(Bloomberg) — The U.S. added Chinese messaging platform WeChat and online marketplace AliExpress to its list of notorious markets for counterfeiting and piracy, an annual compilation of the worst intellectual-property abusers and counterfeiters.
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Alibaba Group Holding Ltd.-owned AliExpress and Tencent Holdings Ltd.’s WeChat are “two significant China-based online markets that reportedly facilitate substantial trademark counterfeiting,” the Office of the U.S. Trade Representative said in a statement accompanying the release of the 2021 review Thursday.
The USTR first started publishing the annual standalone list in 2011 to increase public awareness and help market operators and governments prioritize intellectual-property enforcement efforts. The 2021 review identifies 42 online and 35 physical markets that are reported to engage in or facilitate substantial trademark counterfeiting or copyright piracy.
The list has proven a useful for getting companies, particularly larger ones, to do more to fight piracy and counterfeiting, said Robert Holleyman, who helped oversee the list as deputy U.S. trade representative under President Barack Obama.
“It leads to sharing of best practices around how companies can deal with what’s going to be an ever-increasing challenge, which is the counterfeiters, the bad actors who are using these platforms,” Holleyman, a partner at law firm Crowell & Moring LLP, said in an interview. For counterfeiters, “the tools to evade monitoring and scrutiny continue to grow every year.”
Pinduoduo Inc., one of the largest online retailers in China, continues to be listed after first being included in 2019. Alibaba’s Taobao, together with Baidu Inc. cloud-storage service Baidu Wangpan and e-commerce service provider DHgate.com Inc. are also still on the list. Nine physical markets located within China that are known for the manufacture, distribution, and sale of counterfeit goods are included.
The world’s two largest economies share the biggest bilateral trade relationship, but it has been fractious since 2018, with the Trump administration imposing tariffs on more than $300 billion in imports from China, ranging from footwear and clothing to electronics and bicycles and even pet food under section 301 of the Trade Act of 1974.
Overall, Alibaba is known for having some of the best anti-counterfeiting processes and systems in the e-commerce industry, USTR said.
But rights holders have noted a significant increase in counterfeit goods being offered for sale on AliExpress, a business-to-consumer e-commerce platform that connects China-based sellers with buyers around the world, the agency said. Those include goods that are blatantly advertised as counterfeit and goods that are falsely advertised as genuine.
Alibaba said in a statement that it knows the challenges of intellectual-property protection and remains “fully committed to advancing our leadership in the area.” Tencent said it strongly disagreed with the decision, stressing in its statement that it’s invested significant resources to fight counterfeiting and IP infringement and will work with the USTR to resolve the matter.
“We look forward to continuing the work with governments to understand and address all concerns in IP protection across our platforms,” Alibaba said.
The report listed China as the top country of origin for counterfeit goods seized by U.S. Customs and Border Protection as well as the country with the greatest number of products made with forced labor, including state-sponsored forced labor.
The Biden administration has contemplated a fresh section 301 investigation to counter China’s industrial subsidies. Congress has also considered establishing a review process to limit outbound investment, and the Commerce Department is weighing potential curbs to apps such as TikTok and WeChat that U.S. officials say pose a risk to Americans’ data security.
Commerce also has added more Chinese companies to its so-called Entity List, which prohibits American firms from doing business with them without first obtaining a U.S. government license.
WeChat and Weixin, its China-facing version, are viewed to be among the largest platforms for counterfeit goods in China, with more than 1.2 billion active users around the world in 2021, USTR said. The e-commerce system that works within WeChat is of particular concern, with rights holders identifying weakness in WeChat’s seller vetting as a significant problem, the agency said.
The USTR’s notorious markets list is a spinoff from its so-called Special 301 report, an annual review of the global state of intellectual property-rights protection and enforcement.
USTR highlights the markets because they exemplify global counterfeiting and piracy concerns and because the scale of the violations in those markets can cause significant harm to U.S. intellectual property owners, workers, consumers and the economy.
The American Apparel & Footwear Association said that the notorious markets list is a “a critical and effective tool” for addressing the sale of counterfeits.
“Unsafe counterfeits lurk everywhere we turn, including a number of trusted, and emerging, e-commerce platforms,” Steve Lamar, the group’s president and chief executive officer, said in a statement.
The association is urging Congress to approve bills requiring e-commerce platforms to vet sellers and provide seller information to protect consumers from counterfeit products or be held liable if counterfeit products sold on their platforms harm the health and safety of consumers.
(Updates with Tencent’s comment in 11th paragraph. An earlier version corrected the title of a former official in the fifth paragraph.)
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