Chinese e-commerce platforms and counterfeits: the case of DH Gate
On April 29, 2020, the US administration, through its Trade Representative Office, published its annual “notorious markets” report, which lists physical and online market place with highly problematic intellectual property rights issues. As we wrote earlier, two of the most famous e-commerce companies, Alibaba and Pinduoduo were prominently discussed due to the extent of the problem on these platforms.
Less (in)famous perhaps, another Chinese company was also mentioned: DH Gate (dhgate.com aka 敦煌网 Dūnhuángwǎng). Based in Beijing, “DHgate is the largest business-to-business cross-border e-commerce platform in China with over 21 million registered buyers and over 22 million products for sale. Over 2 million Chinese merchants, many of which are small- and medium-sized enterprises, sell their products on the platform”. The USTR notes that in 2019, DH Gate took some steps to limit the IPR issues, but “DHgate remains a notorious market given the widespread availability of counterfeits on its platform and the ease with which counterfeits are located” (p.22).
And indeed, counterfeits are readily available. For example, as notes the UNIFAB “out of 47,207 items found for men’s watches, about 80% of them are fakes”.
Let’s take another example, guitars. Rick Turner Guitars was founded in 1979 in the US by luthier Rick Turner, and one of his first (hence its name “model 1”), and arguably his most famous guitar was made the same year for Lindsey Buckingham, then member of Fleetwood Mac, who continues to mostly use the Model 1 on stage to this day. It is a premium instrument, and as such, will set you back at least 4000 USD (up to 8000 USD depending on the model).
But on DH Gate, the products on offer are 10 to 30 times cheaper:
As the USTR noted in its report, DH Gate “launched an image recognition system to identify pictures of likely counterfeit goods, and added many brand-related keywords to its counterfeit filter system”. Well, clearly those filters need to be worked on a bit more, as the pictures are pretty identical to the original, the ad mentions clearly the brand (and artist name) and when it comes to the price…
A particularity of DH Gate is its B2B focus on export, with millions of Chinese sellers targeting US and European markets through a website available in multiple languages. It is therefore quite easy for unscrupulous buyers to get their hands on counterfeits that they will then sell to mostly unsuspecting clients via different local retail channels, leading to not only missed sales for the brand, but also damaging its image and value (because let’s face it, even Lindsay Buckingham won’t be able to get much out of these fake Model 1).
DH Gate is facing a growing pressure from the brand-owners as well as from foreign governments, and one could hope to see improvements soon. However, in the meantime, it is possible to limit the proliferation of counterfeits of your brand on e-commerce platforms (not only DH Gate). Actions include:
- Register Intellectual Property Rights (IPR) before entering the Chinese market (not specific to online selling), and even if you do not target the Chinese market (DH Gate is mostly for export)
- Monitor your IPRs online
- Enforce your IPRs (online, offline):
- Collect evidence and analyze facts
- Evaluate strengths and weaknesses of your IPR versus evidence collected
- Set up a strategy of enforcement, that typically includes filing a take-down notice with the platform; filing a civil/criminal/administrative case if relevant
If you want to know how the first model was tested by Lindsay Buckingham, who was so happy with it that he said to his guitar tech: “Leave the Les Paul, the Strat, and the Ovation at home. This is all I need now!” see the full story here: https://rickturnerguitars.com/stories-model-1