What is the “three strikes” policy that allows repeat offenders to be permanently banned from selling?
Alibaba’s platforms, including Taobao, Tmall, 1688, Alibaba and AliExpress, have adopted comprehensive intellectual property protection rules, one of which is the “three strikes” policy which allows repeat offenders to be permanently banned from sale. Given that many intellectual property owners find themselves in an endless game of “mole swiping” over online takedowns in China, this rule could be a key weapon in the ongoing battle against intellectual property infringers.
Due to the real name verification requirement in China, every online sales account must be linked to a real ID. This requirement, if enforced, could prevent intellectual property owners from repeatedly filing takedowns against the same online sellers who could only resume business activities under the identity of another person, or by moving the transactions to another platform, which would cause them significant business disruption.
But how does the three-step policy work in practice? How can this be used against intellectual property infringers? And is this policy effective?
1. An overview of the three-step policy
According to Alibaba’s policy, only “serious violations (i.e. selling counterfeit products)” can count as a “strike”. Other violations, such as unfair use of trademark, copyright or other rights are considered “general violations” and are therefore not counted as a strike. To rack up three warnings and get a seller banned, the IP owner must follow these steps:
During a recent 12-month project, Rouse, on behalf of a multinational intellectual property holder, conducted a total of 1,020 test purchases, of which 638 counterfeit samples were obtained. 100 Taobao stores were banned by enforcing the three-strike policy. In addition, 188,1688 stores received 1 or 2 strikes and received the corresponding sanction from Alibaba. Penalties range from removal or removal of infringing products to restricting the display of products in the store. Of the 188 stores, 38 became inactive (self-banned) and 45 stopped displaying products bearing the IP owner’s brand.
2. Precise strikes against bad faith rrepeat offenders
Under Alibaba’s current intellectual property rules, an online seller has several chances to rectify their behavior before being banned under the three-strike policy. Due to these rectifying changes and arduous procedures, only the most egregious offenders end up getting banned.
Alibaba’s criteria for establishing three strikes include:
a. Limitation of multiple “strikes”
Alibaba says:Multiple complaints of serious violations against the same seller within three days will be counted as one strike.” In practice, the second warning must be filed after the first warning has been successfully completed, which normally takes 7 to 15 days or more depending on whether the seller presents a counter argument or not. If multiple complaints are filed before the counterclaim period expires, Alibaba treats this as one strike.
Thus, the sellers have enough time to remove the counterfeit products from the trade from their stores. A large percentage of these sellers remove counterfeit products for a period of time and then re-list the offers under new listings. This is done to avoid penalties under the three strike policy and to continue selling counterfeit products without receiving a ban.
Test purchase samples purchased from removed listings are no longer considered valid evidence to justify filing a warning. Therefore, the IP holder must follow the same pattern, i.e. monitor the sellers, make a test purchase when a suspicious link is found, confirm that the samples are counterfeit, and then file the complaint by round of strike. However, if the ad is deleted by the seller and re-uploaded under a new link, a new test purchase and a new complaint are necessary.
b. Annual reset on strikes obtained by sellers
Strikes that qualify as serious offenses are recorded on Alibaba’s platform for a total of 365 days. Each warning is accumulated over a period of 365 rolling days. If the IP owner is unable to complete three warnings within 365 days of filing the first warning, the bad case would be canceled by the platform and the seller would get a clean slate.
If a seller stops selling counterfeit products after one or two strikes or stops for several months after receiving a strike, chances are they will escape the consequences of their ban.
Alibaba imposes an account restriction penalty (eg, cannot post new listings for a limited time) and requires mandatory IP training and review for sellers who have received one and/or two warnings. “The seller who receives a warning is required to pass the tutorial and the intellectual property rights exam each time. The seller who passes the review can restore their account to normal status when the restriction period ends.”
In summary, the Alibaba platform provides online counterfeit sellers with plenty of warnings, information, and opportunities before firing them. Licensed or banned sellers are considered repeat offenders who conduct business in bad faith.
Note that Alibaba is not transparent about details regarding point deductions or seller penalty systems, which means banning a store from the platform can be a messy and inconsistent process.
3. The impact on online markets
12 months after the Three Strikes Policy was implemented, the majority of online counterfeit sellers have since become cautious of new buyers, claiming they are ‘out of stock’ or canceling an order if they have any doubts about the buyer’s intentions. This means that test purchases proving that the goods are counterfeit become more difficult to obtain and multiple test purchase accounts under different locations and IDs are required.
Initially, 80% of sample purchases were successful, dropping to 30% by the end of the 12-month project. This shows a serious disruption to the seller’s business by disrupting the supply of counterfeit products, increasing costs for them, thereby reducing the availability and visibility of a product. However, it also illustrates the difficulty of obtaining the required evidence repeatedly and permanently banning repeat offenders under current Alibaba rules.
4. The value of intelligence gathering
A valuable by-product of the three-strike policy is intelligence gathering. Some of the main benefits derived from the information collected include:
- Identify popular or commonly used counterfeit product manufacturing sites as extracted from the sender’s email information;
- Map and group major/active infringers – valuable for focusing online law enforcement actions on offline.
This information will help give IP owners a complete picture of the market situation to shape their comprehensive brand protection strategy.
5.Alibaba brand cooperation team support
It is also possible, under certain circumstances, to escalate issues to members of the Alibaba Brand Cooperation Team. There are occasions when Alibaba will ban regular sellers on complaints from rights holders where their bad faith is clear and Alibaba’s rules have been repeatedly violated, even though a ban has not been possible under the three-strike policy.
Overall, a monitoring and test buying project, combined with takedowns to take advantage of the three-strike policy to get vendors banned, is an effective way to sustainably reduce the level of infringement. This is more effective than continuous pullbacks with sellers who just relist without any further escalation action. Intelligence gathered from test purchases made through such projects can also be instrumental in refining your brand protection strategy, finding clusters of infringements and key players, and taking enforcement action in the off-world. line.