Counterfeit products put Alibaba in the dock

E-commerce giant Alibaba Group Holding Ltd on Monday said the allegations made by leading global luxury retailers that it had turned a blind eye to counterfeiters has "absolutely no basis" and that it would fight the lawsuit filed against it in a New York court.

Industry sources said taking on counterfeits will be a tough and long-term effort for Alibaba as the Hangzhou-based company looks for growth in overseas markets.

The lawsuit was filed in a federal court in New York by Kering SA, the owner of luxury brands like Gucci and Yves Saint Laurent, on Friday. It alleged that Alibaba had conspired to manufacture, offer for sale and traffic in counterfeit products bearing their trademarks without permission, said a Reuters report.

"We continue to work in partnership with numerous brands to help them protect their intellectual property, and we have a strong track record of doing so. Unfortunately, Kering has chosen the path of wasteful litigation instead of the path of constructive cooperation," Alibaba said in a statement vowing to fight the charges "vigorously".

Kering said the lawsuit was a part of the group's ongoing global efforts to maintain its customers' trust in genuine products.

"It takes equally seriously obligation to protect its customers from being defrauded by counterfeiters selling goods of inferior quality," a Kering official said.

Neil Flynn, a portfolio manager at Alcuinn Asset Management LLP who is based in Shanghai, said Alibaba should not allow counterfeiters to sabotage its overseas expansion strategy.

"When a huge company enters a new market, reputation is vital, and news about lawsuits regarding counterfeit products can damage its reputation," Flynn said.

It was the second time in less than a year that Kering is suing Alibaba over the alleged sale of fake goods. Alibaba and Kering had reached a resolution on a suit filed in July 2014.

The counterfeit problem is also prompting some partners of Alibaba to move to other platforms.

Last week, Sephora, a global beauty retailer owned by LVMH Group－the world's largest luxury goods company－set up its first online store on JD.com Inc, one of the major rivals of Alibaba.

The good reputation of JD.com was one of the main reasons why Sephora chose to be part of the platform, according to Helen Zhou, vice-president of Sephora China. "We noticed JD.com's efforts to insist on selling certified goods," Zhou said.

Flynn from Alcuinn Asset Management said Alibaba has to show more determination that it is fighting the issue seriously.