstract:

The advent of e-commerce marketplaces such as Alibaba and Amazon in the new 

millennium has led to the proliferation of the sale of counterfeit goods around the 

world through the Internet. Brand owners find that Internet counterfeiters 

operating in the digital world present even more challenges than those using only 

brick-and-mortar operations. Internet counterfeiters have unprecedented access 

to consumers. They use false identities and addresses and vanish into cyberspace 

at the first sign of trouble. Brand owners seeking help from Alibaba and Amazon 

to remove listings of counterfeits have become frustrated by their convoluted and 

labyrinthine notice and take-down procedures. Even when these procedures are 

used successfully, brand owners find that the process can take months only to 

have the counterfeiter reappear in short order using a new false identity. Many 

brand owners find that dealing with Alibaba and Amazon only adds to their 

misery and believe that both tolerate counterfeits as they earn revenue from all 

sales, including sales of counterfeit goods.

This Article sets forth for the first time how brand owners can use a set of 

currently available information technology tools to help create an effective 

deterrent to counterfeits on the Internet. Using these tools, brand owners can 

force counterfeiters to abandon the subterfuge and disguise that they rely on so 

that brand owners can—without the assistance of e-commerce platforms—

directly pursue counterfeiters in civil and criminal actions in China where most 

of the counterfeiters are located and in the United States. The proposed approach 

should help deter counterfeiters who always work in secrecy and disguise by 

 

 B.A., JD, Yale University. Bazler Chair in Business Law, The Ohio State University Michael 

E. Moritz College of Law. The author lived and worked in China as head of the legal 

department for a multinational company in the consumer products business with serious 

counterfeiting issues. The author also helped to organize and served as the first executive 

secretary for the China Anti-Counterfeiting Coalition, a lobby group for multinationals in 

China (now known as the Quality Brands Protection Committee), and was the principal author 

of the white paper on counterfeiting in China commissioned by the PRC State Council. More 

recently, in addition to academic duties, the author served as an attorney and expert witness in 

U.S. litigation involving the sale of counterfeit cigarettes and internet e-commerce sites in 

China and the United States. The opinions expressed in this Article are the author’s own but 

the author has profited from many discussions with colleagues. The author also thanks Natasha 

Landon, Moritz Law Librarian for her excellent research help.
158

exposing them to what they fear and loathe the most: transparency and 

accountability for their illegal actions.
159

TABLE OF CONTENTS

I. Introduction ................................................................................... 160

II. Counterfeiting and the Internet..................................................... 167

A. Brief Overview of Counterfeiting in China....................... 167

B. The Advent of the Internet ................................................ 168

C. Liability Regimes for Internet Service Providers.............. 171

D. Alibaba .............................................................................. 172

1. Brand Owner Concerns............................................... 172

a. Alibaba’s Defense of Counterfeits........................ 175

b. Counterfeits for Sale on Alibaba........................... 176

2. Alibaba’s “Arrogance” and Illegal Activities............. 179

a. Specific Practices.................................................. 181

b. Above the Law in China ....................................... 183

E. Amazon.............................................................................. 184

III. Entity Verification Measures and the Requirements of PRC 

Law ........................................................................................ 186

A. Problems with Enforcement ........................................... 186

1. False Names, Identities, and Addresses. ................... 186

2. Burdensome Notice and Takedown Procedures ......... 186

3. Lack of Deterrence.................................................... 187

B. Proposed Remedial Measures ........................................... 188

1. AIC Business License ................................................. 188

2. Legal Representative................................................... 190

3. Verification and Deterrence........................................ 192

4. Amazon and PRC Law................................................ 193

5. Consent to Arbitration before CIETAC...................... 194

IV. Conclusion .................................................................................. 195

V. Appendices................................................................................... 199

Appendix 1. Alibaba Listing: Gucci Guccio Handbags......... 199

Appendix 2. Alibaba Listing: Hennessy XO.......................... 200

Appendix 3. Alibaba Listing: Abercrombie & Fitch 

Sweatpants...................................................................... 201

Appendix 4. Abercrombie & Fitch Sweatpants ..................... 202
160

I. INTRODUCTION

The advent of internet commerce (e-commerce) in the early 2000s 

coincided with the unprecedented and historic rise of counterfeiting in the 

People’s Republic of China (PRC or China) that had begun in the 1990s.1

Although sales of counterfeits through brick-and-mortar establishments had 

already gained a substantial share of the market in China by the early 2000s,2

the rise of the Internet in the new millennium has allowed counterfeiters in 

China unparalleled access to consumers not just in China but also in the 

United States and worldwide by transcending the physical limitations 

inherent in the use of brick-and-mortar operations.3 Recent studies show that 

counterfeits and infringing products have proliferated on the Internet and 

have reached levels of saturation that were unattainable by counterfeiters 

selling through brick-and-mortar distributors.4 For example, Xinhua, China’s 

official news agency stated that more than 40% of all goods sold online 

through Chinese e-commerce platforms in a recent year were “counterfeits 

or of bad quality.”5 Since Xinhua is controlled by the Communist Party of 

China (the Party) and would want to present China in the best light possible, 

the 40% figure might understate the severity of the problem. Most consumers 

in China believe that the likelihood of a product sold on the Internet is 

counterfeit is very high, and those who wish to buy genuine products avoid 

the use of the Internet altogether.6 This 40% figure cited by Xinhua is double 

the estimated 15-20% rate of counterfeits sold in brick-and-mortar 

establishments in China.7In the United States, the U.S. General Accounting 

Office recently conducted a study and found that among a selection of 47 

items belonging to four types of frequently counterfeited goods (i.e., 

sneakers, mugs, cosmetics, and phone chargers) purchased online, 27 were 

 

1 See Daniel C.K. Chow, Counterfeiting in the People’s Republic of China, 78 WASH.

U.L Q. 1, 3 (2000).

2 By the early 2000s, brand owners estimated that counterfeits comprised 15-20% of all 

goods sold on the market in China. See id. at 3 n.3 (citing Joseph T. Simone, Countering 

Counterfeiters, CHINA BUS. REV., Jan. 1, 1999, at 12).

3 See U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-18-216, INTELLECTUAL PROPERTY:

AGENCIES CAN IMPROVE EFFORTS TO ADDRESS RISKS POSED BY CHANGING COUNTERFEITS 

MARKET 11 (2018), https://www.gao.gov/assets/690/689713.pdf (discussing how the use of 

the internet allows counterfeiters to transcend limits of brick and mortar counterfeiting) 

[hereinafter GAO REPORT].

4 See infra Parts II.A & II.B.

5 More than 40 Per Cent of China’s Online Sales ‘Counterfeits or Bad Quality’, 

TELEGRAPH (Nov. 3, 2015), https://www.telegraph.co.uk/news/worldnews/asia/china/11971

401/More-than-40-per-cent-of-Chinas-online-sales-counterfeit-or-bad-quality.html. Xinhua 

does not distinguish between counterfeits and products of poor quality; it is unclear whether 

Xinhua believes that these are two separate categories of goods or a single category as most 

counterfeits are of poor quality.

6 This observation is based upon the author’s own experience living and working in 

China and on discussions with colleagues and associates.

7 See Chow, supra note 1, at 3 n.3.
161

authentic and 20 were counterfeit.8 After Seattle-based Amazon made efforts 

in 2015 to woo Chinese manufacturers to sell directly on its platform, 

complaints about counterfeits and infringing products sold on Amazon have 

risen sharply.9

Efforts by multinational companies (MNCs) that own trademarks (or 

brands), copyrights, and other intellectual property rights to stem the flow of 

counterfeits through the Internet have been largely unsuccessful, leading to 

anger and frustration.10 Under current legal regimes, e-commerce platforms 

are in general not liable for counterfeits sold by third-party online vendors 

using the site;11 liability lies with the vendor itself, but many brand owners 

argue that Internet commerce sites facilitate the sales of counterfeits.12 Ecommerce platforms earn revenues from sales, including sales of 

counterfeits.13 Many brand owners argue that e-commerce platforms 

facilitate counterfeiting by allowing webpages or postings of counterfeit 

goods to remain on their sites despite the many protests of brand owners.14

Some of these offending webpages are removed after brand owners suffer 

through a long and convoluted notice and takedown procedure only to 

reappear under a new false name and address in short order.15 In China, 

 

8 See GAO REPORT, supra note 3, at 15. The products were Nike Air Jordan shoes, Yeti 

travel mugs, Urban Decay cosmetics, and UL-certified phone chargers. Id.

9 Wade Shepard, How Amazon’s Wooing of Chinese Sellers Is Killing Small American 

Businesses, FORBES (Feb. 14, 2017), https://www.forbes.com/sites/wadeshepard/2017/02

/14/how-amazons-wooing-of-chinese-sellers-is-hurting-american-innovation/#13af78741d

f2.

10 See infra Parts II.B & II.D.

11 See Digital Millennium Copyright Act of 1998 (DMCA), 17 U.S.C. § 512 (Westlaw 

through Pub. L. No. 116-68) (creating a “safe harbor” from vicarious liability for ISPs that 

upon notification remove infringing material expeditiously). For cases holding that the ISP is 

not vicariously liable for the sale by third party vendors, see generally Milo & Gabby, LLC v. 

Amazon.com, Inc., 2015 WL 4394673 (W.D. Wash. July 16, 2015); Perfect 10, Inc. v. 

Amazon.com, Inc., 2009 WL 1334364 (C.D. Cal. May 12, 2009); Hendrickson v. Amazon.com, 

Inc., 298 F. Supp. 2d 914 (C.D. Cal. 2003).

12 See infra Parts II.B, II.D & II.E.

13 See David Pierson, Extra Inventory. More Sales. Lower Prices. How Counterfeits 

Benefit Amazon, L.A. TIMES (Sept. 28, 2018), https://www.latimes.com/business/

technology/la-fi-tn-amazon-counterfeits-20180928-story.html (“Not only has [Amazon] 

avoided any serious backlash for allowing the sale of fake goods, it’s actually thrived from it, 

say more than two dozen brand owners, e-commerce consultants, attorneys, investigators and 

public policy experts.”).

14 See infra Parts II.D & II.E.

15 See Pierson, supra note 13 (“[I]f Amazon shutters one store for selling knockoffs, the 

owner often shifts operations to another.”); Alana Semuels, Amazon May Have a Counterfeit 

Problem, THE ATLANTIC (Apr. 20, 2018), https://www.theatlantic.com/technology/archive/

2018/04/amazon-may-have-a-counterfeit-problem/558482/ (“‘These problems come up once 

a week.’”). Cf. Jeff Bercovici, Huge Counterfeiting Problem. This “Shark Tank” Company Is 

Fighting Back, INC.COM (Apr. 2019), https://www.inc.com/magazine/201904/jeff-bercovici

/amazon-fake-copycat-knockoff-products-small-business.html (“A recent Pointer report 

noted that Amazon in among the least responsive of all e-commerce platforms to takedown 
162

MNCs have waged a decades-long struggle against Alibaba to stem the sale 

of counterfeits with few tangible results.16 Although Alibaba claims to have 

made many serious efforts in combatting the sale of counterfeit goods, many 

brand owners remain frustrated and dissatisfied.17 As in the case of Alibaba, 

brand owners in the United States are frustrated with what they perceive to 

be Amazon’s half-hearted efforts to battle the flow of counterfeits.18 This 

Article examines counterfeiting on the Internet with a focus on Alibaba and 

Amazon, the largest e-commerce platforms in China and the United States 

respectively and in the world.19 The lessons learned can be immediately 

applied to other e-commerce platforms. 

This Article focuses on why the sale of counterfeits on the Internet has 

exploded and allowed counterfeiters to penetrate markets that were 

previously unavailable when counterfeiters were limited to brick and mortar 

operations. Not only has the Internet given counterfeiters vast new 

opportunities for profit but it has also allowed them to operate in the digital 

world in the open, while simultaneously being able to use false cyber 

identities and addresses to evade detection and capture by brand owners and 

law enforcement authorities.20 With the emergence of the Internet, 

counterfeiting and piracy—already a worldwide problem—have entered into 

a new and even more potent phase.21 Up to the present, MNCs have been 

frustrated by their inability to curtail the growth of counterfeits on the 

Internet.22

Although the problems created by the Internet are daunting, this Article 

argues that a simple and effective deterrent exists in China but has been 

overlooked or ignored by MNCs and e-commerce platforms and explains 

how this deterrent can be used effectively. This Article sets forth for the first 

time how these remedial measures can be used to curtail the explosion of 

 

notices, removing only 25 percent of infringing listings.”).

16 See infra Part II.D.

17 See id.

18 According to one brand owner representative, “Amazon is making money hand over 

fist from counterfeiters, and they’ve done about as little as possible for as long as possible to 

address the issue.” Ari Levy, Amazon’s Chinese Counterfeit Problem Is Getting Worse, CNBC 

(July 8, 2016), https://www.cnbc.com/2016/07/08/amazons-chinese-counterfeit-problem-isgetting-worse.html. See also Semuels, supra note 15 (describing Amazon’s low level of 

responsiveness to brand owner concerns).

19 Alibaba is the world’s largest e-commerce marketplace and Amazon is the second 

largest. See infra notes 103 & 107.

20 See Pierson, supra note 13.

21 See BUS. ACTION TO STOP COUNTERFEITING AND PIRACY & INT’L CHAMBER OF 

COMMERCE, ROLES AND RESPONSIBILITIES OF INTERMEDIARIES: FIGHTING COUNTERFEITING 

AND PIRACY IN THE SUPPLY CHAIN 5 (2015), https://iccwbo.org/publication/roles-respon

sibilities-intermediaries/ (“The Internet has been particularly vulnerable . . . to counterfeiters 

and other criminal capitalizing on the success (and intellectual property) of legitimate 

businesses while remaining anonymous and avoiding detection.”).

