Internet:A Bypass to the Wonderland of Brandname Goods?

Issue 25 By Ginny Han China IP,[Internet & Domain]


Louis Vuitton, GUCCI, LEE, Adidas, Nike ...These famous brands infatuate innumerable people, but the high prices make many people flinch. However, by now, along with the fast development of Internet, many famous brands with lower price are emerging in the online stores. To the ordinary people, a click on the mouse would bring them closer to famous brand. Their dreams of buying international famous brands with low price are coming true. But perhaps it’s just a possibility.

In recent years, online shopping has been developing rapidly. As the most popular Chinese shopping website, Alibaba’s Taobao.com is especially successful. The 2007 Research Report on China Online Shopping Development, published by Taobao.com, shows that the website’s turnover exceeded 43.3 billion Yuan in 2007, up 156.3% year-on-year. This figure outranks Carrefour and Wal-Mart’s Chain Stores in China, and is second only to the Bailian Group, indicating that Taobao.com has become China’s second largest comprehensive market with regard to sales amount.


Log onto Taobao.com’s homepage and the dazzling product pictures present a feast for the eye. Type in the name of the product in the search engine and click “search,” and the corresponding products will be shown as results. The journalist randomly typed in some hot keywords, such as “Louis Vuitton,” “Adidas,” and “NIKE,” and was presented with more than 500,000 hits in various prices from dozens to millions.


When browsing the searching results, a pair of LEE brand jeans marked 100 Yuan aroused the journalist’s attention and questioning. Because in LEE’s franchise stores jeans were always marked about a thousand Yuan. The journalist, posing as a buyer, communicated with the seller using Taobao.com’s online chat tool “Wangwang” with regard to size, quality and delivery issues. However, the result was disappointing.


At first, the seller only replied half-heartedly to our journalist’s suspicions by saying, “we get our supply directly from the factory so the price is lower.” However, as the conversation went on, the seller seemed to drop her guard gradually and she admitted:  “Actually, our jeans are imitations by order, that is, we provide the models and entrust the factories to manufacture the products. But the quality of the jeans is very good. The jeans sold in Shanghai Parkson are almost all over 1,000 Yuan. I think the quality is no better than our 150 Yuan jeans.” It seems that the phrase “export commodity” is simply a marketing ploy used by sellers to hook customers. Whether the commodities are counterfeits or not is unknown.


A Louis Vuitton bag at a whopping price of 10,000 Yuan offered by an online store, “Guangzhou Baiyun Leather Wholesale Market,” stands out from the rest. Could it be authentic?


 The store’s online notice reads:  “Specialize in the sale of world’s top brand handbags such as Louis Vuitton, GUCCI, HERMES, etc. Not sold in retail! 2 categories available: A+ quality at a lower price; export quality at a higher price: 100% identical to the original, Louis Vuitton material, clear security threads, original inside linings, hidden serial numbers…” Having read the store’s plain notice, the journalist was once again disappointed. It seems that a high price does not guarantee authenticity.


Is it possible, then, to buy authentic, famous brands online?


Mr. Wang is among those who are keen on online shopping and used to consider Taobao.com to be trustworthy. At the beginning of this year, he bought a pair of NIKE’s AIR FORCE STAT basketball shoes for 550 Yuan from the online store “Sports Fashion Basketball.” Since the product was covered by Taobao.com’s consumer rights protection “advance compensation,” service, Mr. Wang felt reassured. According to the service promise that if the buyer purchases products with quality problems from the stores covered by the service, Taobao.com will advance compensation on behalf of the seller to the customer once the proper evidence is submitted.


However, to Mr. Wang’s great surprise, he bought a fake product for the same price as the authentic version. He consulted many large NIKE franchise stores in Beijing and was told every time that the shoes he purchased were fake. Only the seller insisted that the shoes were authentic. Since an appraisal report for counterfeits can only be issued by NIKE Sports (China) Co., Ltd. in Shanghai, Mr. Wang had to complain to Taobao.com directly in order to solve the problem as soon as possible. He also sent Taobao.com the relevant evidence including pictures of the fake and authentic products, and chat records, with the hope that Taobao.com could solve the problem. Only after 3 weeks did Mr. Wang get a reply from Taobao.com agreeing to see to the problem and a refund promise from the seller.


Online trading is attracting more and more buyers because of its low cost and convenience. However, as the market flourishes, online counterfeit sales are growing at an alarming rate. According to Rayan Tai, Senior Trademark Counsel of Asia Adidas Group, “Adidas has never authorized any dealer to sell their products online. As of now, all Adidas products sold online in China are fakes. ”The reply from NIKE’s staff responsible for anti-counterfeiting was similar: since the source of the products is not clear, it is difficult to determine the authenticity of the NIKE products sold online. Therefore, whether a product is authentic or fake can only be determined by an appraisal conducted by NIKE  company in Shanghai.


