Alibaba Group Holding's (BABA) e-commerce platform has been added to the United State Trade Representative's list of 'Notorious Markets.' The stock is more than 1 percent lower in pre-market trading.

The list includes online and physical markets that have an exceptionally high proportion of counterfeit goods being sold. Alibaba's Taobao, which is a consumer-to-consumer marketplace and operates much like eBay, was taken off the list four years ago, but now finds itself placed in the same league as and Pirate Bay.

In an official statement released today, the company said it wonders if the USTR acted based on facts or whether it was "influenced by the current political climate." Alibaba President Michael Evans said, “The decision ignores the real work Alibaba has done to protect IP rights holders and assist law enforcement to bring counterfeiters to justice.” (See also:Alibaba's Cloud Set to Take on Microsoft, Amazon)

An Alibaba executive recently wrote a column for Recode about the company's use of big data to fight counterfeiters. It also claims it has removed more than 380 million product listings and closed approximately 180,000 Taobao stores in the 12 months ending August 2016. It has also announced a shift from a Four Strike to a Three Strike Policy and the launch of a Joint Force System earlier this year to improve upon its Good Faith Program.

The official USTR report says, "While recent steps set positive expectations for the future, current levels of reported counterfeiting and piracy are unacceptably high. Not only do counterfeit and pirated goods pose a grave economic threat to U.S. creative and innovative industries, undermining the Chinese and global market for legitimate U.S. products, substandard counterfeits such as auto parts pose a potential public health threat to unsuspecting consumers." The report also adds that a large motor vehicle manufacturer reported that at least 95% of the merchandise bearing its company’s brand names and trademarks found on Alibaba platforms are suspected to be counterfeit. (See also: Amazon Set to Wage War on Counterfeiters)

The USTR also explained the problems companies faced when they tried to report IPR violations to Alibaba or communicate with sellers, including broken hyperlinks, denials of takedown requests, and pertinent communications only sent in Chinese. Small and medium enterprises were not eligible for the company's Good Faith Program which led to unfair treatment.


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