22 See infra Part III.
163

counterfeits on the Internet. In setting forth this analysis, this Article will 

underscore the following three major points that must be understood by all 

MNCs and other brand owners in modern e-commerce. First, the

emergence of e-commerce platforms such as Alibaba and Amazon have 

given counterfeiters a vast new tool to reach end use consumers. Prior to the 

Internet, counterfeiters were subject to the physical limitations created by 

brick-and-mortar distribution and retail sites and were unable to penetrate 

distribution channels that would allow them to sell counterfeits in reputable 

retail outlets.23 Consumers had to travel to less desirable locations to buy 

counterfeits as state-owned department stores and high end retailers in China 

and large reputable retail chains such as Walmart, Target, and Costco in the 

United States refused to deal with distributors of counterfeit goods.24 Instead, 

consumers in China or the United States who wished to purchase counterfeits 

had to go to small discount stores, mom-and-pop stores, flea markets, street 

vendors, or private addresses in side streets, back alleys or other undesirable 

locations, a prospect that deterred many consumers.25 The emergence of the 

Internet has now given what counterfeiters have always sought: a legitimate 

distribution channel that consumers can access at any time from their 

computers without having to travel to undesirable locations to buy 

counterfeits from brick-and-mortar sellers.26 The Internet also gives 

counterfeiters the ability to disguise their identities and to disappear into the 

vastness of cyberspace at the first sign of trouble.27 All counterfeiters and 

pirates, whether they sell in brick-and-mortar locations or through the 

Internet, are very fearful of detection and capture.28 Counterfeiters that use

brick-and-mortar establishments are subject to surprise raids and seizures by 

enforcement authorities,29 but Internet counterfeiters have found ways to use 

false identities that are untraceable by brand owners; even when they are 

detected, Internet pirates that are shut down are able to immediately create 

new false identities and return to their illegal operations on the Internet.30

Second, PRC enforcement officials have recently acknowledged in an 

 

23 See GAO REPORT, supra note 3, at 11.

24 This observation is based on the author’s own experience as an attorney working for 

U.S. brand owners in tracking the distribution channel of counterfeits.

25 Id. See GAO REPORT, supra note 3, at 10 (counterfeits were traditionally sold in 

“underground” or secondary markets such as flea markets or sidewalk vendors).

26 See GAO REPORT, supra note 3, at 11–12.

27 See id.

28 This observation is based on the author’s firsthand experience in pursuing 

counterfeiters.

29 See Chow, supra note 1, at 19 –21 (describing raids conducted in Yiwu City, “a 

significant wholesale distribution center for counterfeit goods in the PRC[,]” from 1998 to 

1999).

30 See Pierson, supra note 13 (“[B]rands say the same fraudsters keep showing up under 

different names[.]”); Semuels, supra note 15 (“Milo and Gabby tried to track down the 

[counterfeit] sellers, but almost all of the sellers had given false names when setting up their 

Amazon seller accounts, and the addresses they gave turned out to be bogus as well[.]”).
164

official report that Alibaba sees itself as above the law in China and feels no 

need to follow it.31 MNCs have long suspected that Alibaba tolerates or 

encourages counterfeiting on its sites.32 Brand owners have persistently 

complained that Alibaba and Amazon appear reluctant to assist brand owners 

in tracking down counterfeiters and create unnecessary bureaucratic and 

technical hurdles in the detection of counterfeiters.33 Some brand owners 

have attributed these difficulties to an economic motive: e-commerce 

platforms earn revenue through sales, including sales of counterfeit goods.34

In the case of Alibaba, brand owners have long suspected that it tolerates or 

supports counterfeiting and these sentiments have been confirmed by official 

statements by PRC enforcement authorities. According to PRC officials, 

Alibaba’s attitude towards the law and enforcement authorities is marked by 

a fundamental “arrogance.”35 In China, it is not unusual for powerful entities 

to view themselves as above the law.36 The Communist Party, the most 

powerful entity of all, sees the law as a mere instrument to be used to serve 

the ends of the Party.37 Alibaba is not intimidated by or fearful of law 

enforcement authorities; to the contrary, Alibaba sees itself as more powerful 

than government law enforcement authorities and answerable only to the 

Party.38 For these reasons, MNCs must accept the reality that Alibaba, in the 

words of PRC officials, tolerates and supports counterfeiters in order to 

protect its revenues from sales of counterfeit goods and that it will likely take 

an intervention by the Party at its highest levels to effect meaningful change 

in Alibaba’s conduct. Any plan to stem the sales of counterfeits on Alibaba’s 

platform that requires Alibaba’s active participation must proceed with the 

assumption that it will be met with resistance or efforts that are half-hearted.

Third, although the use of the Internet to sell counterfeits presents 

formidable new challenges to brand owners, this Article argues that simple 

and effective measures are available under PRC law to brand owners to deter 

 

31 See Gongshang Zongju (工商总局), Guanyu Dui Alibaba Jituan Jinxing Xingzheng 

Zhidao Gongzuo Qingkuang de Baipishu (关于对阿里巴巴集团进行行政指导工作情况的

白皮书), translated in STATE ADMIN. OF INDUS. & E-COMMERCE, PEOPLE’S REPUBLIC OF 

CHINA, WHITE PAPER ON ALIBABA GROUP HOLDINGS ADMINISTRATIVE GUIDANCE WORK 

SITUATION (2015) [hereinafter SAIC WHITE PAPER]. A partial English translation is available 

at Zheping Huang, The Chinese Government Has Erased a Damning Report on Alibaba, but

You Can Read It Here, QUARTZ (Jan. 29, 2015), https://qz.com/335675/the-chinesegovernment-has-erased-a-damning-report-on-alibaba-but-you-can-read-it-here/. The SAIC 

White Paper is extensively discussed in Part II.B.

32 See infra Part II.B.

33 See infra Part III.A.

34 See e.g., Pierson, supra note 13 (“Not only has [Amazon] avoided any serious backlash 

for allowing the sale of fake goods, it’s actually thrived from it, say more than two dozen 

brand owners, e-commerce consultants, attorneys, investigators and public policy experts.”).

35 SAIC WHITE PAPER, supra note 31, at 20.

36 See infra Part II.D.2.b.

37 Id.

38 Id.
165

many counterfeiters from using the Internet and to detect and identify those 

that do.39This Article proposes and sets forth for the first time a set of simple 

and effective methods that MNCs can use to create effective deterrence to 

counterfeiting on the Internet.40 To the best of the author’s knowledge, no 

MNC, brand owner, or any professional or academic study has previously 

identified these methods, although they are openly available in plain sight in 

China’s legal system, and their use is required and regularly encouraged by 

PRC officials. Although certain aspects of China’s information technology 

industry, such as protection and enforcement of intellectual rights, are weak 

by comparison to the United States, other aspects of China’s information 

technology industry are far ahead of the United States.41 In particular, China’s 

obsessive need to exert pervasive control over and to monitor its citizens and 

all aspects of Chinese society have created the informational technology tools 

available to deter counterfeiters.42 In fact, Chinese government officials have 

urged Internet sites to use the tools available to control entry onto Internet 

sites and to monitor entities on the Internet.43Brand owners, however, either 

do not trust PRC officials or understand the potential effectiveness of these 

tools.

Unlike brick-and-mortar counterfeiters who need no permission to 

operate, counterfeiters must obtain a “pass” through a digital port of entry in 

order to obtain access to the Internet to sell their products.44 Operators of ecommerce platforms have the ability to exercise absolute control over entry. 

Controlling this point of entry through the use of tools created by the PRC 

government is the key to controlling counterfeiting on the Internet. 

Counterfeiters wish to operate in hiding and secrecy; they fear and detest 

transparency and accountability. E-commerce platforms can remove the 

anonymity of the Internet by following a straightforward registration system 

 

39 See infra Part III.

40 Id.

41 China is far ahead of the U.S. in the use of technologies, such as facial recognition, to 

closely monitor its citizens. See Zhou Jiaquan, Drones, Facial Recognition, and a Social 

Credit System: 10 Ways China Monitors Its Citizens, S.CHINA MORNING POST (Aug. 4, 2018), 

https://www.scmp.com/news/china/society/article/2157883/drones-facial-recognition-andsocial-credit-system-10-ways-china.

42 China closely monitors its citizens. Recently, China announced a “social credit” system 

in which the activities of each citizen will be ranked, and each citizen given a score evaluating 

the social merit of his or conduct. For a discussion on how China monitors its citizens, see

Charlie Campbell, How China Is Using “Social Credit Scores” to Rewards and Punish Its 

Citizens, TIME (Jan. 16, 2019), https://time.com/collection/davos-2019/5502592/china-socialcredit-score/.

43 See infra Part III.

44 Online vendors are required by e-commerce platforms to register before they are 

allowed to access the site. See e.g., Selling on Amazon: Frequently Asked Questions, AMAZON, 

https://services.amazon.com/selling/faq.htm (last visited July 1, 2019) (requiring a business 

name, address, and contact information among other information in order to open an Amazon 

seller account).
166

as required by PRC law.45 However, Alibaba does not faithfully apply the 

requirements of PRC law but instead is careless and loose in verifying entity 

registration.46 Brand owners also complain that Amazon has lax registration 

requirements and registers many entities with fictitious identities and 

addresses.47

As a condition of gaining access to e-commerce sites, PRC law requires 

all vendors to submit a business license issued by PRC government 

authorities. These licenses have strict disclosure requirements that will reveal 

their true legal identities and locations in strict accordance with the detailed 

and specific information contained in official PRC government records and 

electronically on government websites to the public.48 To obtain this official 

business license, business operators must undergo a review and approval 

process by PRC government authorities over the legality and economic 

feasibility of their proposed business operations.49 Most counterfeiters will 

not wish to submit to such an approval process for fear of being detected and 

being subject to capture and prosecution. Those entities that do undergo this 

official review will then need to openly display their business licenses on the 

website In turn, counterfeiters will be unable to escape detection as brand 

owners will be able to bring suit directly against them.50

A unique concept of PRC law is that each business entity must have a 

natural person who serves as its legal representative and who is subject to 

civil liability and criminal prosecution.51 The legal representative must be 

identified in the business license so brand owners will have a person in flesh 

and blood against whom they can directly file civil or criminal actions in 

China or in the United States if U.S. contacts exist.52 The faithful execution 

of these requirements should help brand owners to deter many counterfeiters 

from selling through Internet sites. Currently, however, brand owners do not 

insist on enforcement of these requirements and neither Alibaba nor Amazon 

faithfully follows PRC law on entity registration.53

This Article will proceed as follows. Part II examines the background 

 

45 See infra Part III.

46 See text accompanying notes 231-34 infra.

47 See infra note 95.

48 See Administrative Measures for Online Trading, art. 23 (promulgated by the State 

Admin. of Indus. & E-Commerce, Order No. 60, Jan. 26, 2014, effective Mar. 15, 2014), 

CLI.4.218557(EN), http://en.pkulaw.cn/display.aspx?id=16309&lib=law&EncodingName=

big5. See also infra Part III.

49 See infra Part III.

50 Id.

51 See General Principles of the Civil Law of the People’s Republic of China, ch. III, art. 

57 (promulgated by the Nat’l People’s Cong., Order No. 66, Mar. 15, 2017, effective Oct. 1, 

2017), translated by Whitmore Gray & Henry Ruiheng Zheng, General Principles of the Civil 

Law of the People’s Republic of China, 34 AM. J. COMP. L. 715, 726 (1986) [hereinafter 

General Principles of the Civil Law of the PRC].

52 See infra Part III.

53 Id.
167

of counterfeiting in China and how the advent of the Internet has propelled 

this illegal activity to new heights. The ability to transcend the physical 

limitations created by brick-and-mortar counterfeiting operations has created 

a vast new opportunity in cyberspace for counterfeiters who can now 

compete directly with genuine goods and vanish at the first sign of trouble. 

Part II also discusses brand owner concerns about Alibaba and Amazon. In 

the case of Alibaba, brand owners have long claimed that Alibaba tolerates 

or supports counterfeiting on its websites. A recent in-depth investigation and 

report by PRC national authorities not only confirms this suspicion but also 

sets forth the PRC government’s view that Alibaba sees itself as being above 

the law. Brand owners have also complained that Amazon is unresponsive to 

their concerns about counterfeits, requiring byzantine notice and takedown 

procedures that only add to brand owners’ misery. Part III examines the 

hurdles that brand owners claim that they face in attempting to work with 

Alibaba and Amazon in removing infringing webpages or postings from their 

sites; these frustrations are due to cumbersome notice and takedown 

procedures that can take months and tax brand owners through heavy costs 

in time, energy, and money. Part III then sets forth this Article’s proposed 

method of using existing online tools in the PRC to help create deterrents to 

counterfeiting on the Internet. These tools can be used to combat counterfeits 

on Alibaba and Amazon as well as on other e-commerce platforms. Part IV 

contains concluding observations.

II. COUNTERFEITING AND THE INTERNET

A. Brief Overview of Counterfeiting in China

As early as 2000, China was described as having the most serious 

counterfeiting problem in world history.54 The origin of this problem can be 

traced to 1) China’s access to advanced technology (i.e. intellectual property) 

brought into China by MNCs that make foreign direct investments in China 

and 2) to China’s weak and developing legal system,55 which does not create 

effective deterrence for counterfeiters and infringers of intellectual property 

rights.56 Although U.S. companies have made many efforts through the first 

two decades of the twenty-first century to combat counterfeiting in China, 

China remains the largest source of counterfeits in the world. For example, a 

recent study cited in Forbes indicates that China produces 80% of the world’s 

counterfeits and that counterfeiting is now a $1.7 trillion per year industry.57

 

54 Chow, supra note 1, at 3. The background and history of the rise of counterfeiting 

before the advent of the internet is set forth in this article. See infra Parts II.A & II.B.

55 DANIEL C.K. CHOW & THOMAS J. SCHOENBAUM, INTERNATIONAL BUSINESS 

TRANSACTIONS 537–38 (3d. ed. 2015).

56 DANIEL C.K. CHOW & THOMAS J. SCHOENBAUM, INTERNATIONAL TRADE LAW 643 (3d. 

ed. 2017) (China’s weak legal system does not create effective deterrence.).

