Online sales during the Christmas season has seen unprecedented growth in recent years with sales online forecast to be above £30 billion for the second year running. Great news for the retail sector!
However, the speed of which we switched to buying items online, accelerated by the Covid-19 pandemic, has increased the exposure of consumers and businesses alike to opportunist counterfeiters. An estimated 56% of all counterfeit goods seized at the EU borders stem from online commerce. It is now more important than ever for brands to have a strategy in place to tackle this problem.
What are counterfeit products?
A counterfeit is a fake, inferior quality product that imitates the appearance of a branded product, manufactured without authorisation. The aim is to take advantage of the reputation of the brand owner, whilst preying on the consumer's desire to purchase branded products more cheaply.
Counterfeiting is not a new concept. However most agree that globalisation from the mid-1990s created fertile ground for counterfeiting. Buying goods from overseas has become incredibly simple due to the development of international postal and courier services, container freight systems and the reduction of shipping costs. More sophisticated banking systems also made the transfer of money easy and quick.
The growth of the internet, online retail and social media to sell products, and the recent pandemic, has rapidly fuelled the rise in counterfeit products, increasing the amount of people that can be targeted. The value of counterfeit goods destined for the EU was EUR 119 billion in 2019 - 5.8% of EU imports. Whilst the majority of those were clothing, footwear, handbags, leather goods and toys and games, counterfeiters will search for any opportunity to exploit and make a profit. The recent pandemic has seen a huge increase in counterfeit pharmaceuticals, hand sanitiser and masks, for example.
Counterfeit products are increasingly difficult to detect. Fakes are often made from the same, if not similar, materials as the genuine product and can feature counterfeit packaging/labelling to make it difficult to differentiate. The items are sold on online marketplaces such as Facebook or Amazon where the credibility of sellers is assumed often using official images from the website and unique listing codes which make them appear legitimate. High quality counterfeits can be sold at close to the full price as consumers are deceived into thinking counterfeits are always cheaper.
Public awareness of the tactics deployed by counterfeiters and the impact of this practice are also lacking. In 2016, 46.5% of imported counterfeit and pirated products sold in the UK were sold to consumers who knew they were buying fake goods. At the point of purchase, consumers may not realise that the money received for the purchase of a fake product can fund the activities of serious organised crime groups.
In terms of the counterfeiters themselves, there is not enough understanding of how resourceful and sophisticated these groups are. A recent trend has highlighted how these groups are now using self-storage facilities not only to store counterfeit products but also to act as a legitimate address for communications and returns.
Additionally, it is widely acknowledged that there are insufficient border controls in place. The free movement of goods has enabled counterfeiters to pollute supply chains across many borders, but customs authorities have not been given the resources to tackle the problem. Investigative authorities are hindered by a lack of communication and intelligence allowing fakes to frequently slip through the net as a result.
Tackling the problem
One of the most useful tools brand owners can use to tackle counterfeiting is to register IP rights. It is worth evaluating all the unique aspects of the brand including logos, names, colours but also the shape and packaging to determine whether it may warrant trade mark and/or design registration. Having a registered trade mark / design makes enforcement of rights more straightforward. In this regard, one benefit of registration is that an intellectual property rights holder can apply for an Application for Action with UK Customs and Border Force.
Consider also whether it may be worthwhile registering your trade mark in other countries where products are manufactured or distributed.
Brand owners should also take advantage of the growing number of technologies designed to determine whether a product is genuine or fake. A good example is NFC technology which can be incorporated into the label or product itself. As smartphones are already able to communicate using NFC, consumers can check the authenticity of products themselves. A further useful investment would be software that scans online marketplaces and social media for counterfeit goods.
Brand owners, consumers and border force agencies need to work together to combat counterfeiting. Social media is a great way to communicate directly with customers and so campaigns or posts that spread awareness of fake products are valuable. Educating consumers on methods for reporting suspected fake products and the impact on businesses of purchasing them are also good strategies. Further, although customs authorities seize a large amount of counterfeit goods at the borders, the trade mark holder and manufacturer are best able to identify counterfeit products and so the burden is on them to educate border forces on how to spot fakes.
Wedlake Bell are experts in assisting brands in protecting their IP, products and consumers.
For further reading, please see: