August 22, 2014, 2:08 PM

Gucci parent company declares a truce with Alibaba

Kering has withdrawn a lawsuit it filed in federal court in New York over fake products allegedly offered on Alibaba online marketplaces in China.

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A French company that owns such luxury brands as Gucci and Stella McCartney has dropped China’s leading e-commerce company from a lawsuit over sales of allegedly fake products on online marketplaces in China.

Kering S.A. dropped Alibaba from the lawsuit earlier this month after what it described as a constructive dialogue with Alibaba Group Holding Ltd. Kering had filed the suit July 9 in the Southern District of New York against Alibaba—operator of Tmall and Taobao, the leading online shopping portals in China—its affiliated payments arm Alipay and some 20 merchants that sell on Alibaba sites. Kering is still suing the merchants, but not Alibaba and its affiliates.

Kering and Alibaba have agreed to work together on ways to enhance intellectual property protection and reduce counterfeiting of Kering brands, according to a joint statement from Kering and Alibaba. The two companies declined further comment.

Besides Gucci and Stella McCartney, Kering’s brands include Bottega Veneta, Alexander McQueen, Balenciaga, Boucheron and Puma.

This lawsuit from Kering highlights the increasing pressure for Chinese online marketplace providers, such as Alibaba and JD.com Inc. to fight with counterfeit products. That pressure is greater now that many Chinese Internet companies are going public on U.S. stock markets. JD.com went public on the Nasdaq exchange in May, raising $1.8 million. Alibaba has filed for an IPO on the New York Stock Exchange that’s expected to take place in the next several weeks.

Several luxury brands owned by Kering are very popular in China, including Gucci and Bottega Veneta. Although Gucci doesn’t operate an official store on Tmall, there are about 6,000 Gucci products listed by resellers on Taobao and Tmall. Some may be fakes and others could be legitimate products obtained by retailers that are not authorized by Kering to sell its products, an example of the so-called “grey market” for luxury goods.

Some analysts say launching a Chinese e-commerce site or opening an official store on Tmall, the more brand-friendly of Alibaba’s big marketplaces, could help international brands combat the grey market and the sale of counterfeit goods in china.

“In some cases brands have found that a direct-to-consumer or Tmall store will give consumers who have bought fakes the opportunity to buy the real product, which the consumer prefers if they can afford it,” says Kelland Willis, an e-commerce analyst at Forrester Research Inc. 

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