57 Wade Shepard, Meet the Man Fighting America’s Trade War Against Chinese 

Counterfeits (It’s Not Trump), FORBES (Mar. 29, 2018), https://www.forbes.com/sites/wade
168

The U.S. General Accountability Office reports that in 2016, 88% of all 

seized counterfeit goods by the United States originated from China and 

Hong Kong.58 The European Union claims that China is the largest source of 

counterfeit goods sold into the EU.59 Counterfeiting is now the largest 

criminal enterprise in the world,60 and China is the epicenter of 

counterfeiting.61 The highest number of shipments of counterfeits seized 

around the world originates from East Asia, with China as the top source.62

On April 3, 2019, the Trump Administration issued a Presidential 

Memorandum announcing that combatting counterfeiting and piracy had 

been elevated to a new level of priority for the United States.63 The 

memorandum specifically tasked the Justice Department and the Department 

of Homeland Security to focus on and investigate “online third party 

marketplaces.”64 This indicates a recognition by the United States that 

counterfeiting on e-commerce platforms is a specialized priority area of 

concern.

B. The Advent of the Internet

The rise of Internet sales platforms in the early 2000s created a valuable 

new opportunity for counterfeiters. To understand the significance of this 

development, it is necessary to recognize that there are two main components 

to counterfeiting: manufacturing and distribution.65

The manufacturing of counterfeits tends to arise in proximity to the 

manufacturing of genuine goods.66 In the early 1990s, one of the first areas 

open to foreign investment in China was in the southern region of Guangdong 

Province, near Hong Kong. MNCs opened manufacturing facilities in special 

 

shepard/2018/03/29/meet-the-man-fighting-americas-trade-war-against-chinesecounterfeits/#321a1941c0d6.

58 GAO REPORT, supra note 3, at 13.

59 EUROPEAN COMM’N, EU SEIZURES AT THE BORDER OF GOODS INFRINGING ON 

INTELLECTUAL PROPERTY RIGHTS (2018), https://ec.europa.eu/taxation_customs/sites/

taxation/files/factsheet_ipr_report_2018_en.pdf.

60 See Shepard, supra note 57 (“The trade in counterfeit and pirated goods is currently at 

$1.7 trillion . . . and is expected to grow to $2.8 trillion and cost 5.4 million jobs by 2022.”).

61 See id. See also EUROPEAN COMM’N, supra note 59 (reporting that China and Hong 

Kong, together, accounted for over 83% of counterfeit goods).

62 OECD & EUROPEAN UNION INTELLECTUAL PROP. OFFICE, TRADE IN COUNTERFEIT AND 

PIRATED GOODS: MAPPING THE ECONOMIC IMPACT 49 (2016), http://dx.doi.org/10.1787/

9789264252653-en.

63 Memorandum on Combatting Trafficking in Counterfeit and Pirated Goods, Section 1 

(Apr. 3, 2019), https://www.whitehouse.gov/presidential-actions/memorandum-combatingtrafficking-counterfeit-pirated-goods/.

64 Id.

65 Daniel C.K. Chow, Organized Crime, Local Protectionism and the Trade in 

Counterfeit Goods in China, 14 CHINA ECON. REV. 473, 474 (2003).

66 Id.
169

economic zones that created financial incentives for investment.67 Soon after 

these facilities were established, the brand owners found that counterfeits 

began to appear in the same locations.68 MNCs discovered that employees 

working in their facilities or their relatives, friends, or associates had begun 

to use the know-how that they acquired from the MNC to establish their own 

manufacturing operations in order to produce counterfeits.69

A counterfeiter that has manufactured a fake good must then sell it to 

consumers. The illegal factory may be located far away from densely 

populated urban areas where large numbers of consumers are found, so the 

counterfeiter must find a distribution channel for the goods to reach the enduse consumer. Distribution is the second major component of counterfeiting.

Prior to the rise of the Internet, counterfeiters faced a problem: 

legitimate distributors would have nothing to do with counterfeits.70 MNCs 

distribute their products in China only through qualified distributors that are 

able to sell to high-end state-owned department stores and other retail outlets 

in high-end shopping centers.71 Qualified distributors are those entities that 

are able to pass a stringent set of criteria established by brand owners.72 These 

distributors will not work with counterfeiters for fear of losing their contracts 

with legitimate brand owners, and, as a result, counterfeiters are unable to 

penetrate into legitimate distribution channels to reach high-end retailers.73

Rather, counterfeiters had to rely on brick-and-mortar wholesale distributors 

of lesser and questionable repute who would be willing to sell counterfeits, 

smuggled goods, and inferior quality products.74These wholesale distributors 

are found in markets in China that are either enclosed or open air spaces with 

hundreds or thousands of wholesale vendors.75 Retailers appear at these 

wholesale markets with trucks or vans to transport the counterfeits purchased 

at these markets.76 Large reputable retailers, such as state-owned department 

stores, do not buy at these wholesale markets.77 Only retailers that are small 

mom and pop stores, street stalls, or open air vendors in China will purchase 

from these markets.78This left the counterfeiter with the problem that it could 

 

67 Id.

68 See id. at 474–75.

69 This observation is based upon the author’s own experience working as in-house 

counsel for an MNC with major operations in China. It is a pattern that is repeatedly occurs in 

China: counterfeiting tends to arise in locations with legitimate manufacturing operations.

70 See Chow, supra note 65, at 476.

71 Id.

72 Id.

73 Id.

74 See id. at 476–77.

75 Id. at 476.

76 See Chow, supra note 65, at 476.

77 Id.

78 Id.
170

almost never penetrate into high-end retail stores.79 Purchasers of 

counterfeits would have to travel to side streets, back alleys, and other areas 

in less desirable urban locations to buy counterfeits from small and less 

reputable retailers.80 The need to travel to unsavory locations deterred many 

consumers.

In the United States, counterfeits are also unable to penetrate into 

legitimate distribution channels to reach large department stores or other 

large retailers.81 Counterfeits are almost never found in large chain stores 

such as Costco, Target, or Walmart. These companies either use qualified 

distributors or have vertically integrated business models that allow them to 

control distribution themselves.82 These distributors refuse to deal in 

counterfeits, smuggled goods, or gray market goods.83 Only less reputable 

distributors will deal in these secondary goods, but they do not sell to large 

and high end retailers who refuse to deal with them.84 These distributors sell 

to discount stores, small mom-and-pop stores, street vendors, or private 

persons who arrange for sales through word of mouth.85The advent of the 

Internet has now given counterfeiters what they have long sought: a 

legitimate and broad-reaching distribution channel to reach retail consumers 

who are now able to purchase products without having to travel to specific 

and undesirable locations where counterfeits are sold. Counterfeiters can now 

place their products on the Internet to reach consumers worldwide and are no 

longer confined to using illegal wholesale markets to reach lower retail 

quality stores. While in the past, consumers would not encounter counterfeits 

on the next shelf adjacent to authentic goods in brick and mortar stores 

because high end retailers refused to deal with distributors of counterfeit 

goods, the same is no longer true on the Internet. It is now possible for 

counterfeits to be on the digital shelf next to genuine goods on the same or 

an adjacent webpage.86 Counterfeits can now compete directly with genuine 

goods.87 Counterfeiters can also use false digital images that hide the low 

 

79 Id.

80 Id.

81 This observation is based on the author’s own experience as an expert witness in U.S. 

litigation involving U.S. multinational companies in cases involving counterfeits from China.

82 Id.

83 Gray market goods (sometimes also called parallel imports) are genuine goods that are 

intended for sale in a foreign market but that are purchased abroad and shipped back to the 

home market. For example, genuine goods that are sold by the manufacturer to Japan are 

purchased by a foreign distributor in Japan who then resells them to an importer in China. The 

foreign distributor is able to take advantage of a lower price in Japan or favorable currency 

exchange rates in order to sell the products in China at a price that is lower than the genuine 

goods are sold directly by the manufacturer to buyers in China. See CHOW & SCHOENBAUM,

supra note 55, at 567-68.

84 See Chow, supra note 65, at 476.

85 Id.

86 See GAO REPORT, supra note 3, at 11.

87 Id. (“In the past, consumers could often rely on indicators such as appearance, price, or 
171

quality of their goods in competition with genuine goods.88

The rise of counterfeits coincides with shifts in consumer habits. In June 

2000, approximately 22% of U.S. consumers purchased goods online, but by 

December 2016 that portion had risen to 79%.89 By 2020, worldwide ecommerce sales are expected to reach $4 trillion, and e-commerce is expected 

to reach nearly 15% of global retail spending by 2020.90

Prior to the advent of the Internet, counterfeiters in China that sought to 

sell their goods in the United States loaded the goods in large shipping 

containers with false documentation to transport the goods by ocean carriage 

to a port in the United States.91While detection was difficult, if a brand owner 

had reliable specific intelligence of an illegal shipment,92 customs authorities 

in the United States would open and inspect the container.93 With Internet 

sales, thousands or hundreds of thousands of small, individual packages are 

now shipped to the United States by mail, making it nearly impossible to 

detect and stop these shipments.94

Not only do e-commerce platforms allow counterfeiters unprecedented 

access to end use consumers, counterfeiters are also able to take advantage 

of the anonymity of the internet to evade capture and detection by using false 

identities, business names, and locations.95 The Internet has created an 

irresistible new opportunity for counterfeiters and has opened vast new 

avenues for generating profit.

C. Liability Regimes for Internet Service Providers

Under the Digital Millennium Copyright Act (DMCA)96 in the United 

 

location of sale to identify counterfeit goods in the marketplace, but counterfeiters have 

adopted new ways to deceive customers.”).

88 Id. Cf. id. (“The physical appearance of counterfeit goods may no longer serve as a ‘red 

flag’ for consumers that the good they are considering purchasing is not genuine. Counterfeit 

goods and their packaging are becoming more sophisticated and closely resemble genuine 

goods[.]”).

89 Id. at 12.

90 Id.

91 See Chow, supra note 65, at 475.

92 Such intelligence can be gathered through the use of private investigation companies 

that penetrate counterfeit rings. A number of companies, such as Kroll and Pinkerton, 

specialized in these investigations.

93 The author was involved as an attorney in a counterfeiting case in the United States in 

which U.S. Customs authorities stated that they would be willing to conduct an inspection of 

shipping containers but only on the basis of reliable specific information.

94 See Pierson, supra note 13 (“Customs agents had a fighting chance when pirated goods 

predominantly arrived in cargo containers. But with the rise of e-commerce, counterfeiters and 

their middlemen can ship goods in parcels too innumerable to catch.”).

95 See id. (“[B]rands say the same fraudsters keep showing up under different names[.]”); 

Semuels, supra note 15 (“Milo and Gabby tried to track down the [counterfeit] sellers, but 

almost all of the sellers had given false names when setting up their Amazon seller accounts, 

and the addresses they gave turned out to be bogus as well[.]”).

96 17 U.S.C. § 512 (Westlaw through Pub. L. No. 116-68). DMCA implements two World 
172

States and similar provisions in China,97 Internet service providers (ISPs) are 

not directly liable for the sale of counterfeits listed on their sites by thirdparty vendors.98 While ISPs may be subject to vicarious liability for 

facilitating the sales, DCMA provides a “safe harbor.”99 ISPs are entitled to 

immunity from vicarious liability for third-party listings and sales of 

counterfeit goods if they have no knowledge of the infringing material and 

remove it expeditiously upon receiving notice of its illegal nature.100 To 

implement DCMA and the corresponding PRC law, e-commerce companies 

such as Alibaba and Amazon have set forth internal notice and takedown 

procedures that brand owners are required to follow when they find 

infringing material.101 As detailed in a later section, brand owners often 

complain that these procedures are cumbersome, time consuming, and 

ineffective.102

D. Alibaba

1. Brand Owner Concerns

Alibaba is currently the world’s largest e-commerce platform in the 

world.103 In 2016, Alibaba’s Internet marketplaces in China had 423 million 

 

Intellectual Property Organization (WIPO) treaties: the WIPO Copyright Treaty and the WIPO 

Performances and Phonograms Treaty. WIPO Copyright Treaty, Dec. 20, 1996, 112 Stat. 

2861, 2186 U.N.T.S. 121; WIPO Performances and Phonograms Treaty, Dec. 20, 1996, 112 

Stat. 2861, 2186 U.N.T.S. 203. As of 2007, the United States and the People’s Republic of 

China are now contracting parties to both treaties. Contracting Parties – WIPO Copyright 

Treaty, WIPO, https://www.wipo.int/treaties/en/ShowResults.jsp?lang=en&treaty_id=16 

(last visited July 1, 2019); Contracting Parties – WIPO Performances and Phonograms 

Treaty, WIPO, https://www.wipo.int/treaties/en/ShowResults.jsp? lang=en&treaty_id=20 

(last visited July 1, 2019).

97 See generally Trademark Law of the People’s Republic of China (promulgated by the 

Nat’l People’s Cong., adopted Aug. 23, 1982, most recently revised Apr. 23, 2019, effective 

Nov. 1, 2019); Law Against Unfair Competition of the People’s Republic of China 

(promulgated by the Nat’l People’s Cong., Order No. 10, Sept. 2, 1993, revised Nov. 4, 2017, 

amended Apr. 23, 2019).

98 See 17 U.S.C. § 512(c)(1).

99 Id. See generally Susanna Monseau, Fostering Web 2.0 Innovation: The Role of the 

Judicial Interpretation of the DMCA Safe Harbor, Secondary Liability and Fair Use, 12 J. 

MARSHALL REV. INTELL. PROP. L. 70 (2012).

100 See 17 U.S.C. § 512(c)(1).

101 See Intellectual Property Policy for Sellers, AMAZON, https://sellercentral. 

amazon.com/gp/help/external/201361070 (last visited July 1, 2019); Intellectual Property 

Rights (IPR) Protection Policy, ALIBABA, https://rule.alibaba.com/ rule/detail/2049.htm (last 

visited July 1, 2019).

