The Impact of Counterfeiting Activities and the Enforcement Strategies under the ‘New Normal’

Loo Wai Hoong shares the recent notable statistics on the impact of counterfeiting activities on the economy and the strategies in keeping counterfeiters at bay.

The year 2020 has come and gone, yet the COVID-19 pandemic still lingers on and does not appear to be relenting anytime soon. While numerous legitimate businesses are scaling down or have even folded, counterfeiting activities have surged exponentially and remain as resilient as the pandemic. Counterfeiters have seized the moment by engaging in brisk sales of counterfeit goods – mainly through online channels – and are expected to continue exploiting vulnerable consumers while raking in large profits as brand owners and authorities tackle the practical challenges in the brand enforcement scene under the ‘new normal’.

Statistics of Counterfeiting Activities and Anti-Counterfeiting Enforcement Actions

  • It is estimated that smuggling, counterfeiting and related illegal activities deprive the global economy of US$2.2 trillion annually while the international ‘black market’ for counterfeit goods account for US$461 billion.
  • In 2018, the trade in counterfeit goods in South East Asia was estimated to be approximately US$35.9 billion which accounted for almost 10% of the international trade in such goods.
  • Online fraud and illicit trade including the online sales of counterfeit goods cost South East Asia an estimated US$260 million per year.
  • The global counterfeit pharmaceutical trade is estimated to be worth approximately US$4.5 billion. The Organisation for Economic Co-operation and Development (OECD) revealed that the most frequently counterfeited medication classes are antibiotics (35.4%), male impotence pills (15.6%), painkillers (10.4%) and anti-malaria pills (8.9%).
  • In 2020, film piracy increased by 41% in the USA, 43% in the UK and 63% in India.
  • In March 2020, Interpol conducted Operation Pangea XIII, a multi-agency enforcement action involving 90 countries to tackle illicit online sale of medicines and medical products which resulted in seizures of 4.4 million products worth US$14million, 121 arrests and takedowns of more than 2,500 websites, social media accounts, online marketplaces and online advertisements.

The estimated impact of counterfeiting activities on the Malaysian economy are similarly reflected by on-the-ground enforcement actions carried out by the Ministry of Domestic Trade and Consumer Affairs (MDTCA):

  • The MDTCA’s Putrajaya headquarters conducted 257 cases related to counterfeit goods resulting in seizures worth approximately 5 million (US$1.11 million) between early 2020 until October last year.
  • Between the start of 2020 to early December last year, the MDTCA’s Kuala Lumpur branch had conducted 45 cases under the new Trademarks Act 2019 which saw seizures of goods worth approximately RM4.8 million (US$1.18 million) which included concurrent raid actions attended by Wong Jin Nee & Teo against two related premises where 36,722 units of counterfeit eyewear and caps bearing various renowned brands estimated to be worth RM1.5 million (more than US$370,000) were confiscated.
  • Throughout the various phases of the Movement Control Order (MCO) imposed last year, it is estimated that Malaysia was deprived of about RM1 billion (US$246 million) in unpaid taxes which is often the by-product of smuggling, counterfeiting and other related illicit activities.

Brand Enforcement Measures

Under the ‘new normal’ in Malaysia which involves physical distancing measures, the imposition of travel restrictions and migration of businesses to online marketplaces, brand owners and enforcement authorities are now faced with novel challenges in their brand enforcement initiatives. The following are some dynamic approaches that brand owners may consider adopting in thwarting the counterfeit trade under the ‘new normal’:

Employ Product Authentication Features and Educate Consumers

  • Implement robust authentication features such as scannable unique QR codes which can be verified instantly online or via an app.
  • Publish general details of verified supply chains and genuine products such as lists of authorised dealers/sellers and product price points to increase awareness.

Clean Up the Online Marketplaces & Lodge Take-down Requests

  • Conduct online sweeps on e-commerce platforms and websites to search and identify infringing listings which advertise or offer counterfeit products for sale.
  • Lodge takedown requests with e-commerce platforms to request for the removal or “takedowns” of infringing sellers’ accounts, listings, trademarks, product images and copyrighted materials.
  • Issue Cease and Desist letters to e-commerce platforms to request for the removal of infringing listings and materials.

Engage Law Enforcement Authorities and E-commerce Platforms

  • Engage law enforcement authorities and e-commerce platforms as a joint initiative between the government and the industry on best methods and practices to tackle online counterfeit goods.
  • Conduct capacity training with law enforcement authorities to foster collaboration and share product knowledge to enable proactive enforcement actions by the authorities.

Conduct Investigations, Raid Actions, Issue Cease & Desist Letters and/or Commence Civil Suits

  • Conduct test purchases and/or investigations to identify infringers.
  • Conduct raid actions at identified infringers’ physical premises and seize counterfeit goods.
  • Issue Cease and Desist letters to identified infringers.
  • Commence civil suits for trademark/copyright infringement and/or passing off against identified infringers.

Conclusion

The impact of counterfeiting activities on the economy and businesses’ revenues are substantial and highly detrimental. As counterfeiters constantly ‘re-invent’ themselves and offer increasingly new varieties of counterfeit products, brand owners should likewise embrace the ‘new normal’ in the enforcement sphere and implement new approaches or strategies as outlined above to stop or at least slow down the counterfeiters in their tracks.

For more information on how to formulate and implement tailored enforcement strategies for your brand and business, kindly reach out to us at Wong Jin Nee & Teo.

 

Wai Hoong is a Senior Associate at Wong Jin Nee & Teo. He develops and implements online and offline brand enforcement and anti-counterfeiting programs for multinational clients across various industries.