Gucci's owner sues Alibaba over counterfeiting
French luxury brand holding company Kering has sued Alibaba Group Holding (BABA) for the alleged continued sales of counterfeit products that use the company's brands without permission. Kering owns such names as Yves Saint Laurent, Gucci and Alexander McQueen, and filed suit in U.S. district court in the Southern District of New York.
According to Kering, Alibaba, which acts as a marketplace for third-party companies to sell their goods online to customers around the world, had conspired to manufacture and sell products using top brand names without permission.
In a statement, Alibaba said it works with companies to help protect intellectual property like brand names and that Kering had "chosen the path of wasteful litigation instead of the path of constructive cooperation." Alibaba added that it believed Kerig had no basis for the complaint and that Alibaba would "fight it vigorously."
It's not a first -- Kering sued Alibaba last year in July, but withdrew the suit that month to work on a solution with Alibaba.
One example of alleged counterfeit activity was the sale by a Chinese merchant of Gucci-labeled bags for between $2 and $5 per bag for minimum lots of 2,000 bags per order. The retail price of a genuine article would be close to $800.
In a counterfeiting case, the brand owner typically orders a product to prove availability. The company has nonpublic ways of identifying a genuinely manufactured or licensed product, including hidden marks or chemical tests.
Allegations of Chinese counterfeited products entering the U.S. through marketplaces such as those run by eBay (EBAY) and Amazon (AMZN) is nothing new. Manufacturers have tried lobbying, legal sting actions and even PR campaigns aimed at making people aware of the issue, but the flood of cheap goods with the labels people want to sport hasn't stopped.
A few years ago, Coach got into hot water after sending cease-and-desist letters to people who allegedly were illegally selling products online when a woman sued the company in return. She said she was selling a bag she purchased from a Coach store and subsequently decided that she didn't want it.