Mobile chat apps are latest battleground in war on Chinese fakes

Beijing (dpa) – A woman from south China’s tropical island province of Hainan made 400,000 yuan (63,000 US dollars) last year by selling counterfeit handbags using a mobile chat application.

The 27-year-old, who only gave her surname of Xiong, said she used to run her business out of her online shop on China’s popular web-based marketplace Taobao, but she started selling to customers over the mobile chat app WeChat last year after China intensified a crackdown on fake product sales.

“WeChat is safer because you are chatting directly with each customer instead of selling from a public website,” she said. “You don’t have to worry as much that someone will find out you are selling fake goods and report you.”

Vendors can simply post photos of products on their personal accounts’ “Moments” feed and accept payment transfers from customers over the WeChat Wallet service.

While most of Xiong’s customers are happy to pay cut-rate prices for fakes that look and feel like the real thing, thousands of other consumers have felt cheated when their purchases arrive.

Commerce authorities received 77,800 complaints about online orders last year, an increase of 357 per cent compared with the previous year, a government report said.

Only 59 per cent of goods sold online are genuine or of good quality, the report said.

Apart from being of dubious quality, some fake goods can even be bad for the health.

Mercury, lead, arsenic, cyanide and even human urine and rat droppings are often found in counterfeit beauty products made in China. The level of toxins in some of these products have led to severe allergic reactions, including skin rashes and burns, long-term health problems and, in at least one case, death.

China in March had promised further consumer safeguards in the online sales industry, which accounts for about 10 per cent of China’s total retail revenues. Those safeguards came on top of protective measures implemented last year, including the right to return goods within seven days and mandatory registration of retailers’ names and details.

Some international brands have nevertheless taken action against Chinese companies for providing platforms for the sale of counterfeit luxury goods that they said harm their business and reputations.

Kering – the parent company for brands that include Gucci, Saint Laurent and Bottega Veneta – filed a lawsuit in a New York court in May against the Chinese internet giant Alibaba for what it charged was the creation of an environment that promotes the sale of counterfeit goods.

China’s State Administration for Industry and Commerce in January also singled out Alibaba for not doing enough to stop the sales of illegal goods on their Taobao shopping site.

In response, Alibaba founder Jack Ma pledged to work with authorities to fight fakes and boost consumer protections.

The company had already cooperated with Chinese law enforcement agencies in more than 1,000 counterfeiting cases last year, leading to hundreds of arrests, an Alibaba spokeswoman said.

“In addition, we remove product listings suspected of being counterfeit either reported by brand owners or found during our proactive monitoring,” she said. “In 2014, we identified and removed 119 million.”

However, the move by vendors such as Xiong to mobile chat platforms is making it harder for authorities to track the trade in illegal goods.

“Brick-and-mortar stores, night markets, online stores and online marketplace platforms are still the main channels for the sale of fake products, but there is an increase in retailers using mobile chat platforms to sell products directly to customers,” said Yao Jianfang, a legal analyst at the China E-commerce Research Center.

Hundreds of WeChat retail accounts list no contact number, email, website or mailing address, according to a dpa investigation.

The owner of WeChat, Tencent Holdings, did not respond to dpa’s repeated requests for comment.

But Anne Stevenson-Yang, founder of J Capital Research, which provides investment ideas for clients, said the fact that WeChat transactions are “interpersonal” and the company does not take commissions has meant regulators have not yet focussed on Tencent.

The economics of fake mobile sales also appear to be a strike against regulators.

The value of mobile payments is expected to rise rapidly this year to more than 9 trillion yuan (1.41 trillion dollars), meaning many sellers are willing to risk fines or jail time because it is “truly more profitable to sell fake products,” Yao said.

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