102 See infra Part III.

103 Comment Submitted by Eric Pelletier, Vice President of Alibaba, to the Honorable 

Probir Mehta, Assistant United States Trade Representative re: 2016 Special 301 Out-of-Cycle 

Review Notorious Markets (Docket Number USTR-2016-2013), at 2 (Oct. 7, 2016), 

https://www.alizila.com/wp-content/uploads/2016/10/P-Alibaba-Group-Comments-for2016-Notorious-Markets-Report-2_FINAL_compressed.pdf?x95431 (last visited Nov. 25, 
173

active purchasers with a combined gross merchandise volume (GMV) of 

$485 billion.

104 In 2018, in the span of just two years, active purchasers in 

China grew to 636 million and GMV grew to exceed $768 billion,105 creating 

the prospect that Alibaba’s users may soon surpass one billion and its GMV 

may soon surpass $1 trillion, numbers that seemed almost inconceivable just 

a decade ago. In 2015, package delivery from Alibaba’s e-commerce 

platform in China averaged thirty million per day.106 The sheer size and scope 

of Alibaba’s operations dwarfs even that of its closest competitors. For 

example, Alibaba’s GMV in 2018 at $768 billion is more than three times 

that of Amazon, the world’s second e-commerce platform, at $239 billion.107

From Alibaba’s earliest days of operation, back in 1999, MNCs have 

claimed that counterfeits are abundantly available on Alibaba’s websites.108

Frustrated with the lack of results in China, U.S. companies have raised these 

concerns with the U.S. government and, as a result, Alibaba has been 

repeatedly placed on U.S. government blacklists. Despite its many claims 

that it is implementing new changes to effectively combat counterfeiting on 

its websites, Alibaba was first placed on the Out-of-Cycle Notorious Markets 

List in 2011109 and sought to remove itself from the list in anticipation of its 

initial public offering (IPO) in the United States in 2014. Although Alibaba 

was dropped from the 2012 list,110 Alibaba found itself once again on the 

 

2019).

104 Id.

105 Press Release, Alibaba Group Announces December Quarter 2018 Results (Jan. 30, 

2019), https://www.alibabagroup.com/en/news/press_pdf/p190130.pdf.

106 Jen Wieczner, Alibaba: Here’s Why Our Mind-Blowing Numbers Are Real, FORTUNE

(Sept. 23, 2015), https://fortune.com/2015/09/23/alibaba-says-numbers-real-not-fake/.

107 Adam Levy, The 7 Largest E-Commerce Companies in the World, THE MOTLEY FOOL

(Dec. 26, 2018), https://www.fool.com/investing/2018/12/26/the-7-largest-e-commercecompanies-in-the-world.aspx.

108 See, e.g., Alibaba and the 2,236 Thieves: An Online-Fraud Scandal in China, THE 

ECONOMIST (Feb. 22, 2011), https://www.economist.com/newsbook/2011/02/22/alibaba-andthe-2236-thieves;

109 OFFICE OF U.S. TRADE REPRESENTATIVE, 2011 OUT-OF-CYCLE REVIEW OF NOTORIOUS 

MARKETS 3 (Dec. 20, 2011), https://ustr.gov/sites/default/files/uploads/gsp/speeches/reports/

2011/Notorious%20Markets%20List%20 FINAL.pdf (discussing Alibaba’s subsidiary site 

Taobao.com).

110 Doug Palmer, U.S. Drops China’s Taobao Website from “Notorious” List, REUTERS

(Dec. 13, 2012), https://www.reuters.com/article/net-us-usa-trade-piracy/u-s-drops-chinastaobao-website-from-notorious-list-idUSBRE8BC1IG20121213.
174

Notorious Markets list in 2014111, 2016112, 2017113, and 2018114. Furthermore, 

in 2016, a group of 17 international trade associations reiterated their 

concerns in a letter to USTR, stating:

During the ten months since USTR published [the 2015 USTR Special 

301 Notorious Markets Report] we have seen little evidence that there 

has been any noticeable change on the Alibaba platforms themselves; 

and at any given moment, a consumer around the world can chose 

from hundreds of thousands of counterfeit clothes, shoes, travel 

goods, handbags, toys, auto parts, jewelry, watches, furniture, 

electronics, pharmaceuticals, and other articles.115

Many brand owners have concluded that Alibaba, despite its 

protestations to the contrary, actually tolerates and supports counterfeiting on 

its websites because Alibaba earns revenues from all sales, including sales of 

counterfeit goods. Labelling Alibaba as “our most dangerous and damaging 

adversary,”116 one brand owner stated:

Alibaba’s strategy has consistently been to provide lip service to 

supporting brand enforcement efforts while doing as little as possible 

to impede the massive flow of counterfeit merchandise on its 

platforms.117

 

111 OFFICE OF U.S. TRADE REPRESENTATIVE, 2014 OUT-OF-CYCLE NOTORIOUS MARKETS 

LIST 8 (Mar. 5, 2015), https://ustr.gov/sites/default/files/2014%20Notorious%20Markets

%20List%20-%20Published_0.pdf (discussing Alibaba’s subsidiary site Taobao.com).

112 OFFICE OF U.S. TRADE REPRESENTATIVE, 2016 OUT-OF-CYCLE NOTORIOUS MARKETS 

LIST 12–13 (Dec. 2016), https://ustr.gov/sites/default/files/2016-Out-of-Cycle-ReviewNotorious-Markets.pdf (discussing Alibaba’s subsidiary site Taobao.com).

113 OFFICE OF U.S. TRADE REPRESENTATIVE, 2017 OUT-OF-CYCLE NOTORIOUS MARKETS 

LIST 20–23 (Jan. 11, 2018), https://ustr.gov/sites/default/files/files/Press/Reports/

2017%20Notorious%20Markets%20List%201.11.1 8.pdf (discussing Alibaba’s subsidiary 

site Taobao.com).

114 OFFICE OF U.S. TRADE REPRESENTATIVE, 2018 OUT-OF-CYCLE NOTORIOUS MARKETS 

LIST 26–27 (Jan. 11, 2018), https://ustr.gov/sites/default/files/2018_Notorious Markets_

List.pdf (discussing Alibaba’s subsidiary site Taobao.com).

115 Comment Submitted AFL-CIO et al. to the Honorable Probir Mehta, Assistant United 

States Trade Representative re: 2016 Special 301 Out-of-Cycle Review Notorious Markets 

(Docket Number USTR-2016-2013), at 2 (Oct. 26, 2016), https://www.mema.org/sites/

default/files/resource/Multi-Org%20Letter%20on%20Alibaba%20102616.pdf.

116 Letter from Lee S. Sporn of Michael Kors (USA), Inc. to Bob Barchiesi, President, 

International Anti-Counterfeit Coalition (IACC), at 2 (Apr. 21, 2016) [Hereinafter Letter from 

Lee S. Sporn]. See Erika Kinetz, Some Howl Over Alibaba’s Place in Anti-Counterfeiting 

Group, ASSOC. PRESS (May 5, 2016), https://www.apnews.com/2c9381cb0c2841aba956abe

f1a3005b3.

117 Letter from Lee S. Sporn, supra note 116, at 2. See Kathy Chu, Brands Voice Doubts 

After Alibaba Joins Group Fighting Fake Goods, WALL ST. J. (Apr. 28, 2016), 

https://www.wsj.com/articles/brands-voice-doubts-after-alibaba-joins-group-fighting-fakegoods-1461763178.
175

a. Alibaba’s Defense of Counterfeits

Many brand owners’ skepticism about Alibaba’s sincerity in combatting 

counterfeiting can be attributed to statements made by its Chairman and 

founder, Jack Ma, that defend counterfeiting. In responding to criticism by 

luxury brands about the sale of counterfeits on Alibaba, Ma made clear his 

position in 2015. A commentator observed:

The longer Ma talks, the more it’s clear where his sentiments fall. The 

second-richest man in China thinks the very idea of luxury retail—

selling belts and accessories and the like for thousands of dollars—is 

inherently absurd. “How can you sell Gucci or whatever branded bag 

for so much money? It is ridiculous,” he says. “I understand the 

branded companies are not happy, but I also say that’s your business 

model. You have to check your business model, too.”118

The following year, in a speech at Alibaba’s headquarters, Ma stated:

The problem is the fake products today are of better quality and better 

price than the real names. They are exactly the [same] factories, 

exactly the same raw materials but they do not use the names.119

These statements suggest that Ma believes that there is a normative 

justification for Alibaba’s support of counterfeits. Ma believes luxury brands 

like Gucci are inviting unauthorized copies by charging prices so high that 

they are “absurd.” Alibaba sees itself as helping out small-time sellers that 

sell counterfeits or infringing products to lift themselves into the middle 

class. Jack Ma and Alibaba take on a modern “Robin Hood” persona. Just as 

the fictional Robin Hood robbed from the rich to give to the poor, Alibaba is 

assisting small-time Chinese sellers to take a free ride on the goodwill of 

luxury brands owned by MNCs that have invited counterfeiting through their 

greed, avarice, and attempts to gouge vulnerable Chinese consumers. China’s 

consumers also benefit from having access to fakes that are “of better quality 

and better price than thee real names.”120 Ma’s position may help Alibaba to 

further gain popularity in China by enhancing Ma’s reputation as a true 

national hero and great patriot of China, but it also infuriates brand owners.121

 

118 Michael Schuman, Why Alibaba’s Massive Counterfeit Problem Will Never Be Solved, 

FORBES (Nov. 4, 2015), https://www.forbes.com/sites/michaelschuman/2015/11/04/alibabaand-the-40000-thieves/#31848fd729dc.

119 Charles Clover, Alibaba’s Jack Ma Says Fakes Are Better Than Originals, FIN. TIMES

(June 14, 2016), https://www.ft.com/content/6700d5cc-3209-11e6-ad39-3fee5ffe5b5b.

120 Id.

121 See Letter from Lee S. Sporn, supra note 116. When Alibaba was accepted as a member 

of the International Anti-Counterfeiting Coalition, Sporn, who represents Michael Kors, a 

fashion house, resigned in protest. Chu, supra note 117.
176

b. Counterfeits for Sale on Alibaba

To test the claims of brand owners that counterfeits are found in 

abundance on Alibaba’s sites, the author recently did a search of Alibaba 

sites and immediately found many examples of counterfeits and infringing 

products. Photographs of the webpages containing three of these examples 

are set forth in the Appendices. These examples are discussed below, but 

there are other examples on this site that are too numerous to discuss within 

the confines of this Article.

(a) Appendix 1 is an advertisement for handbags being sold under a 

“big brand name” (“Da Pai”) called “Gucci Guccio.” These handbags 

copy the design and trade dress of Gucci handbags and use the name 

“Gucci” as part of their brand name.122 Gucci was singled out by 

Alibaba Chairman Jack Ma as a luxury brand owner selling its 

products at absurdly high prices.123 The advertised price for these 

products is 1500 Renminbi (“people’s currency” or RMB, the Chinese 

fiat currency). At the currency exchange rate of 1 RMB to 0.15 U.S. 

dollar, this price is the equivalent of about $225 U.S. dollars. On 

Gucci’s website in the United States, genuine Gucci bags similar to 

the ones advertised on Alibaba sell for over $2000 U.S. dollars with 

some bags selling for as much as $7500.124 It is highly unlikely for a 

genuine Gucci handbag of the type in this advertisement to sell for 

$225. It is also highly unlikely that these types of prices can be 

charged for gray market goods.125 In addition, nothing in the 

advertisement indicates that these are second hand or used goods. 

Chinese consumers have an aversion to purchasing secondhand goods 

due to cultural reasons, and Chinese merchants are well aware of 

consumers’ dislike of secondhand goods.126 It is highly likely that the 

products advertised in the attached Alibaba webpage are counterfeits.

(b) Appendix 2 is an advertisement for a 700 ml bottle of Hennessy 

 

122 The author was told by an associate in China that Alibaba did not consider “Gucci 

Guccio” to be an infringing or counterfeit use because the name “Gucci” did not appear alone 

but was accompanied or modified by another name as part of the product’s brand name. Only 

the unauthorized use of a trademark such as Gucci appears alone would be considered an 

infringing use.

123 See infra text accompany note 117.

124 Women’s Handbags, GUCCI, https://www.gucci.com/us/en/ca/women/womenshandbags-c-women-handbags/1 (last visited July 1, 2019).

125 While prices for gray market goods are usually lower than prices for genuine goods 

intended for the home market, the price differential would not be as great as that set forth in 

the case of the handbags in Appendix 1, i.e. it would be highly unlikely that a genuine handbag 

that sold for approximately $2,000 to $7,500 in Japan could be sold as a gray market good in 

China for $225. CHOW & SCHOENBAUM, supra note 55, at 567.

126 See Yiling Pan, Why the Second Hand Luxury Market isn’t Thriving in China, JING 

DAILY (Aug. 24, 2017), https://jingdaily.com/what-blocks-secondhand-luxury-marketthriving-in-china/ (last visited July 12 2019) (Chinese consumers “still prefer to purchase new 

luxury goods and look down on the value of second-hand goods”).
177

XO cognac with an advertised price of 432 RMB or $65. A similarly 

sized bottle (750 ml) sells for approximately $160 in the United 

States.127 It is highly likely that the bottle sold on the Alibaba website 

is a counterfeit.

(c) Appendix 3 is an advertisement for fashion workout pants made 

by Abercrombie and Fitch, based in Columbus, Ohio, selling at a price 

of 80 RMB or $12. Based on the photograph and the author’s 

experience in tracking counterfeiters in the consumer products 

industry, it is apparent that these products are of low quality and are 

inferior to what Abercrombie and Fitch would sell in retail stores. By 

comparison, Appendix 4 includes a photograph of a similar 

Abercrombie and Fitch product from its website that sells for $58.128

These facts indicate that it is highly likely that the product advertised 

on the Alibaba website is a counterfeit.

