Innovation & Technology

E-Commerce: Taking on the Online Counterfeiters

Counterfeit goods are not a new business phenomenon. Academics point to the practice occurring as far back as Babylonian times. Today, the counterfeit trade no longer operates solely through downtown street vendors.The internet has been a major enabler in the sale of counterfeit products, ensuring anonymity and providing access to a global market.

Counterfeit goods are not a new business phenomenon. Academics point to the practice occurring as far back as Babylonian times. Today, the counterfeit trade no longer operates solely through downtown street vendors.The internet has been a major enabler in the sale of counterfeit products, ensuring anonymity and providing access to a global market.


The problem getting worse

 

It is unsurprising that the market has exploded in recent years – between 2008 and 2013, OECD/ EUIPO estimates showed an 80% global growth in counterfeiting. A 2016 ICC commissioned report estimates the total value of pirated and counterfeited goods will reach between $1.9 and $2.81 trillion by 2022, and that’s without even considering the wider economic – and social – costs.


With criminal counterfeiters enjoying online anonymity, they are more elusive than ever. By contrast, the products they peddle are ever more visible. A 2016 study by Markmonitor found that keyword searches used by consumers on internet search engines brought up more than seven times as many rogue sites than genuine retailers.


Even when using a reputable online marketplace, there is still a chance of falling into the trap of buying counterfeit goods, as fakes and genuine goods are sold side by side. Apple, for example, has claimed that 90% of “genuine Apple products” sold on e-commerce giant Amazon are in fact, counterfeit – leading them to sue Amazon supplier Mobile Star in October 2016. More significant yet, with sites like Amazon “comingling” its inventory, even the most vigilant consumer who avoids the fake online may, in fact, end up receiving a counterfeit item in the mail. This problem has been so substantial that some brands, such as Birkenstock, have turned their back on online marketplaces altogether, no longer selling products, or allowing third party merchants, to list the goods on these channels. A report by CNBC stated the company Forearm Forklift has seen its revenue drop 30% since 2008 as a direct consequence of their product being counterfeited and sold online.

 

Various parties fighting back

 

Online marketplaces have begun to step up efforts to prevent the sale of counterfeit goods on their sites. In November 2016, Amazon led a lawsuit against two fraudulent sellers, the first time they have taken such action in their two decades online. Two months later, Alibaba became the first e-commerce site in China to sue counterfeiters. Additionally, Amazon has introduced a $1,500 fee for traders wishing to sell major brands and, furthermore, they plan to continue to attack counterfeiters, by encouraging all brands – whether they sell through their marketplace or not – to register their brand, providing them the ability to verify the legitimacy of third- party sellers. Similarly, Ebay has a verified rights owner program, so that intellectual property owners can easily report listings that infringe their rights.


The cost of counterfeiting is undeniable, and, as it is enabled by the internet where jurisdictional lines are blurred, a global effort is required to combat it. Whilst cross-border legislative measures such as the Anti-Counterfeiting Trade Agreement have faced widespread criticism (it was unequivocally rejected by the EU), various NGOs are attempting to take down the counterfeiters.


The International Anti-Counterfeiting Coalition has implemented various initiatives, including Rogue Block – a collaboration with the payment providers which has seen 5,000 counterfeiters’ merchant accounts shut down since 2012. Similarly, Trustworthy Accountability Group, a marketing- media industry program, is working to eliminate fraudulent digital advertising traffic and fight ad-supported internet piracy to ensure brand integrity.


Whilst progress is being made, the war on counterfeiters is far from won and there remains ample opportunity for greater collaboration across industries and borders to reduce counterfeiting and piracy.
 

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