India: The Issue Of Identifying Counterfeit Goods Online: Flipkart Been Sued By Skechers For Selling Fakes

Last Updated: 11 January 2018
Article by Lucy Rana

Introduction

From the internet savvy younger generation to the older generation with health problems to a 10 year old children who cannot be sent to shop alone, everyone has their own taste in shopping for simplest things. Newer e-commerce websites are popping up every other day in a fertile marketplace like India to tap into the huge number of eager consumers being regularly introduced for the convenience of shopping over the Internet. However, with its growth, grew the problem of counterfeit/fake products, which, under the guise of anonymity provided by the online market interface, can easily be passed off to the lay consumer.

Selling of counterfeits is a big business - counterfeit goods account for almost 10% of worldwide trade, totaling $500 billion annually, according to the World Customs Organization. This, naturally, is a great concern for genuine brand-owners, looking to protect the reputations of their brands and their sources of revenue.

The consumers who buy cheaper knock-offs, are often not the target clientele for the brand- owners. It is when the counterfeits start duping the target customer into buying a fake at the cost of the original, that the pinch hits the pocket of the brand-owner. Also, overflowing of the counterfeit in the market affects the uniqueness and exclusivity of the high-end brands, which is the soul of the brands, as this uniqueness give them the sheen and reputation in the market and make them worthy of the price of which their goods are sold.

The Cases

Recently, Skechers, an American lifestyle and performance footwear company for men, women and children, dragged e-commerce giant Flipkart and four of its seller, namely Retail Net, Tech Connect, Unichem Logistics and Marco Wagon to Court for allegedly selling its counterfeit products. According to a report in The Economic Times 'Skechers, with the help of court- appointed local commissioners, raided seven warehouses of the sellers in Delhi and Ahmedabad and found more than 15,000 pair of fake shoes that were to be sold as Skechers.' Another report on news18 claimed that '60% of Sports Goods, 40% of Apparel on Sale Online Are Fake'1

This is not the first time that online counterfeit has been brought to light. In a previous instance the Hon'ble Delhi High Court restricted Brandworld, an online retailer, from using the name L'oreal on any of its products sold on ShopClues.com. A more recent instance being, MontBlanc suing Digaaz.com, a Chandigarh based e-commerce site, for selling its counterfeit goods at 75% discount. These are all examples of the mounting problem of counterfeit on e-commerce websites.

Dangers of Counterfeiting

The only drawback to counterfeit goods is not the loss of revenue to the brand owner. Counterfeit goods generally do not match the quality standard of the genuine product, are not sourced responsibly, do not undergo regulatory and/or environment compliances, and will not be covered by a manufacturer's warranty. As a result, counterfeiting in certain industries such as foodstuffs, pharmaceuticals and machine parts poses greater risks than in others. For example, in a report by London Police in 2015, a counterfeit perfume had human urine and cyanide as its ingredient, and there are many such instances where counterfeits products have harmful chemicals like lead, arsenic, mercury, etc. Apart from this if a counterfeit product is bought from a website only selling fake products, then there is a high risk of exposing the personal and financial details of the buyer to online misuse.

Identifying Counterfeit Goods Online

Counterfeits also have significant variations in quality among them:

  • High-end counterfeits- Also known as "first copy" or replicas. These are the counterfeits which are very difficult for a lay person to tell apart from the genuine product. As a result, these are also more expensive.
  • Knock-offs- These are low-end counterfeits, often bearing obvious differentiation form the original brand. Consumers purchasing these items are often aware that they are not purchasing the genuine article, which is generally much more expensive.

For Consumers

To fight the battle against counterfeits a watchful consumer is equally important. There are several common-sense measures that may be taken to ensure that the buyer is not duped into buying a counterfeit product online. These are:

  • Price Check: If the price is too good to be true, it probably is. Ultra-low prices for a known valuable item is an obvious red flag that all customers should be aware of.
  • Product Reviews: Glancing through the 'product review' section on the shopping site is a good way to keep a tab on the authenticity of the product.
  • Shady Refund & Return policy: If there is no return policy listed, it is probably not a legitimate company. A site selling genuine products will have a well-defined refund policy.
  • Do research: Check the designer's website for their list of authorized dealers; if they aren't on the list, they may not be the real deal. If a site's URL contains a construction like this — the manufacturer's brand name, the word "discount" or something like "outlet store" that's a clue the website might be cybersquatting and selling fakes.
  • Domain and product names: These are sites with names that are a misspelled version of a brand. Counterfeit sites often take the time to make their operations look legit. But do some investigating and see if they have completed "FAQ" or "About Us" sections.
  • Heavy discounts: Discounts can be dubious. Unbelievable discounts on branded products should always be questioned. Before falling for these discounts always compare them with other similar sites selling that product.
  • Privacy policy: Counterfeiters don't take the time to craft protections for their customers.

Solutions

For Brands and E-Commerce sites

Apart from the buyers, the e-commerce websites and brands should also put their share of effort. They should have:

  • A strong IP portfolio and Policy
  • A detailed and well-defined 'cease & desist' notice policy
  • Report and abuse option
  • Timely follow-ups to keep a tab on the kind of products sold on the website
  • Take immediate action as soon as any lead is given

There are certain steps that e-commerce websites are already taking:

  • E-Bay: E-Bay has an option of paying through 'paisapay'. The seller does not get the money unless and until the goods are received by the buyer. And in case of any default the payment is withheld till the time the issue is fixed. It also has a guide that helps the buyer in pointing out the fake products on its website.
  • Amazon: Amazon's policy of 'Brand Gating' according to which to sell a branded product the merchant is required to submit 3 official invoices and/or a letter from the brand owner. Amazon in 2017, also launched 'Amazon Brand Registry' which will allow the brands to register its logo and IP so that the fakes can easily be spotted on the site.
  • AliBaba: AliBaba's last year launch of 'Big Data Anti Counterfeit Alliance' wherein it has formed an association with the international brands like Louis Vuitton, Swarovski, etc. In this Alibaba will provide alliance members with advanced technological support and protection from counterfeiting, and in exchange the global brands will provide such resources as "IP authentication know-how and anti-counterfeiting data."2
  • Jabong: Jabong has a 'one brand one product policy'. The company contacts the official distributors of the brands, gets the different quotations for the same product that is to be sold on the site and gets the best bargain to be sold.
  • Flipkart: It has a 'zero tolerance' policy for counterfeit products. According to which it immediately removes as soon as any fake is spotted.
  • Paytm Mall: In July, 2017, Paytm Mall delisted over 85K online sellers, in an effort to block fraudulent merchants from signing up on the ecommerce platform.3

The battle against counterfeit should be fought together, i.e. the consumers, brands, e-commerce sites and regulators everyone needs to do their bit. A blind eye, even from one member could result in losing the fight. Whatever step are being taken are noteworthy, but more strong steps are required to be taken.

SOURCES:

Footnotes

1. http://www.news18.com/news/india/nearly-60-of-sports-goods-40-of-apparel-products-available-online-are-fake-1615763.html

2. https://fashionista.com/2017/01/alibaba-anti-counterfeit-alliance

3. https://inc42.com/buzz/ecommerce-flipkart-amazon-fake/

For further information please contact at S.S Rana & Co. email: info@ssrana.in or call at (+91- 11 4012 3000). Our website can be accessed at www.ssrana.in

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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