What You Need to Know about the Best Way to Reduce Counterfeit Risk
The global nature of e-commerce marketplaces combined with consumer demand for cheap goods has created a perfect storm for counterfeit brands to thrive online. Discover the best way e-commerce marketplaces can reduce counterfeit risk and protect their marketplace from regulatory scrutiny. Then download our guide IP Infringement and Organized Crime, and contact us for a quick strategy session.
What Is the Best Way to Reduce Counterfeit Risk?
Reducing counterfeit risk is top of mind for lawmakers. In the United States (US) the INFORM Consumers Act now requires online marketplaces to more closely oversee their sellers. Other governments are more aggressively addressing the issue of counterfeit brands. Europe’s Digital Services Act aims to protect the digital space against the spread of illegal content — especially counterfeit goods.
By following a few best practices, marketplaces can significantly reduce their exposure to counterfeit risk:
- Ask for the agreement. The easiest way to determine if a seller is offering counterfeit or diverted products is to ask for the licensing agreement with the featured brand. If a seller cannot produce one, that is problematic.
- Know your brands. Luxury brands such as Louis Vuitton and Gucci have some of the most commonly counterfeited products. Other brands popular among counterfeiters include entertainment brands such as Disney, sports brands such as Nike and Adidas, and electronics brands such as Apple. Always pay extra attention to sellers who offer these brands.
- Search the contact information. Doing a search using the contact information provided by the seller, such as an email address or phone number, may help you identify websites or social media accounts connected to the seller. Sometimes counterfeit sellers are more explicit about their offerings when marketing off-platform.
With the additional regulatory oversight baked into the INFORM act and the Digital Services Act, it’s more important than ever for online e-commerce marketplaces and payments companies to address the issue of intellectual property (IP) infringement.
Counterfeit Brands Invite Regulatory Scrutiny
Counterfeits are inviting ever more regulatory scrutiny. The Office of the United States Trade Representative (USTR) has been targeting counterfeits in marketplaces since 2006. The Office’s annual Notorious Markets List highlights online and physical markets that appear to engage in or facilitate substantial trademark counterfeiting or copyright piracy.
The most recent report called out 39 online marketplaces. Even if this report doesn’t directly result in fines, this kind of publicity causes reputational harm that can have tangible impacts on your business.
Counterfeit Brands Erode Consumer Trust
The most obvious loser in the counterfeit market are the brands whose goods are being imitated. Not only do they lose out on potential revenue, but a survey indicated that more than half of consumers who purchased a counterfeit product lost trust in the genuine brand. The inferior quality and poor customer experience of a knockoff can translate to negative feelings about the actual brand.
But e-commerce marketplaces lose out too. According to the same survey, 64% of consumers said they will lose trust in an online marketplace after purchasing counterfeit goods. Increasingly, consumers expect marketplaces to be reliable gatekeepers of the products sold on their platforms. That means careful vetting of both sellers and their products. If consumers feel cheated by a product they’ve purchased on a platform, they are less likely to buy again from it.
Counterfeit Brands Online Can Harm Consumers
Counterfeits can risk consumer health because they often are made without regard to health and safety standards. The US Department of Energy regularly warns consumers of the dangers posed by counterfeit electrical devices that can cause fires or electrical shocks. In one instance, a police officer was injured when a counterfeit battery exploded in his flashlight. The officer suffered injuries to his face and hands.
In another example, Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE) intercepted 40,000 counterfeit condoms entering the US through Puerto Rico from China. These products have not been properly vetted and tested, raising the risk that they could malfunction or break during use.
Consumers have also been harmed by counterfeit cosmetics found to contain hazardous substances including cyanide, arsenic, mercury, and lead. Whenever consumers are harmed, it poses the risk of reputational harm to the platform, not to mention the risk of legal action by injured consumers.
Learn More About Counterfeits and the Harm They Cause
Download our 16-page guide IP Infringement and Organized Crime for deeper insight into:
- The common types of IP infringement to watch out for online
- Why websites of counterfeit merchants are so difficult to spot
- The risks of internet protocol TV (IPTV) and cyberlockers in facilitating piracy
- Key warning signs of IP infringement
- How IP infringement supports and perpetuates organized crime
LegitScript Marketplace Monitoring Helps Marketplaces Reduce Counterfeit Risk
Are you an e-commerce marketplace looking for the best way to reduce counterfeit risk? Marketplace Monitoring helps you reduce the risk of IP Infringing products by monitoring your marketplace using the largest database of high-risk and problematic products on the commercial internet. Confidently grow your business into new product categories and jurisdictions while eliminating false positives with LegitScript Marketplace Monitoring.
Contact us for a quick strategy session.