To understand why brand owners view examples such as these as threats 

to their business, it is necessary to realize that in China (as in many other 

countries) there is a huge appetite for counterfeit goods, and many consumers 

actively search for and buy counterfeits.129 The vast majority of consumers 

in China who visit the webpages for the products described in the examples 

above are fully aware that these are counterfeit goods, but these consumers 

are actively seeking these goods.130 In the case of counterfeit Gucci handbags 

and counterfeits of other famous brand names, consumers are actively 

seeking to buy cheap imitations of the famous brand that they can purchase 

for a tenth or less than the genuine product.131 These consumers want the 

prestige of the brand, trademark, or trade dress and are not concerned about 

the quality of the actual merchandise itself.132 So long as the product has the 

trademark or trade dress, the purchaser of the counterfeit is able to enjoy the 

 

127 Hennessy Cognac XO, WINE CHATEAU, https://www.winechateau.com/products/

hennessy-cognac-xo (last visited July 1, 2019).

128 See Appendix 4 infra.

129 Jay Kennedy, Commentary: More Buying Counterfeits and Knockoff - It’s Costing 

Billions and More (May 12, 2019), CHANNEL NEWS ASIA, https://www.channelnews

asia.com/news/commentary/more-buy-knock-off-counterfeit-fake-goods-branded-drugcrime-11499382 (noting that “there are many consumers who willingly buy counterfeit 

goods”). See also The Counterfeit Goods Industry in Modern China (April 15, 2019), DAXUE 

CONSULTING, https://daxueconsulting.com/counterfeit-products-in-china/ (noting that “the 

market for fake goods in China is largely driven by consumers who actively search for and 

purchase counterfeit products”).

130 This observation is based on the author’s own experience in China. See Liz Robbins, 

Investigators Seize Fake Luxury Goods, N.Y. TIMES (Aug. 16, 2018), 

https://www.nytimes.com/2018/08/16/nyregion/fake-luxury-goods-handbags.html.

131 This observation is based on the author’s work with private investigation companies 

tracking counterfeiters in China.

132 See DANIEL C.K. CHOW & EDWARD LEE, INTERNATIONAL INTELLECTUAL PROPERTY:

PROBLEMS, CASES, AND MATERIALS 784 (3d ed. 2017) (consumers will knowingly purchase 

fake luxury goods).
178

good will associated with the brand name or trademark.133 In China today (as 

in many other countries), there is an enormous demand for counterfeit luxury 

branded handbags that offer the prestige of the genuine brand at a fraction of 

the price of the genuine product.134

The same is true with counterfeit liquor as shown in example (b) above. 

Consumers in China who purchase counterfeit bottles of famous brand name 

liquor are not in general buying the liquor for private or personal 

consumption.135 In China, for personal or professional reasons, people often 

have banquets or dinners where highly alcoholic drinks are served and 

consumed in large quantities as part of social drinking rituals.136 It is a mark 

of prestige for a host to serve a famous foreign brand of liquor, such as a 

French made cognac like Hennessy or a western brand of whiskey such as 

Johnny Walker Black Label.137 There is a huge demand for this type of 

counterfeit liquor, where the counterfeiter uses a bottle that is either a copy 

or a genuine used bottle and fills it with a cheap but potent liquor.138 The host 

can enjoy the good will of serving his guests a high prestige brand while only 

paying for a common liquor that, while inexpensive, is just as potent but is 

not contaminated or harmful to the guests.

In the case of (c), young adults in China are highly fashion-conscious 

and are hungry for famous international brands.139 Most consumers viewing 

the webpage with Abercrombie and Fitch pants selling for $12 are fully 

aware that these are counterfeits and that the product is of low quality. They 

reason, however, that they can pay about the same price for a low-quality 

product without the prestige of the counterfeit Abercrombie label or pay a 

little bit more for the same low-quality product but enjoy the prestige of the 

Abercrombie brand name. Many consumers will choose the latter.140

 

133 Id.

134 Id.

135 These observations about the use of alcohol in China are based upon the author’s own 

experience and based on discussions with colleagues and associates.

136 See Nathan H. Gray, “Gan Bei”: Business and Ritualistic Drinking in China, WORD 

PRESS (Apr. 22, 2010), https://nathanhgray.wordpress.com/2010/04/22/gam-bei-businessand-ritualistic-drinking-in-china/ (discussing the importance of drinking rituals).

137 See Jiani Ma, Rich Post-80s Drive Chinese Whiskey Market Growth, JING DAILY (Apr. 

16, 2018), https://jingdaily.com/chinese-whiskey-market/ (noting the demand for premium 

and super premium brands of whiskey and cognac in China).

138 Natalie Wang, Nearly 40% of Chinese Consumers Admit to Purchasing Fake Booze, 

THE DRINKS BUS. (Mar. 19, 2018), https://www.thedrinksbusiness.com/2018/03/nearly-40-

chinese-consumers-admit-to-purchasing-fake-booze/ (noting that consumers admit to 

intentionally purchase fake booze in China).

139 See e.g., Luxury Brands Tailor Their Marketing to Asian Millennial Consumers, THE 

FASHION LAW (Aug. 7, 2018), http://www.thefashionlaw.com/home/luxury-brands-tailortheir-marketing-to-millennial-consumers-in-the-far-east.

140 This observation is based upon the authors’ experience in investigating counterfeit 

consumer products in China.
179

2. Alibaba’s “Arrogance” and Illegal Activities

While MNCs have consistently complained about Alibaba’s tacit 

approval and support of counterfeiting, these sentiments were recently 

confirmed for the first time by enforcement authorities in China in connection 

with an extraordinary national level investigation of Alibaba. The State 

Administration of Industry and Commerce (SAIC) and its local branches 

(AICs) are charged with maintaining orderly markets in the PRC and are 

primarily responsible for stemming the flow of counterfeit goods.141 In the 

case of Alibaba, the SAIC took the unprecedented step of conducting an 

administrative guidance meeting with Alibaba officials in July 2014.142 The 

Director of the SAIC emphasized the unique nature of the meeting when he 

stated, “For this meeting, I didn’t know whether it’s the first ever of its kind, 

or the last, but I hope that this would be the last time for a meeting of this 

nature.”143

Enforcement actions are usually the provenance of local AICs as the 

SAIC, the central level authority, is a supervisory and policy-making body.144

However, the SAIC believed that in the case of Alibaba, it was necessary for 

the agency to step in to resolve a case that had proven to be intractable to 

local authorities.145 In the administrative guidance meeting, the SAIC and 

appropriate local level AICs met with Alibaba officials in order to set forth 

an agreed upon set of steps to remediate counterfeiting on Alibaba 

platforms.146

The administrative guidance meeting between the SAIC and Alibaba 

executives occurred on July 16, 2014,147 and on January 28, 2015, the SAIC 

issued a White Paper as a follow up to the meeting to formally set forth a 

 

141 State Administration of Industry and Commerce, IP CHANNEL (Feb. 9, 2010), 

http://ip.people.com.cn/ GB/152255/10960401.html.

142 See Transcript of Administrative Guidance Meeting Between SAIC and Alibaba (held 

July 14, 2016) (on file with author) [hereinafter Transcript of Admin. Guidance Meeting]; 

Huang, supra note 31 (“On July 16, 2014, the administrative guidance group of the Internet 

Supervision Department . . . held an administrative guidance forum at the Zhejiang Province 

Industry and Commerce Bureau. Principal officers and management teams of the core 

departments of Alibaba Group attended the meeting and accepted administrative guidance.”). 

See also Heather Timmons, Chinese Regulators Flagged Illegal Practices at Alibaba Months 

Before Its Monster IPO, QUARTZ (Jan. 28, 2015), https://qz.com/334863/chinese-regulatorsflagged-illegal-practices-at-alibaba-months-before-its-monster-ipo/. Administrative guidance 

is governed by the SAIC’s Comprehensive Promotion of Administrative Guidance Work 

(2009).

143 Transcript of Admin. Guidance Meeting, supra note 142, at 128.

144 State Administration of Industry and Commerce, supra note 141 (“The [SAIC] . . . is 

the competent authority of ministerial level directly under the State Council in charge of 

market supervision/regulation and related law enforcement through administrative means.”).

145 See SAIC WHITE PAPER, supra note 31, at 11–12.

146 The steps were later summarized in the SAIC White Paper. Id. at 19.

147 See id.; Huang, supra note 31.
180

plan of remediation.148 In both the transcript of the meeting and in the SAIC 

White Paper, the SAIC makes the point repeatedly that at the time of the 

meeting in July 2014 there were numerous counterfeits, infringing products, 

and other violations of Chinese laws on advertising, product information, and 

licensing on Alibaba’s websites.149

However, the point being made by the SAIC White Paper and during 

the administrative guidance meeting is more subtle, and even more deepseated, than the need to control persistent illegal activities. For example, the 

SAIC states:

Alibaba Group, for a long time, has failed to take seriously the 

operational violations on its e-commerce platforms and did not take 

effective measures to address the violations. This caused a miniscule 

issue to snowball into a serious problem, leading Alibaba to its 

greatest crisis since its incorporation.150

This critique is not directed at practices involving IP rights; it is directed 

at an underlying culture at Alibaba, which is one of viewing itself as above 

the law, including an attitude of a willful refusal to obey the law. At another 

point, the SAIC White Paper states:

It is suspected that [Alibaba] knowingly, intentionally, by negligence 

or in spite of their presumed knowledge facilitates unlicensed 

operations, trademark infringements, untruthful publicity, pyramid 

schemes and violations of consumers’ rights.151

The SAIC traces Alibaba’s flouting of the law to an attitude of 

“arrogance.”152 An AIC official at the July 16, 2014 meeting stated that when 

speaking to Alibaba employees, he felt “a kind of arrogant emotion sprouting 

and growing.”153 In its White Paper, the SAIC specifically tells Alibaba that 

it should “redress arrogance.”154 The SAIC informs Alibaba that it cannot 

expect to “receive special treatment under law. . . . Regulators . . . shall treat 

businesses equally under law.”155 The SAIC also admonishes Alibaba to 

“ethically conduct business” and warns that “[a]n enterprise shall not get 

 

148 See SAIC WHITE PAPER, supra note 31. The purpose of the White Paper is to provide 

“various understandings and information about the said administrative guidance meeting” to 

Alibaba. See id. at 11.

149 Transcript of Admin. Guidance Meeting, supra note 142, at 3–8.

150 SAIC WHITE PAPER, supra note 31, at 11–12 (emphasis added).

151 Id. at 14.

152 Id. at 20.

153 Transcript of Admin. Guidance Meeting, supra note 141, at 117.

154 SAIC WHITE PAPER, supra note 31, at 20.

155

“No market player shall receive special treatment under law. The management of 

Alibaba family shall understand their bottom line. Regulators in the applicable jurisdiction 

shall treat businesses equally under law.” Id.
181

what it wants at its own will.”156 The SAIC additionally warns Alibaba that 

it cannot flout the law when it finds the law interferes with its interests and 

then assert the law when it needs the law’s protection despite acting without 

credibility or integrity.157

Although the SAIC stood in the position of a government regulator at 

the meeting, it at times seemed to descend into the role of a sycophant 

flattering the Alibaba executives for the purpose of cajoling and pleading 

with them to respect the law. For example, at the administrative guidance 

meeting, AIC officials lavishly praised Alibaba, telling the executives how 

proud the PRC was of their accomplishment,158 mentioning that all of the 

Alibaba executives at the meeting were “famous people”159and “big 

shots,”160 and joking that the monthly salary of just one of the Alibaba 

executives were as much as the combined annual salaries of all the AIC 

officials present at the meeting.161

a. Specific Practices

Alibaba’s lack of respect for the law manifested in two practices that 

drew the SAIC’s special attention and were the focus of discussion during 

the administrative guidance meeting: taking bribery from the platform 

participants and colluding with the counterfeiters. The SAIC states that “a 

large number of Alibaba staffers take business bribes in exchange for giving 

platform participants [preferential business opportunities] to squeeze out 

their competitors.”162 While Alibaba was already aware of the bribery 

problem and took some steps to control it, the AICs stated that bribery was 

still a problem as of the July 16, 2014 administrative guidance meeting,163

and an Alibaba vice president at the meeting acknowledged that “temptation 

from the outside” is a problem among the Alibaba staff.164 The SAIC also 

cited Alibaba employees’ active participation in misleading consumers and 

committing various consumer protection violations. For example, the SAIC 

 

156 Id.

157

“An enterprise shall not get what it wants at its own will, i.e. when needing credibility 

to protect an enterprise’s interest, it boasts about credibility but throws the law away; when 

needing law to protect itself, it raises up high the flag of law but intentionally ignores its duties 

regarding credibility and integrity.” Id.

158 Transcript of Admin. Guidance Meeting, supra note 141, at 13.

159 Id. at 39.

160 Id.

161 Id. at 109.

162 SAIC WHITE PAPER, supra note 31, at 16.

163 Transcript of Admin. Guidance Meeting, supra note 141, at 9 (“The sixth problem is 

what was included in governance, that is, the commercial bribery existing among the staff of 

Taobao.com. Suppliers and users of the platform are all involved. You have realized this 

problem and tried to keep it under control. However, the situation still exists.”).

164 Alibaba executive Xiaofeng Shao: “Recently, we have continued to improve the 

punishment system, even including the standards for our internal staff because this is also a 

big problem we face like the temptation from the outside.” Id. at 92.
182

notes that “[s]ome of the online shops, through the trading with others, delete 

negative comments, providing business information to themselves and others 

that disrupts normal business order . . . . But [Alibaba’s] supervision and 

punishment are not strict enough. There are staff in [Alibaba] involved in this 

violation.”165 A second set of practices involves Alibaba employees working 

together with counterfeiters, tipping the counterfeiters off to enforcement 

actions. For example, an SAIC official stated that in one instance the SAIC 

asked Alibaba for information about ten online stores suspected of selling 

counterfeits; although Alibaba provided the information, seven of the stores 

promptly closed, two cancelled their accounts, and one started to sell 

authentic products.166 The SAIC concluded that “[t]his indicated information 

disclosure by your company staff”167 to the counterfeiters. In another 

instance, the SAIC stated that after local AICs provided Taobao, an ecommerce platform owned by Alibaba, with information about their 

investigations, Taobao was suspected of tipping off counterfeiters and 

manufacturers of illegal narcotics.168

The unlawful activities by Alibaba employees discussed at the 

administrative guidance meeting in July 2014 came just three years after a 

major scandal in 2011 that involved about 100 Alibaba employees, including 

supervisors and sales managers, who after an internal investigation were 

found to be directly responsible for allowing over 2,300 China Gold 

Suppliers to defraud international buyers.169 Long time CEO David Wei Zhe 

and COO Elvis Lee Shi Huei were forced to resign as a result of the 

scandal.170 According to news reports, Alibaba lost $933 million in market 

share due to the scandal.171 Three years after this scandal, according to the 

SAIC, numerous members of Alibaba’s staff continued to conduct illegal 

activities adding further to its perception of a culture of lawlessness at 

Alibaba.

