Alibaba faces lawsuit from luxury brands over counterfeits

Alibaba called the lawsuit wasteful and plans to fight it in court

Alibaba Group offices in China.

Alibaba Group offices in China.

Alibaba Group has been hit with a lawsuit from luxury brands that alleges that the Chinese e-commerce giant has been deliberately promoting the sale of counterfeit products.

The lawsuit, filed in a New York federal, comes from Gucci, Yves Saint Laurent and other brands owned by Kering. The brands claim that Alibaba has knowingly helped an "army of counterfeiters" to sell their products over its e-commerce sites.

These counterfeiters include little-known Chinese vendors that are selling fake Gucci bags for cheap prices, and in wholesale quantities. Alibaba's search algorithms direct customers to these counterfeits, even when it's obvious that the products are fakes, the brands alleged in a filing.

Instead of banning these merchants, Alibaba has sought to profit from the counterfeit sales, the lawsuit added. Last July, Kering filed a similar legal action against Alibaba, but later withdrew the complaint, after the two companies agreed to crackdown on the counterfeiting together.

But Kering on Friday filed a new lawsuit, in spite of the earlier effort.

On Monday, Alibaba said in an email it had a "strong track record" of helping brands protect their intellectual property. "Unfortunately, Kering Group has chosen the path of wasteful litigation instead of the path of constructive cooperation. We believe this complaint has no basis and we will fight it vigorously," the company added.

Alibaba is China's largest e-commerce company, and it operates both retail and wholesale sites for Chinese and international customers. Over the years, the company has been repeatedly dogged by allegations that it doesn't do enough to stop fake goods from reaching its site.

In January, Alibaba clashed with a Chinese regulator over a government investigation that found the company had allegedly failed to clean up the problem. In response, Alibaba called the government report unfair and biased, adding that it had been working hard to crackdown on the illegal goods.

Alibaba shot into prominence after an initial public offering in the U.S. that raised US$25 billion last year. The company, however, has warned investors that it could face lawsuits over the counterfeiting problem.

Kering's lawsuit is demanding that the U.S. court order Alibaba to pay damages and stop the sale of counterfeit products related to the brands.

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Tags e-commerceAlibaba GroupregulationCivil lawsuitslegalgovernmentinternet

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