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Alibaba sues two vendors for allegedly selling fake watches

The e-commerce giant said it's the first time a platform has sued counterfeiters in China.

The Alibaba Group is suing two vendors on its Taobao site for allegedly selling fake Swarovski watches.
Alibaba Group

Alibaba is taking its battle against counterfeiters to the courts.

The Chinese e-commerce goliath is suing two vendors who allegedly sold fake Swarovski watches on Taobao -- its equivalent of eBay.

Launched in 2003, Taobao has actually toppled eBay in China as the main place for people to buy and sell items online. But the site's success has also cursed Alibaba with hordes of counterfeiters, pushing Taobao back on the US Trade Representative's "notorious markets" list in December, just four years after it had been removed.

Two weeks after it returned on the counterfeit warning list, Alibaba Group announced a $201,320 lawsuit against Liu Huajun and Wang Shenyi, two sellers the company claims peddled counterfeit luxury watches on Taobao. The company is suing for violation of contract and goodwill in the Shenzhen Longgang People's District Court.

The company is hoping that by taking legal action -- both in criminal and civil courts -- counterfeiters will be scared off from selling on Taobao. Alibaba said this is the first time a platform has sued its sellers in China over counterfeiting.

"Selling counterfeits...ruins the hard-earned trust and reputation Alibaba has with our customers," Jessie Zheng, Alibaba Group's chief platform governance officer said in a statement.

Staffers from Alibaba busted the Swarovski counterfeiters by using data analysis to root out any fake sellers, and then buying the suspicious products to compare with the real items, the company said.

The data analytics "make it increasingly difficult for these illicit sellers to hide in the shadows," Alibaba's head of global intellectual property enforcement Matthew Bassiur said in a statement.

They compared the fake watch's quality, workmanship and packaging to confirm that the watches were counterfeit. Alibaba handed over the seller's information to Shenzhen's police, who busted a warehouse in August 2016, seizing an estimated $28.7 million in counterfeit Swarovski products.

Swarovski did not respond to requests for comment.

Alibaba has spent hundreds of millions of dollars fighting counterfeiters, with more than 2,000 staffers just to take on fake products, along with 5,000 volunteers. Between January 2013 and November 2014, the company spent $161 million removing over 90 million counterfeit items from Taobao's listings. And in 2015, the e-retailer spent $21.6 million just to buy fake goods to test against real products.

Counterfeiters aren't exclusive to just China. The knock-off market is worth nearly half a trillion dollars internationally.

Amazon, Alibaba's US-based rival, experiences the same issues. In November, Amazon also filed two lawsuits, alleging more than 20 companies were selling fake exercise and furniture moving equipment.