Alibaba Says Kering Suit Alleging Fake Gucci Sales Has No Basis

Alibaba Group Holding Ltd., China’s largest e-commerce operator, rejected claims in a lawsuit by Kering SA that it facilitates the sale of counterfeit merchandise.

Kering said Alibaba profited from the sale of goods that infringe on its brands, including Gucci and Yves Saint Laurent, according to the suit filed Friday in the U.S. District Court in New York. The complaint “has no basis” and will be fought vigorously, Alibaba said in an e-mail Monday.

The e-commerce operator is fending off a Kering lawsuit for a second time in 12 months after the luxury brand owner withdrew a complaint last year under an agreement to cooperate on fighting sales of fake branded goods. The company’s shares have slumped 15 percent this year after China’s consumer watchdog complained about fakes on Alibaba’s malls and investors filed a U.S. lawsuit accusing the company of making misleading statements in its initial public offering last year.

Lawsuits are “one of the concerns, and we look at whether it will impact the financials,” said Victoria Mio, a fund manager at Robeco Hong Kong Ltd.

Shares of Alibaba closed at $88.46 Friday in New York. The stock has lost more than $75 billion of market value since its November peak amid concerns that sales growth is weak and allegations it isn’t stopping counterfeit goods sales.

“We continue to work in partnership with numerous brands to help them protect their intellectual property,” Alibaba spokeswoman Melanie Lee said in an e-mailed statement on Monday. “Unfortunately, Kering Group has chosen the path of wasteful litigation instead of the path of constructive cooperation.”

In the latest suit, Kering accuses Alibaba of knowingly encouraging, assisting and profiting from the sale of counterfeits.

Bags bearing Gucci’s trademark were being sold on an Alibaba platform by a vendor for as little as $2 apiece, compared with $795 for an authentic version, according to Kering’s latest complaint.

When a customer types in the word “replica” in the search bar on the Alibaba.com website, an algorithm adds the term “wristwatches” and directs the customer to merchants selling counterfeits, according to the suit.

It usually takes Alibaba as long as 5 working days to remove a product, Alibaba said in August.

Notorious Markets

China is host to a number of markets known for counterfeit merchandise, the Office of the U.S. Trade Representative said in February 2014. Authorities arrested 59,000 people and seized more than 9,000 tons of fake and shoddy products in 2013 in cases worth 172.9 billion yuan ($28 billion), a Ministry of Public Security official also in January last year.

Hangzhou, China-based Alibaba was removed from the U.S. government’s Notorious Markets list in 2012, a list that was started in 2006 to highlight online and physical businesses that allow or encourage fakes and piracy.

Alibaba worked with 40 brands including Nike and Adidas from June to September last year to remove fake athletic shoes, watches and bags on the company’s largest retail platform Taobao Marketplace. More than 40,000 sellers were penalized, the company said in an e-mailed statement on Monday.

The case is Gucci America Inc. v. Alibaba Group Holding Ltd., 15-cv-03784, U.S. District Court, Southern District of New York (Manhattan).