In this Sept. 9, 2011 interview with Alizila editor Jim Erickson, Alibaba.com Global Marketing Director Linda Kozlowski explains the e-commerce company’s Fair Play Fund, which helps compensate members who have been defrauded online by suppliers using the B2B website. The following is a transcript of the video interview:

Alizila: The Alibaba.com Fair Play Fund was started about a year and a half ago, what was the purpose of the fund when it began?

Linda Kozlowski: When we started the fund, our goal was really to be as fair as possible to the buyers. Because Alibaba is not a part of the transactions that happen on our platform, we can’t actually help a buyer get a refund if they’ve been scammed or defrauded by a supplier. But what we can do is we can redistribute the revenue that we’ve gotten from the membership of that supplier to the buyers, so that Alibaba does not profit off any type of fraud. So, we designed a program where the Gold Supplier fees of any member that has committed fraud are put into a fund, and then redistributed to any buyers that have been victims of scams.

Alizila: How many members have benefited since the fund was started, and did they benefit exclusively monetarily or there are other benefits as a result of them seeking compensation from the fund?

Linda: Well, first of all, the thing you should know is as soon as somebody has a verified claim against them that enables pay-out from the Fair Play Fund, that means they get removed from the site. So some of the other benefits are the fact that we do take action upon that particular person who committed the fraud, and in addition to that we are protecting other buyers from experiencing the same problems. So by just being a part of the Fair Play Fund, you are automatically taking action and removing somebody who could scam other buyers. We’ve helped thousands of people since we actually started the program, and we’ve paid out more than 2.17 million US dollars.

Alizila: It’s a way of policing the site. The fund encourages members to report some of the suppliers that may be involved in activities that we don’t approve of.

Linda: Exactly, and in addition to that, we learn from each one of these cases, so we can start to identify potential fraud cases even earlier. By reporting things, buyers are actually helping us to make the entire platform safer.

Alizila: How easy is the process in terms of applying? If I’ve purchased a product over Alibaba.com, and my supplier in China hasn’t delivered, how difficult is it for me to actually receive compensation? How long does the process take, is it all transacted over e-mail or phone calls, how does it work?

Linda: Well, it varies depending on the complexity of the case of course, but the important thing to remember is that, Alibaba.com is a platform, so we have to be fair to all parties. We want to make sure we have substantial evidence to indicate that someone has committed fraud before making a final decision on the Fair Play Fund. That being said, we have experts who understand exactly what evidence they need to gather from the supplier and from the buyer, in order to verify exactly what’s happened. Cases can be handled in as little as a couple of weeks, or maybe a couple of months for more complex cases.

Alizila: So buyers need to understand that it’s not a simple matter of saying “hey, I was cheated, give me my money”, there is a process involved and they will be required to provide evidence of the transaction and make a case.

Linda: Absolutely, and just as they would want us to be fair to them, we need to be fair to the supplier and make sure we have in fact examined all the evidence properly, so they will need to present the correct evidence of fraud.

Alizila: How is the program been evolving over the year-and-a-half or so of its existence?

Linda: The program has been evolving in a rather interesting direction. At first we focused only on China suppliers, but we have now opened the program to global Gold Suppliers We’ve also expanded the way that we make payments, and we’ve changed the systems to process the claims a lot faster now. I think most importantly, one of the interesting things that we’ve seen about the evolution of the program is the decreasing number of claims. The fair play fund was implemented alongside a lot of other trust and safety initiatives to help try to reduce frauds. We’ve seen a 40% decrease in the number of claims submitted to the Fair Play Fund just in the last 6 months.

Alizila: That’s terrific. What are some of the other anti-fraud measures? How are you working to assure that people aren’t having to apply for the Fair Play Fund in the first place?

Linda: The Fair Play Fund is actually something that happens after fraud has already occurred, so in our mind, the less people that need to apply for this, the better. We are trying to help prevent fraud before they even get to that point. The No.1 way that we can do that is through customer education. We try to teach traders how they can take advantage of trust and safety tools that are on the platform, looking to see how long someone has been a member, are they a Gold Supplier, do they have a factory audit that demonstrates that we’ve done deeper research on their factory to determine their capacity and their financial situation, or are there other references out on the web that they can check and find out if this supplier has a bad reputation. We are trying to put a lot of education in place, so that customers know to look for these resources, and think about this carefully before they make a transaction, in order to make sure they are safe.

In addition to that, we are looking at some other programs like payment options, including extending the Escrow payment service that we have on our Aliexpress site to Alibaba.com, so the first time that you work with a new supplier, you are able to conduct a transaction over Escrow. If for some reason you have any problems, you can get your money back from Alibaba as opposed to having to rely on the refund from the supplier.

Alizila:There have been some criticisms about Alibaba.com that we are somehow benefiting from illicit activities that take place on the site. How important is it that Alibaba.com continue to push programs that try to make it a safe, secure and completely trustworthy trading platform?

Linda: Because we don’t take a portion of the transaction, because we are membership and subscription-based site, any transaction that happens on the site, we are not taking a portion of that. The only revenue coming from the suppliers are their membership fees. That’s why we developed the Fair Play Fund, so that we can actually return those fees to the buyers that have experienced fraud, and remove any potential profit from Alibaba. Alibaba does not benefit from this at all, it’s damage to our reputation, it’s damage to our honest suppliers’ reputations and it creates a lot more work for the company to try to manage these cases. So we want try to make sure that customers are as safe as possible, they understand safe trading practices, they understand the key things to look for, and know how to protect themselves, so that we don’t actually have to make these pay-outs.