Chinese Regulator Again Calls Out Alibaba for Counterfeit Goods

August 11, 2016, 6:45 AM UTC
Alibaba Group Holdings Ltd. and Founder Jack Ma As Company Files for U.S. Initial Public Offering of E-Commerce Giant
Photograph by David Paul Morris — Getty Images

The same Chinese regulator that released a report last year critical of Alibaba’s counterfeit goods is back, once again saying the e-commerce giant must improve efforts to combat fake goods on its platforms.

“I’ve repeatedly emphasized to Jack Ma that you (Alibaba) are not outside the law,” Zhang Mao, head of the State Administration for Industry and Commerce (SAIC) said in a television interview last week. “You must take the primary responsibility.”

Zhang commended Alibaba for spending more than $160 million in anti-counterfeiting efforts. But, he added, “there are still plenty of issues [that] remain unresolved.”

See also: Report: Amazon Japan Has Been Raided on Suspicion of Antitrust Practices

The regulators’ comments must sting Alibaba and Ma, its founder. As Fortune has reported, fakes remain a sizable portion of many branded goods sold on Alibaba’s Taobao platform, but in the past, critical comments have generally come from Western brands who have always been harsh of counterfeits in China.

Condemnation from Alibaba’s own Chinese regulator, on the other hand, has been new and unpredictableand comes with serious consequences. An Alibaba spokeswoman declined to comment on Zhang’s interview.

See also: Star Wars Fakes Flood Taobao After Alibaba Warned about Counterfeits

In January 2015, SAIC released a white paper critical of Alibaba’s policing of fake goods, suggesting Alibaba employees accepted bribes from sellers looking for higher rankings. Just a day later, the report was pulled off SAIC’s website without explanation, but not before Alibaba’s stock tanked over 4% on the news and ended up losing lost $30 billion in value during the week.

In his recent interview, Zhang explained why the report disappeared, the Wall Street Journal noted. He said the SAIC published the white paper after a routine visit to Alibaba, urging greater anti-counterfeiting efforts but misjudging how international traders would react.

SAIC pulled the report when Alibaba told the regulator it would work with it to address the problem. In a statement today, the company said, “Alibaba Group (BABA) is committed to being a global leader in the fight against the production and sale of counterfeit goods, and has a proven track record of creating and implementing programs that produce results.”

See also: Nothing to See Here, Says Alibaba’s Ma – and Customers Seem to Agree

To be sure, progress on fighting fakes has been slow at the company, as evidenced by Zhang’s comments and the continued condemnation from Western brands. But the fight is appearing important as ever—both inside China, and out.