 

165 Id. at 10.

166 Id. at 11.

167 Id.

168 SAIC WHITE PAPER, supra note 31, at 17.

169 Pascal-Emmanuel Gobry, Huge Fraud at China E-Commerce Giant Alibaba.com: 

Management Out, 100+ Employees Dismissed, BUS. INSIDER (Feb. 21, 2011), 

https://www.businessinsider.com/alibaba-ceo-resigns-over-huge-fraud-scandal-2011-2;

Kelvin Soh, Alibaba.com CEO Resigns After Jump in Fraudulent Sales, REUTERS (Feb. 21, 

2011), https://www.reuters.com/article/us-alibaba/alibaba-com-ceo-resigns-after-jump-infraudulent-sales-idUSTRE71K1QA20110221 (“‘Members of our company’s senior 

management knew of a noticeable increase of fraud claims by global players against China 

Gold Supplier customers on the international marketplace that began in late 2009,’ Ma said in 

the statement.”).

170 Gobry, supra note 169; Soh, supra note 169.

171 Mark Lee, Alibaba Shares Tumble After Fraud Leads to CEO Departure, BLOOMBERG

(Feb. 22, 2011), https://www.bloomberg.com/news/articles/2011-02-22/alibaba-comdown

graded-by-morgan-stanley-after-ceo-wei-resigns.
183

b. Above the Law in China

Alibaba’s “arrogance” needs to be understood in the context of China’s 

legal and political culture. In China today, it is not unusual for powerful 

entities to routinely disregard the law. In general, the more powerful an 

entity, the less compelled it feels to follow the law. Alibaba is among a 

handful of the most powerful entities in China. As a mundane example 

familiar to every citizen in China, cars registered to the People’s Liberation 

Army (“PLA”) do not obey traffic laws.172 Every car registered to the PLA 

has a special license plate. These cars will routinely drive through red lights, 

speed, and refuse to pay tolls. Under China’s current security systems, cars 

that drive through red lights are recorded by cameras stationed at every traffic 

stop, and letters containing fines are sent to transgressors. PLA cars, 

however, do not pay fines. No regular police officer with the Public Security 

Bureau will dare to stop a PLA car for a traffic violation, and no toll collector 

will dare to challenge a PLA car that refuses to pay the toll. This is a deeply 

embedded cultural attitude that starts at the top with the most powerful entity 

of all in Chinese society: the Communist Party, which views itself as above 

the law and views the law as a mere instrument for it to use to achieve its 

own ends.173 These Party attitudes will be familiar to Jack Ma, the chairman 

of Alibaba, who is also a member of the Communist Party,174 as are other 

senior Alibaba executives.175

As noted earlier, Alibaba’s size is prodigious, and its financial power 

overwhelming.176 In China today, an entity that is as large and powerful as 

Alibaba does not believe that it needs to answer to lowly government 

enforcement officials. Alibaba executives, such as Chairman Jack Ma, 

himself a Communist Party member, and other senior Alibaba officials who 

are also Party members, believe that they do not answer to the law but only 

to the Party, the ultimate authority in China.177 One example of the close link 

between Alibaba and the Party is that Alibaba runs China’s new social credit 

system.178 Alibaba assigns a three digit score (from 350 to 950) to each 

citizen in China based on the social desirability of the citizen’s conduct, 

 

172 The author has witnessed these practices by the PLA firsthand in China.

173 DANIEL C.K. CHOW, THE LEGAL SYSTEM OF CHINA IN A NUTSHELL 62 (3d ed. 2015): 

“[N]either Imperial China nor pre-reform modern China recognized or accept the rule of law 

. . . . [T]he Communist Party views itself as holding unchallenged authority. In modern China, 

the Communist Party is supreme.”

174 Li Yuan, Jack Ma, China’s Richest Man Belongs to the Communist Party. Of Course., 

N.Y. TIMES (Nov. 27, 2018), https://www.nytimes.com/2018/11/27/business/jack-macommunist-party-alibaba.html.

175 The author has personal knowledge that senior Alibaba officials are Party members 

from his current work as a legal expert in litigation involving China.

176 See supra text accompanying notes 103–107.

177 This observation is based upon the author’s own assessment and analysis.

178 Campbell, supra note 42.
184

allowing the government to punish or reward its citizens.179 These close ties 

further suggest that Alibaba is not intimidated by and does not fear PRC 

enforcement authorities. For their part, PRC enforcement authorities are 

reluctant to shut down or seriously harm Alibaba because such actions will 

lead to significant financial losses for China and the possible demise of one 

of the world’s leading technology companies and a great source of national 

pride.180

An indication of how Alibaba continues to view itself as above the law 

in China is that on April 25, 2019, the USTR placed Alibaba on its Notorious 

Markets List for the third year in a row.181 This designation occurred five 

years after the SAIC administrative guidance meeting in July 2014 and four 

years after the SAIC issued the White Paper detailing a plan of remediation 

in 2015. In its 2018 report, the USTR stated, “[a]lthough Alibaba has taken 

some steps to curb the offer and sale of infringing products, right holders . . 

. continue to report high volumes of infringing products and problems with 

using takedown procedures.”182 After a history of misconduct, scandals, 

vehement protests by brand owners, an extraordinary effort by the PRC 

government, and numerous blacklists by the U.S. government, Alibaba’s 

conduct has not changed appreciably. Under these circumstances, brand 

owners must confront the reality that Alibaba is not likely to change its 

conduct without intervention by the highest levels of the Party, probably only 

by a personal decision by Xi Jinping, China’s President and the General 

Secretary of the Communist Party.183 Until senior Party leaders intervene, 

brand owners must accept the likelihood that Alibaba believes that it can 

operate outside of the law in China with impunity and without fear of 

government reprisals.

E. Amazon

Amazon is currently the largest e-commerce marketplace in the United 

States184 and is the second largest in the world, trailing only Alibaba.185 As 

of 2016, the market value of Amazon exceeded that of the eight largest U.S. 

brick-and-mortar retailers combined, including Walmart, Target, and Best 

 

179 Id.

180 This observation is based upon the author’s assessment of the overall tone of the SAIC 

White Paper, supra note 31, and the transcript of the administration guidance meeting, supra 

note 141.

181 OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, SUPRA NOTE 114.

182 Id.

183 This is the author’s professional opinion based on his experience and knowledge of 

China. For a summary of Xi’s positions, see President Xi Jinping, THE U.S.-CHINA BUS.

COUNCIL, https://www.uschina.org/president-xi-jinping (last visited July 1, 2019). See also #1 

Xi Jinping, FORBES, https://www.forbes.com/profile/xi-jinping/#2f2f40051601 (last visited 

July 1, 2019) (President Xi became the “core” leader of the Communist Party in 2016.).

184 See Levy, supra note 107.

185 See id.
185

Buy.186 In December 2018, Amazon’s GMV reached $239 billion.187 One of 

its most popular online retail services, Amazon Prime, now has over 100 

million members worldwide.188 Amazon’s official anti-counterfeiting policy 

states that it is the responsibility of the seller or supplier to ensure that its 

products are genuine, not counterfeits.189 Two aspects of Amazon’s business 

practices have led to a rise in online counterfeits.

Once a brand owner agrees to sell its products on Amazon’s ecommerce marketplace, Amazon will source products not only from the 

brand owner, but also from other third-party vendors that sell the branded 

products. In order to have sufficient inventory on hand to satisfy customer 

orders expeditiously, Amazon’s warehouses will co-mingle products from 

the brand owner and from other third-party vendors into a single source of 

supply.190 If a third-party vendor ships a counterfeit product to Amazon, it 

becomes co-mingled with genuine products in Amazon’s warehouse. When 

a customer orders a product online, the customer may receive a product from 

the warehouse from either the brand owner or a third-party vendor, which 

might be a counterfeit. The source of the product is not clear to the customer 

when he or she makes a purchase, but the customer will generally assume 

that it was manufactured by the brand owner.

Unable to make inroads into China’s e-commerce marketplace against 

competitors such as Alibaba, Amazon decided in 2015 to woo Chinese 

manufacturers to sell directly to U.S. consumers on its e-commerce site.191

As China is the world’s largest source of counterfeits, the result was 

predictable: beginning in 2015, counterfeits soon began to proliferate on 

Amazon’s e-commerce sites, much to the chagrin and exasperation of brand 

owners. Brand owners’ complaints against Amazon also echo some of the 

complaints against Alibaba. For example, according to one brand owner 

representative, “Amazon is making money hand over fist from counterfeiters, 

and they’ve done about as little as possible for as long as possible to address 

the issue.”192

 

186 Jeff Desjardins, The Extraordinary Size of Amazon in One Chart, VISUAL CAPITALIST

(Dec. 30, 2016), https://www.visualcapitalist.com/extraordinary-size-amazon-one-chart/.

187 See Levy, supra note 107.

188 Austen Hufford & Georgia Wells, Amazon Prime Has More Than 100 Million 

Members, WALL ST. J. (Apr. 18, 2018), https://www.wsj.com/articles/amazon-prime-hasmore-than-100-million-members-1524088630.

189 Amazon Anti-Counterfeiting Policy, AMAZON, https://sellercentral.amazon.com/gp/

help/external/201165970 (last visited July 1, 2019).

190 Pierson, supra note 13.

191 Shepard, supra note 9.

192 Levy, supra note 18.
186

III. ENTITY VERIFICATION MEASURES AND THE 

REQUIREMENTS OF PRC LAW

The discussion in Part II centers on how the concern is different in each 

case, although brand owners voice similar concerns about counterfeits 

available on Alibaba and Amazon. The major complaint by brand owners 

with Alibaba is that it facilitates the sale of counterfeits in order to satiate the 

enormous appetite for counterfeits among China’s consumers. In the case of 

Amazon, the major concern of brand owners is that U.S. consumers who seek 

to purchase genuine products are instead deceived into purchasing a 

counterfeit. In both cases, brand owners have expressed frustration with the 

lack of effective enforcement by these e-commerce platforms against 

webpages or postings selling counterfeits on Alibaba or Amazon’s websites. 

These problems are further discussed below.

A. Problems with Enforcement

Although brand owners have many complaints about enforcement 

issues against counterfeiters on Alibaba and Amazon platforms, the crux of 

these complaints can be summarized as follows: (1) counterfeiters use false 

identities and addresses and thus are untraceable; (2) brand owners must 

suffer through the use of cumbersome and ineffective notice and takedown 

procedures; and (3) existing measures used by e-commerce platforms do not 

deter repeat infringing activity.

1. False Names, Identities, and Addresses

Current e-commerce platforms, including Alibaba and Amazon, do not 

subject new sellers to adequate verification or confirmation although Alibaba 

is required to do so under PRC law; without an enforced verification or 

confirmation process, counterfeiters routinely use false or inaccurate names

and addresses when registering with these e-commerce platforms.193 When 

brand owners pursue counterfeiters in enforcement actions, they discover that 

names and addresses are fictional, and the counterfeiters then disappear into 

the vast expanse of cyberspace. Brand owners argue that Alibaba and 

Amazon have few requirements for registration and that verification of this 

information is not thorough or adequate. In the case of Alibaba, the SAIC 

White Paper stated that “only lip service is paid to credential review and 

registration of vendors.”194 Brand owners often complain that vendors on 

Amazon use fictitious names and addresses.195

2. Burdensome Notice and Takedown Procedures

E-commerce platforms create bureaucratic or technical hurdles in 

 

193 SAIC WHITE PAPER, supra note 31, at 13.

194 Id.

195 See [a hereinafter reference], supra note 13.
187

helping brand owners to locate or identify sources of counterfeits and 

counterfeiters.196 These hurdles delay, frustrate, and create additional 

financial burdens for brand owners.197 Both Amazon and Alibaba use a notice 

and takedown procedure that is based upon requirements set forth in the 

DMCA198 and similar provisions in PRC law, respectively.199 When a brand 

owner discovers an offending webpage or posting, the brand owner is 

required to submit notices to the ISP under a certain set of criteria that results 

in the ISP requiring the removal of an offending webpage or posting. Brand 

owners have described the experience of using notice and takedown 

procedures as “Kafka-esque”200 and likened their use to being imprisoned in 

“Amazon purgatory.”201 Brand owners are required to place an order for the 

counterfeit goods, buy and receive the goods from the offending website, test 

the goods, verify that they are counterfeit, and then submit both the 

counterfeit and genuine product with notices documenting these actions.202

Alibaba has a “three strikes” policy,203 requiring proof of three completed 

transactions involving counterfeits and submission of notices before an 

offending webpage can be removed. This process can take months, is 

expensive, and consumes significant time and effort by the brand owner. 

Even when brand owners satisfy this arduous process, they complain that the 

notices are still often ultimately rejected for technical reasons.204

3. Lack of Deterrence

In those instances in which brand owners can achieve a takedown of the 

offending website or otherwise bring pressure to bear on counterfeiters, 

brand owners complain that once the counterfeit goods disappear, they 

reappear in short order on a new webpage.205 Some brand owners refer to this 

process as a futile game of “Whac-A-Mole” in which a counterfeiter 

disappears only to immediately reemerge under a new name, identity, and 

location to resume its counterfeiting operations.206 In the meanwhile, brand 

owners have expended significant time, effort, and money in pursuing the 

 

196 See supra text accompanying note 15; see also supra text accompanying note 101.

197 See Bercovici, supra note 15.

198 See 17 U.S.C. § 512 (Westlaw through Pub. L. No. 116-68). See also Intellectual 

Property Policy for Sellers, supra note 101 (Amazon); Intellectual Property Rights (IPR) 

Protection Policy, supra note 101 (Alibaba).

