Fighting fraud online under spotlight

Shanghai Daily, May 9, 2011

Deeper problem

The notice also urged law enforcement departments to disclose big cases of fraud. Vendors found to be violating laws may face disconnection of their telecommunication services.

Such administrative orders may help eliminate online sales fraud in the short run, but they don't really address the deeper problem of distribution channels that allow such goods to be made and dispersed into the marketplace.

Online shopping platforms like Taobao have set up elaborate evaluation systems allowing users to rank products and vendors.

On Taobao, for example, users can rank vendors as "good, intermediate or poor" following each transaction. A "good" rating gives the vendor one point, while a "poor" rating deducts a point. When a vendor accumulates 250 points, he gets a "diamond" crown. Higher levels of points add blue crowns or gold crowns.

These "crowns" become an important standard for buyers to decide which vendor to choose. Those with crowns are more likely to get robust sales.

But let us not forget that fake products didn't originate with the Internet.

Illegal hawkers still tout fake watches with Swiss brand names and handbags bearing designer labels along some of the most fashionable shopping streets in Shanghai.

People who crave the vanity of brand names at low prices don't much care whether they purchase fake goods on the street or online. The problem for authorities is really the manufacture and distribution that feed such goods to both channels.

Criticism that the Internet is encouraging the fake goods markets isn't really fair. Indeed, the Internet is but a mirror that reflects both good and bad in society.

"One cannot demolish the bad things simply by destroying the mirror and say, 'Hey, it isn't there anymore,'" Ma said.

Shutting down online shopping platforms certainly isn't the answer. A lot of budget-conscious consumers really need the low-cost advantage the Internet offers, and most of what they buy is perfectly legal.

Why shoot the messenger?

Taobao knows that its success hangs on the need to offer as many products as possible to meet public demand and it's hard to keep track of every vendor. Taobao also places great stock in its credibility and certainly will make every effort to ensure that connivers don't end up on its website.

Public trust is a hard thing to earn, and once it's earned, a responsible vendor will do everything possible to safeguard his reputation. It's become a tougher environment as consumers grow ever more skeptical in the face of scandals like dairy company Sanlu's use of melamine to make its milk powder seem more protein-rich.

Everyone agrees that online shopping is a boon to the country's small businesses.

Manufacturers and sellers should bear in mind that shortsightedness will not only cost them their credibility but also will damage a healthy long-term business environment.

Cracking down on fake products cannot be achieved by merely posting administrative orders. The process requires the vigilance of everyone, including consumers and industry groups, to ensure that their self-interests aren't destroyed by a few rotten apples.

Ma has invited the police and quality goods inspection watchdogs to partner with Taobao in cracking down on fake products.

After all, the task of catching wrong-doers doesn't fall on Taobao alone. Government regulatory bodies need to define what are Taobao's liabilities before anyone jumps to the conclusion that the online site lacks responsibility.

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