Mr. Zhang, who used to own an online store, believes there are several reasons for this flourishing growth of online counterfeit sales. First, customers fanatically pursue famous brands. Sometimes, even if they know the products are counterfeits, they will still make the purchase. This leads to an overflow of fake products onto the market.  Second, there is a lack of supervision. Laws and regulations regarding online shopping are still deficient; the risk of selling counterfeits is low.  Third, because of the regional licensing system, it is very difficult for online businesses to obtain licenses in China. Additionally, the business model and industry rules of B2C in China have not been well formed yet and the lack of funds impedes venture funds. All these make it difficult for Internet to form regular brand selling channels.


Under the effect of those above mentioned obstacles, the online counterfeit sellers seem to be in a vacuum zone and their business are flourishing. Take Taobao.com, for example; it is extremely easy to open an online store on that website. All the seller needs to do is to register an account, open an Alipay account, pass Alipay’s authentication procedure (i.e., submit personal information, ID number and bank account) and contain a stock of 10 items or more for sale, with no fee required. Apart from the authentication procedure, which requires 1-2 days, all the other procedures can be done over the internet instantly. How can counterfeit sellers not be tempted when provided with such convenient application procedures? If high profit can be generated with little cost and without the risk of being investigated by the departments for industry and commerce, of course counterfeit sellers will happily take advantage of that opportunity.


While online counterfeit sellers are quite cheerful, the customers who unknowingly purchase their fake products are far from happy. Since getting refunds is very difficult and time consuming, many customers just accept their bad luck without complaint. Of course there are also customers who decide to fight against counterfeit sellers with all of their might even though they often face serious difficulties. Compared with them, Mr. Wang is already very lucky.
Although Taobao.com is famous for its multiple functions, it is, after all, no more than a platform for electronic transactions. According to the Guiding Opinions of the Ministry of Commerce for Online Trade (Provisional) published in 2007, such platforms for electronic transactions, like Taobao.com, are obliged to provide supervision for online trading. However, due to the lack of specific implementation guidance, the supervision of the network operator is more of a formality check than essential management and punishment.


“Cases of selling counterfeits online are far more complicated than traditional counterfeit selling cases. This is determined by the characteristics of the online trade: global, trans-regional and virtual practice.” Wang Jie, a lawyer from Beijing Hong Sheng Law Firm, explained, on the one hand, online trade means that the transaction between buyer and seller happens in the virtual space. The seller’s credit status, assets, the product’s quality, and the execution ability of both parties are filled with uncertainty. Once disputes occur, it is very difficult for the customer to protect his rights.  Currently, China’s online trade model and legal system are still far from perfect. Sellers seldom provide customers with any warranties during the online shopping process. In addition, most transactions are trans-regional. Even if the customer files a complaint with the local consumers’ association, more often than not the problem won’t be solved efficiently.


At the beginning of July of this year, the Beijing Administration for Industry and Commerce published the Opinions on the Implementation of Regulations of Beijing Municipal on Information Technology Promotion and Strengthening the Online Trade Supervision (the Opinions). The Opinions require that from Aug. 1, all companies and individuals engaging in online trade within Beijing obtain a business license. The new regulation has triggered many disputes since its publication; the regulation does not provide clear guidance on how to define whether a business is operating in Beijing.  Additionally, how to determine the “individual seller” and its profitability is also the focus of discussion and debate.


Before the new online store regulation was implemented, tech.sina.com.cn conducted a relevant survey. Among the 16,187 netizens who participated in the survey, 14,160 were against the new regulation, representing 87.48% of the total votes. Apart from these netizens, the press has also shown a one-sided opinion. Many online trade exporters vigorously attack the regulation. What’s more interesting is that Administrations for Industry and Commerce in various regions have also shown differing attitudes toward the regulation. Competent departments in Hangzhou, Shenzhen, and Tianjin have clearly indicated that the new online store regulation will not be adopted in the near future, while it is said that districts including Chongqing and Shanghai will formulate relevant regulations targeting local online stores.


The new online store regulations might have problems in implementation; although the original intention of the Beijing Administration is clearly good. Currently, China’s online shopping market is still immature and shows a lack of complete, relevant, regulations and an market credit system. How should consumers respond once a dispute occurs? According to Wang Jie, during the trading process, customers should try to save all of their materials related to the transaction, such as emails, chat records of QQ, MSN, SMS and, especially, the promises that the seller has made with regard to the product and service. These can all be used as evidence when protecting consumers’ rights. Once a dispute occurs, the customer can protect his rights by negotiating with the seller, asking consumers’ right associations to intervene, complaining to the Administration for Industry and Commerce, and filing lawsuits with the court. If necessary, customers can employ relevant technical methods for the preservation of evidence from the suspected counterfeit sales websites. As for those counterfeit sellers suspected of fraud, customers can report their case to the local public security bureau. If the transaction platform providing the website is liable for the customers’ losses, for example, by providing a warranty or guarantee of authenticity, customers can demand compensation from the website.


Although there are many ways to protect consumers’ rights, buyers should still beware for, after all, the less trouble, the better. In fact, the attraction of online shopping lies in its convenience and freedom for consumers, but if we end up with fake products, it will be contrary to the purpose of online shopping!
                                                                   

                                                                       (Translated by Elina Cai)

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