199 See generally Trademark Law of the People’s Republic of China, supra note 97; Law 

Against Unfair Competition of the People’s Republic of China, supra note 97.

200 Bercovici, supra note 15.

201 Id.

202 Id.

203 Enforcement Actions for Intellectual Property Rights Infringements Claims on 

Alibaba.com, ALIBABA (Nov. 1, 2017), https://rule.alibaba.com/rule/detail/2043.htm.

204 See Bercovici, supra note 15.

205 See supra text accompanying note 15.

206 Bercovici, supra note 15.
188

counterfeiting without achieving any tangible results.

B. Proposed Remedial Measures

While counterfeiting on the Internet is a daunting problem, China 

provides the information technology tools that can be used to deter 

counterfeiters and that can address each of the three major enforcement issues 

faced by brand owners: false identities and addresses, convoluted notice and 

takedown procedures, and rampant recidivism. Most brand owners are 

completely unaware of or otherwise do not understand these potent tools.

1. AIC Business License

As part of China’s extensive system of industrial and social control, a 

legal regime of identification and attribution of legal liability exists that can 

be used against counterfeiters involved in e-commerce commerce. Both in 

the July 16, 2014 administrative guidance meeting and in its White Paper, 

the SAIC repeatedly refers to Alibaba’s need to control counterfeiting at the 

point of entry (i.e., registration on the Alibaba websites). The AICs stressed 

that if entry is well controlled, many of Alibaba’s current problems can be 

solved.207 This Article argues that brand owners should heed the advice of 

China’s enforcement authorities and seek to have e-commerce platforms 

implement effective registration procedures in accordance with the specific 

requirements of PRC law. These measures can create prophylactic measures 

at the point of entry that can create an effective deterrent to counterfeiting. 

Article 23 of SAIC Order No. 60, Measures on the Administration of 

Online Transactions (“MAOT”)208 requires business operators of online 

platforms to verify the legal identities of all entities or persons applying for 

access to their platform for the sale of products:

The business operator of a third-party transaction platform shall 

examine and register as business operators the identities of the legal 

persons, other economic organizations or industrial and commercial 

sole proprietors that apply for access to the said platform for sale of 

products or provision of services, establish registration files and 

conduct regular verification and updating, and make public the 

information specified in their business licenses or provide electronic 

links to their business licenses in eye-catching locations on its main 

web pages for business activities.

209

As set forth above, Article 23 requires the e-commerce platform to 

display information in the business licenses of business operators or to 

 

207 Hua Yu of Fujian Provincial AIC: “Until now, it seems that there are some difficulties 

in solving some problems. But in fact, if the entity is well controlled, I don’t think it will be a 

problem.” Transcript of Admin. Guidance Meeting, supra note 141, at 27.

208 See Administrative Measures for Online Trading, supra note 48.

209 Id. at art. 23 (emphasis added).
189

provide a link to their business licenses.210 Under PRC law, every lawful 

business entity in the PRC must have a business license issued by the local 

AICs that contains the lawful business scope of the entity, its address, and 

the name of its legal representative.211 All lawful enterprises must have an 

official, AIC-issued business license; any entity that does not have a business 

license cannot lawfully operate.212Business operators obtain a business 

license by applying to local AICs that review their proposed business 

operations to ascertain that they are lawful and economically feasible.213 For 

example, if a business operator proposes to sell trademarked products, the 

AICs will ask for proof of a trademark registration or trademark licensing 

agreement.214 The issuance of a business license means that the AICs have 

reviewed and approved the proposed business plan of the applicant and found 

it to be lawful. 

Among its other functions, the business license sets forth the lawful 

business scope of the entity. For example, a business license might state that 

the entity is lawfully authorized to engage in the sale of laundry detergent or 

other cleansing agents for laundry. Such an entity would be acting unlawfully 

if it engaged in any business outside of that scope, such as, for example, the 

sale of peripheral equipment for computers or mobile phones. A business 

operator that obtains a business license for the sale of genuine products but 

instead sells counterfeits is in violation of its license and faces a fine or 

suspension of the license, which would require ceasing business operations. 

The business license also prevents the business operator from using a 

business name and address on an e-commerce site different from that on the 

business license. Only the business identified in the license by its name and 

address is lawfully entitled to use the business license, i.e. such licenses are 

not transferable and cannot be used by an entity other than the one that 

 

210 Id.

211 Companies Law of the People’s Republic of China, ch. I, art. 7 (promulgated by the 

President of the PRC, Order No. 42, Oct. 27, 2005, effective on Jan. 1, 2006) (“The business 

license for a company shall state therein such matters as the name, domicile, registered capital, 

actual paid-up capital, business scope, the name of the legal representative, etc.”) [hereinafter 

Companies Law of the PRC].

212 See id. (“Company registration authorities shall issue business licenses for companies 

established under the law. The date of issuance of a business license for a company shall be 

the date of establishment of the company.”). See National Enterprise Credit Information 

Publicity System, SAIC, http://www.gsxt.gov.cn/index.html (last visited July 1, 2019). See 

also The 5-in-1 China Business License (WFOE/WOFE), FDI CHINA (July 11, 2018), 

https://www.fdichina.com/blog/china-company-registration/wfoe-wofe/5-in-1-businesslicense/.

213 This observation is based upon the author’s own experience in applying for business 

licenses in China. See Matt Slater, What Is a China AIC?, CHINA CHECKUP (Dec. 9, 2013), 

https://www.chinacheckup.com/blogs/articles/china-aic (“China AICs . . . provide official 

registration records for all companies in their jurisdiction[.]”).

214 The author has applied for business licenses in China and was asked by the AIC to 

provide proof of ownership or authorized use of trademark rights for products sold under the 

mark to ensure that the business had the legal right to sell the branded products.
190

applied for and received the business license. A business operator that has 

sold counterfeit goods and that has been the subject of an enforcement action 

cannot just simply disappear and reappear on the Internet under a different 

business name and address; if the name and address do not match that on the 

license, the use of the license is unlawful. Strictly verifying the information 

on the business license will prevent business operators accused of 

counterfeiting from disappearing and immediately reappearing under a 

different name and address. To use a different name and address, the business 

operator would have to apply for a new business license from the AIC, a 

process that could take months.215

Requiring a valid business license will preclude many underground 

counterfeiting factories, petty criminal organizations, smugglers, and other 

illegal entities from registering to sell on an e-commerce platform because 

such entities are unwilling to undergo scrutiny by the AICs for fear that their 

illegal activities will be exposed, leading to prosecution by AICs and other 

PRC authorities, such as the Public Security Bureau (the police). These types 

of nefarious entities and persons are also involved in brick-and-mortar 

counterfeiting; they operate illegal underground factories and have no 

business licenses.216 However, without a valid business license, these entities 

will be unable to register on an e-commerce platform such as Alibaba in 

accordance with Article 23 of the MAOT.

2. Legal Representative

The business license will also contain the name of the business entity’s 

legal representative.217 Under PRC law, every lawful business must have a 

natural person who serves as the legal representative of the business entity.218

According to PRC law, the legal representative has the clear authority to act 

on behalf of the business entity and can bind the business entity to contracts 

and other legal relationships.219 In many cases, the chairman of the board of 

directors of a company or a person of a similar rank in other organizations 

will serve as the legal representative.220 PRC authorities wanted to make sure 

that under the law, it was always clear which person within a business 

enterprise could sign a legally binding contract or create other legal 

 

215 This observation is based on the author’s own personal experience in applying for 

business licenses in China.

216 The author’s own experience is that many of these counterfeiters do not operate their 

businesses within the boundaries of the laws and regulations.

217 Companies Law of the PRC, supra note 211, at ch. I, art. 7

218 General Principles of the Civil Law of the PRC, supra note 51, at ch. III, art. 38 (“In 

accordance with the law or the articles of association of the legal person, the responsible 

person who acts on behalf of the legal person in exercising its functions and powers shall be 

its legal representative.”).

219 Id.

220 Any person can serve as a legal representative, but companies usually appoint a high 

ranking official.
191

relationships.221 Although not specifically required by the MAOT, ecommerce platforms should require the business entity’s legal representative 

to undergo the registration procedures so as to make certain that the business 

entity has lawfully committed to legal obligations created by registration. 

Under PRC law, the legal representative is also personally subject to 

administrative and criminal liability whenever the company conducts illegal 

operations beyond the range approved by registration authorities, commits 

fraud, secretly withdraws or transfers funds, or engages in other illegal 

activities.222 The existence of the legal representative ensures the PRC 

government that there is always a flesh and blood person who will be 

responsible to PRC authorities for violations of the law by legal “persons,” 

such as a business enterprise. 223 PRC authorities did not want ultimate civil 

or criminal liability to rest solely with a legal fiction while natural persons 

escaped responsibility.224

By identifying a business entity’s legal representative through requiring 

submission of its business license, e-commerce platforms such as Alibaba 

would provide the brand owner with a flesh and blood person against whom 

it can directly bring a complaint in a civil lawsuit under the PRC Trademark 

Law225 or Anti-Unfair Competition Law226 or whom the Public Security 

Bureau (the police) can arrest under the PRC Criminal Law.227

With these requirements, brand owners would not be limited to using 

the e-commerce platform owner’s internal enforcement mechanism, such as 

 

221 General Principles of the Civil Law of the PRC, supra note 51, at ch. III, art. 38.

222 General Principles of Civil Law of the People’s Republic of China, Article 49:

Under any of the following circumstances, an enterprise as legal person shall bear liability, its 

legal representative may additionally be given administrative sanctions and fined and, if the 

offence constitutes a crime, criminal responsibility shall be investigated in accordance with 

the law:

(1) conducting illegal operations beyond the range approved and registered by the 

registration authority;

(2) concealing facts from the registration and tax authorities and practicing fraud;

(3) secretly withdrawing funds or hiding property to evade repayment of debts;

(4) disposing of property without authorization after the enterprise is dissolved, disbanded 

or declared bankrupt;

(5) failing to apply for registration and make a public announcement promptly when the 

enterprise undergoes a change or terminates, thus causing interested persons to suffer 

heavy losses;

(6) engaging in other activities prohibited by law, damaging the interests of the State or 

the public interest.

General Principles of the Civil Law of the PRC, supra note 51, at ch. II, art. 49.

223 General Principles of the Civil Law of the PRC, supra note 51, at ch. III, arts. 38 & 49.

224 Id.

225 Trademark Law of the People’s Republic of China, supra note 97.

226 Law Against Unfair Competition of the People’s Republic of China, supra note 97.

227 Selling counterfeits violates Article 140 of the Criminal Law of the People’s Republic 

of China. See Criminal Law of the People’s Republic of China, ch. III, art. 140 (promulgated 

by the President of the PRC, Order No. 83, Mar. 14, 1997).
192

the notice and takedown procedures. As PRC law requires that the business 

operator make its business license available on the e-commerce platform and 

as business licenses are publicly available on the AIC websites, the brand 

owner does not need to go through the platform owner to obtain the necessary 

information to directly pursue the business operator.228 Instead, the brand 

owner can immediately act against the legal representative listed in the 

business license upon discovering an offending webpage or posting rather 

than be subject to the long and frustrating delays of the notice and takedown 

procedures. Of course, the brand owner can also use the platform owner’s 

internal procedures in addition to bringing an action directly against the 

business operator through PRC enforcement authorities or, under some 

circumstances, in the United States if the offender has sufficient U.S. 

contacts.229

The use of an enforcement method that does not rely on the active 

participation of the e-commerce platform is particularly useful in the case of 

Alibaba, which the PRC authorities themselves have identified as viewing 

itself above the law. Any method of enforcement against counterfeiters that 

requires the active participation of Alibaba could be met with half-hearted 

efforts or resistance, as many brand owners have persistently suspected and 

complained. Directly pursuing the counterfeiter will also relieve brand 

owners from the burden of using Amazon’s convoluted internal procedures.

3. Verification and Deterrence

Requiring, verifying, and displaying seller information should create an 

effective deterrent against selling counterfeits on Alibaba and other ecommerce platforms, since fewer counterfeit sellers would even turn to the 

platform in the first place if such sufficient safeguards were in place. 

Counterfeiters always rely on the use of false identities, false names, and 

false addresses because they are fearful of detection, capture, arrest, and 

prosecution.230 This is true of counterfeiters who sell in brick-and-mortar 

outlets as well as counterfeiters who sell on the Internet. The essential tools 

 

228 A similar procedure can be used in the case of sole proprietorships that would require 

individuals to register, i.e. Alibaba should do a strict review of the identity card of the 

registrant. “A natural person who intends to engage in online product transactions shall carry 

out business activities via a third-party transaction platform, and submit to the third-party 

transaction platform his/her name, address, valid identity proof, valid contact details and other 

real identity information.” General Principles of the Civil Law of the PRC, supra note 51, at 

ch. I, art. 7. The same principle applies: identifying the name and address of a flesh and blood 

person who can be held civilly and criminally responsible can be an effective deterrent against 

counterfeits on Alibaba websites.

229 It would be possible to file an action against a Chinese counterfeiter in the United States 

only if the counterfeiter is subject to the personal jurisdiction of U.S. courts under the 

minimum contacts standard set forth in Int’l Shoe v. Wash., 326 U.S. 310 (1945) and its 

progeny.

230 This observation is based on the author’s own extensive experience in pursuing 

counterfeiters in China and in the United States.
193

of the counterfeiter are secrecy, subterfuge, and artifice. The counterfeiter 

relies on these tools to disappear at the first sign of trouble. Denying the 

counterfeiter the use of these tools of secrecy and disguise would force the 

counterfeiter to operate openly and transparently subject to legal actions in 

China or in the United States, a prospect that counterfeiters abhor. Many 

counterfeiters would find the price of transparency and the risks of capture 

too high a price to pay for operating on the Internet and, as a result, will be 

deterred from registering on e-commerce platforms. 

