The ‘Online Black Market’ Virus: The Rise in Online Counterfeit Goods in the Wake of COVID-19

 

Loo Wai Hoong sets out various approaches that brand owners should adopt to combat the unprecedented surge of online counterfeit goods.

 

As the COVID-19 pandemic spreads across borders and has infected the population of virtually every nation, governments around the world have imposed lockdown or restrictive measures to contain the outbreak. Malaysia has implemented such austere measures since March 2020 before gradually transitioning to more relaxed recovery measures under the current Recovery Movement Control Order (RMCO) phase.

During this challenging period, not only has it been business as usual for e-commerce businesses and merchants, but their sales have in fact surged significantly. Placing orders and purchasing products online have become part of the ‘New Normal’ as consumers adapt to restrictive stay-at-home and physical distancing measures. A wide range of consumer and household products purchased online have been ‘flying off the shelves’ as they are transported from manufacturers and sellers in different states or countries right to their customers’ doorsteps in unparalleled volumes.

The downside is that a different outbreak has spread across cyberspace – an outbreak of increased online counterfeit goods. Opportunistic counterfeiters have jumped on the bandwagon and are capitalising on consumers’ insatiable appetite for online shopping. This has led to the proliferation of counterfeit goods on online marketplaces in virus-like proportions caused by the following:

  • Counterfeiters are taking advantage of consumers’ fears and panic buying sprees to advertise and sell, among others, counterfeit face masks, other personal protective equipment and hand sanitizers.
  • Disruptions in genuine products’ supply chains and the difficulty in keeping up with consumers’ ever-increasing demands are being exploited by counterfeiters who quickly fill the supply-and-demand gap with counterfeit products.
  • Counterfeiters are exploiting the adverse effects of the pandemic which has hit the world’s economy by offering oblivious consumers seemingly genuine products at unbeatable low prices under the guise of ‘lockdown sales’ or similar promotions and delivering counterfeit products to them at lightning speed.

To ensure that their brands are being protected and counterfeiters do not have an edge over them, brand owners should consider adopting the following approaches to stay ahead of the competition from the rapidly expanding and menacing ‘online black market’:

  • Know Yourself

Brand owners should identify their key products which are being copied and hawked by counterfeiters while reallocating their resources to the online space and enforcing their rights over those key products.

  • Know Your Enemies

Brand owners should utilise data mining and intelligence gathering exercises by conducting focused online sweeps on major e-commerce platforms and websites to identify the markets and product listings where counterfeits of their products are advertised and offered for sale by infringing merchants.

  • Seek allies

Brand owners should foster close collaborations with their IP counsel, investigators, fellow brand owners and other industry peers to conduct joint-industry enforcement actions and programs. In addition, they should collectively engage with local law enforcement authorities and e-commerce platforms towards coming up with some common strategies for tackling the presence of online counterfeit goods.

Conclusion

A consistent implementation of collaborative enforcement programs by the stakeholders would certainly send a stern message and leave a lasting impact in deterring merchants from dealing with counterfeit products. In addition, by reaching out to law enforcement authorities and the e-commerce platforms, brand owners may be able to retrieve the personal details of infringing merchants. With this exercise, it is hoped that the masterminds behind the illegitimate operations could be identified and physical offline actions be taken against them. Further, brand owners should consider setting up official online stores on e-commerce platforms and/or their own websites.  These official on-line stores would offer consumers secure sources of genuine products thereby providing consumers with the peace of mind when making online purchases.  In turn, this would help brand owners to drive out competition from counterfeiters.

Apart from just scrutinising their balance sheets, brand owners should also take a serious look at their inventories and current market shares on e-commerce platforms and websites. It would certainly be beneficial for brand owners to make their presence on online marketplaces felt sooner rather than later as it would be too late to ‘clean up’ an online market which is overrun by counterfeits of their genuine products. Essentially, every counterfeit product sold in the market displaces the sale of a corresponding genuine product and deprives brand owners of profits. Hence, immediate actions against infringing online merchants would help brand owners to reduce their expenditure for brand protection measures and maximise their profits in the long run. To effectively stem out the ‘online black market’ virus, brand owners must quickly redirect their sights and take the fight directly to the online marketplaces where counterfeiters are thriving.

 

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