Currently, however, as the SAIC notes, Alibaba “only pays lip 

service”231 to verifying information. The SAIC specifically criticized Alibaba 

for numerous careless and lax practices in its examination of business 

licenses that fail to verify that the entity named in the business license was 

the user of the license.232 A review of the Alibaba webpages contained in the 

Appendix indicates the business operator has not displayed or provided 

access to its business license on its webpage as required by Article 23 of the 

MAOT.233 At present, many individuals register on Alibaba’s websites by 

using false identification papers, sets of which—as the SAIC noted—can be 

purchased on Alibaba’s websites.234 Under its guidelines, Amazon does not 

require online sellers from China to submit an AIC business license or 

identify a legal representative. Currently, Amazon only requires a business 

name, a telephone number, and some form of personal identification, and, as 

a result, many vendors provide fictitious information.235

4. Amazon and PRC Law

Although Alibaba is clearly subject to the SAIC Measures on the 

Administration of Online Transactions, it is arguable that Amazon is also 

subject to these provisions as applied to business entities in China that 

register on Amazon. Under traditional choice of law principles, the physical 

location of the business entities in China provides a basis for choosing 

Chinese law to govern the matter of the registration of those entities.236 Even 

 

231 SAIC WHITE PAPER, supra note 31, at 13.

232

“Some online stores that are required to upload business licenses to pass the true name 

authentication have an entity name, business address, residential information that apparently 

are not consistent with the entity name, business address or residential address on the business 

license. Some vendors uploaded business license information of other companies.” Id.

233 See Appendices 1-3.

234 Transcript of Admin. Guidance Meeting, supra note 142, at 98.

235 Selling on Amazon: Frequently Asked Questions, supra note 44 (requiring a business 

name, address, and contact information among other information in order to open an Amazon 

seller account); see also supra note 13 (brand owners find vendors provide bogus 

information).

236 Under the Restatement (Second) of Conflicts of Law § 188(2), the following factors 

would support a finding of PRC law to govern the registration requirements: (a) place of 

contracting, (c) place of performance, (d) location of the subject matter of the contract, and 

(e) place of incorporation and place of business of the parties. Restatement (Second) of 

Conflicts of Law § 188(2) (Am. Law Inst. 1971).
194

if choice of law rules do not dictate the application of the SAIC Measures, 

nothing prevents Amazon from choosing on its own, through a choice of law 

clause in its contracts with vendors, to follow PRC law and require each 

Chinese business to submit an AIC business license or a link to the license 

on its websites as well as requiring the legal representative to undergo 

registration procedures.237 This process will allow brand owners in the United 

States to bring an action directly against business operators in China that use 

offending webpages or posts on Amazon in lieu of or in addition to pursing 

notice and takedown procedures. As the vast majority of counterfeits 

originate from China,238 such measures could be an effective deterrent to 

counterfeits on Amazon.

5. Consent to Arbitration before CIETAC

Although not required by MAOT or other PRC law, e-commerce sites 

should also include in their registration procedures a clause requiring the 

resolution of disputes involving foreign elements by arbitration before the 

China International Economic and Trade Arbitration Commission 

(CIETAC).239 CIETAC has its headquarters in Beijing and facilities in other 

cities in China and Hong Kong;240 it lists many foreign experts among its 

roster of arbitrators,241 and parties can choose English as the language of the 

arbitration.242 The clause should include a provision that the business 

operator consents to the arbitration of disputes with the platform owner or an 

entity authorized by the platform owner, i.e., the brand owner.

Arbitration clauses providing for resolution of disputes by CIETAC are 

now commonly used by many companies to resolve international business 

disputes that involve China,243 and arbitration is generally the normal method 

for resolving international disputes.244 The advantage of such a clause for the 

brand owner is the certainty that an action can be filed against the legal 

 

237 Parties can also choose the applicable law through a choice of law provision. See id. § 

187.

238 See supra Part II.A.

239 China Int’l Econ. & Trade Arbitration Comm’n (CIETAC) Arbitration Rules, art. 3(2) 

(revised and adopted by the China Council for the Promotion of International Trade and China 

Chamber of International Commerce on Nov. 4, 2014 and effective on Jan. 1, 2015), 

http://www.cietac.org/Uploads/201904/5caae5be03bb5.pdf [hereinafter CIETAC Arbitration 

Rules].

240 CIETAC Arbitration Rules, supra note 239, art. 2(3).

241 Arbitrators, CIETAC, http://www.cietac.org/index.php?g=User&m=Arbitrator&a=

index&l=en (last visited July 1, 2019).

242 CIETAC Arbitration Rules, supra note 239, art. 30.

243 See Model Clause: China International Economic and Trade Arbitration Commission 

(CIETAC), INT’L TRADE CENTR., http://www.intracen.org/Model-Clause-China-InternationalEconomic-and-Trade-Arbitration-Commission-CIETAC/ (last visited July 1, 2019) 

(promoting the use of a model arbitration clause using the CIETAC).

244 CHOW & SCHOENBAUM, supra note 55, at 593 (noting that arbitration is now the normal 

way to resolve international business disputes).
195

representative of the business operator with CIETAC and that CIETAC will 

have jurisdiction over the respondent. This will allow brand owners to move 

expeditiously when filing an action with CIETAC without having to deal 

with the uncertainty of preliminary issues such as proper notice and 

jurisdiction in a court-based litigation. The brand owner will also not need to 

suffer through the agony of waiting months required by using notice and 

takedown procedures. 

CIETAC awards enjoy a high degree of respect and enforceability in 

China. PRC law requires parties to implement CIETAC arbitral awards245

and the awards are enforceable by Chinese courts at the local level.

246

Consent to arbitration before a prestigious entity such as CIETAC would act 

as a further powerful deterrent to counterfeiters in China, who are used to 

dodging legal authorities not consenting to appear before them. The threat of 

being brought before CIETAC should further deter counterfeiters from 

registering on e-commerce platforms. For those merchants that do register, 

brand owners will have a quick and effective method of enforcement.

IV. CONCLUSION

The dawn of the age of e-commerce in the new millennium opened new 

possibilities for legitimate commerce, but it also created vast new 

opportunities for illegal commerce, such as the sales of counterfeits on a 

previously impossible scale and level of penetration. This Article has detailed 

some of the daunting challenges the Internet created for brand owners and 

the brand owners’ numerous but frustrated efforts in dealing with this potent 

new threat.

This study has focused on the two largest e-commerce sites in the world 

that dominate online retail services in China and the United States and the 

lessons learned can be immediately applied to other sites. The kinds of 

problems that brand owners face on Alibaba and Amazon are both different 

and similar. 

The problems are different in that Alibaba facilitates the sale of 

counterfeits to satiate the enormous demand for counterfeits by Chinese 

consumers, whereas Amazon sells counterfeits on its e-commerce site to U.S. 

consumers who are deceived into buying a counterfeit when they sought to 

buy a genuine product. Together, Alibaba and Amazon can deliver a 

crippling one-two punch to brand owners: Alibaba facilitates the sale of 

counterfeits of their products to those consumers who seek them, and 

Amazon facilitates the sale of counterfeits to those who do not. Considering 

 

245 CIETAC Arbitration Rules, supra note 239, art. 55(1) (“The parties shall perform the 

arbitral award within the time period specified in the award. If no time period is specified in 

the award, the parties shall perform the award immediately.”)

246 CIETAC Arbitration Rules, supra note 239, art. 55(2) (“Where one party fails to 

perform the award, the other party may apply to a competent court for enforcement of the 

award in accordance with the law.”)
196

that there are other huge e-commerce sites such as JD.com and Tencent in 

China and e-Bay and Groupon in the United States with similar issues, brand 

owners are faced with numerous dangerous threats. 

The problems are similar in that brand owners find the pursuit of 

counterfeiters through these two e-commerce giants to be frustrating and 

ineffective and the direct pursuit of counterfeiters to be futile, as 

counterfeiters quickly vanish into cyberspace at the first sign of trouble. 

Both sets of problems can be remediated through the suggested course 

of action set forth in this Article. However, while brand owners have made 

many demands to Alibaba and Amazon to streamline and improve their 

internal procedures for the monitoring of counterfeits and their notice and 

takedown procedures, to the best of the author’s knowledge, no brand owner 

has looked closely at PRC law for help despite the urging of PRC officials.247

Given the poor reputation of China in protecting foreign intellectual property 

rights,248 this lack of trust in PRC law is understandable, but information 

technology tools are available that can be put to effective use. Of course, 

these tools were not created by the PRC with the goal of protecting foreign 

brand owners, but instead for the purpose of satisfying China’s obsessive 

need to closely monitor all aspects of Chinese civil society. While China is 

far behind the United States in protecting intellectual property rights, China 

is far ahead of most countries in using information technology to monitor and 

supervise all aspects of Chinese civil society.249 These tools can provide a 

level of effective deterrence to Chinese counterfeiters that seek to sell their 

illegal wares on internet commerce sites based in China or the United States. 

Brand owners can use the tools detailed in this Article on their own, or in 

conjunction with existing and developing new tools through internet 

commerce sites as an overall strategy of deterrence. 

To be able to use the tools discussed in this Article, brand owners only 

need to insist on what they have every right to receive: e-commerce sites in 

China, such as Alibaba, must faithfully obey relevant provisions of PRC law 

that are simple and straightforward, an area in which Alibaba falls far 

short;250 and e-commerce sites in the United States, including Amazon, 

should apply PRC law on entity registration of Chinese business operators 

 

247 See supra note 206.

248 See Daniel C.K. Chow, The Myth of China’s Open Market Reforms and the World 

Trade Organization, U. PENN.J. INT’L L. 8 (forthcoming 2019) (file on copy with the author).

249 One example is China’s recent social credit system, which involves assigning a social 

credit score indicating the desirability of a citizen’s conduct to each citizen in China, a country 

of over 1.38 billion people. See supra note 42. There is also a more menacing side to China’s 

use of technology in monitoring its citizens. Critics have argued that China has used advanced 

technology to create an “all seeing police state” in the rebellious Muslim-dominated area of 

Xinjiang Province. See China’s Hi-Tech Police State in Fractious Xinjiang a Boon for 

Security Firms, S. CHINA MORNING POST (Jun. 27, 2018), https://www.scmp.com/

news/china/diplomacy-defence/article/2152749/chinas-hi-tech-police-state-fractiousxinjiang-boon.

250 See supra Part II.D.2.
197

under traditional choice of law rules, a choice of law clause, or voluntarily. 

Verification of entity registration should become easier with the enactment 

of proposed new data security legislation that would impose civil and 

criminal liability for the misuse of electronic information.251 Entities that 

register on e-commerce sites could become liable for the use of false, 

misleading, or inaccurate business licenses and thus would have an additional 

legal incentive to use business licenses accurately. 252

Alibaba poses a particularly formidable challenge to brand owners due 

to its overwhelming size and power within China and its leading role in 

facilitating the online sale of counterfeits. Alibaba’s prodigious wealth and 

strength has led, in the words of PRC officials, to a culture of “arrogance.”253

Brand owners have suspected for years that Alibaba tacitly tolerates and 

supports counterfeiting in order to earn revenue from these sales. Recently, 

PRC national government authorities have confirmed these suspicions as the 

result of an extraordinary national-level intervention intended to discipline 

Alibaba. Beyond tolerating and supporting counterfeiting, Alibaba, in the 

words of PRC national authorities, views itself as above the law and unafraid 

of and not intimidated by PRC enforcement authorities.254 In fact, the 

opposite seems to be the case, as the 2014 investigation of Alibaba by the 

SAIC indicates: government authorities are reluctant to seriously discipline 

Alibaba or its business due to Alibaba’s exalted stature and reputation as a 

national paragon in China.255 This raises a deeper issue with Alibaba for

brand owners, as this attitude is unlikely to change without intervention by 

the highest levels of the Communist Party, a topic that deserves further 

scholarly exploration but is beyond the scope of this Article. 

The proposed course of action described in this Article has the 

advantage of not having to rely on Alibaba’s active participation; all that is 

required is that Alibaba mechanically apply the law as is required for 

registration of online vendors, and brand owners can on their own enforce 

their rights against offending parties in civil and criminal actions in China or 

the United States. The proposals set forth in this Article also apply to 

problems that brand owners face on Amazon and other U.S.-based ecommerce sites, so long as these sites apply PRC law as a result of choice of 

law analysis, a choice of law clause, or voluntarily. So long as Amazon 

follows PRC law in entity registration verification, brand owners can proceed 

directly with legal actions against counterfeiters and infringers in China or 

 

251 Shuju Anquan Guanli Banfa (Zhengjiu Yijian Gao) Di Si Tiao (数据安全管理办法

(征求意见稿)第四条), translated in Security Measures for Data Security Management 

(Draft for Comments), art. 4, COVINGTON UNOFFICIAL TRANSLATION, https://www.inside

privacy.com/wp-content/uploads/sites/6/2019/05/Measures-for-Data-SecurityManagement_Bilingual-1.pdf (last visited Nov. 25, 2019).

252 Id.

253 See supra text accompanying note 151.

254 See supra text accompanying notes 151-156.

255 See supra text accompanying note 182.
198

the United States and are not relegated to the misery of relying solely on 

Amazon’s convoluted and cumbersome internal procedures. 

Ironically, while most brand owners have focused their attention on 

streamlining the internal monitoring procedures of e-commerce platforms, 

they have ignored the more effective tools that are available in plain sight in 

China’s legal system. By using these tools created by China’s obsessive need 

to closely monitor and control all aspects of its civil society, brand owners 

can help to deter counterfeiters by forcing them to shed their concealment 

and anonymity and by exposing them to what they fear and loathe the most: 

transparency and accountability for their illegal actions.
199

V. APPENDICES

Appendix 1. Alibaba Listing: Gucci Guccio Handbags
200

Appendix 2. Alibaba Listing: Hennessy XO
201

Appendix 3. Alibaba Listing: Abercrombie & Fitch Sweatpants
202

Appendix 4. Abercrombie & Fitch Sweatpants