The rise of sales, influence and counterfeiting on social media
Around 560 billion Dollars’ worth of sales through social media were recorded in 2020. The figure is expected to reach 2.9 trillion by 2006. In 2021, 50% and 36% of internet users in China and the USA respectively made purchases on social platforms. Social media has transformed the entire buying and selling mechanism as it has turned out to be the most effective marketing tool of the modern times. 70% of business to consumer marketers were recorded to have gotten their customers through Facebook. 78% of sellers involved in social selling are recorded to be outselling their competitors who are not. 90% of marketers observed that social media marketing increased exposure to their business. Social media offers not only representation, reach and access, but also the scope of influencing potential buyers. This comes from influencers who gain popularity and become a source of inspiration for purchase decisions of their followers by way of endorsements.
It comes as no surprise that social media influencers have a magnificent impact on the purchasing decisions of their followers. However, the extent of this impact may bring in surprise and some worry as well. UK Intellectual Property Office (UKIPO) found from one of the surveys that around 13% of the responding females were influenced by endorsements on social media. That is not the point of concern here. What does call for concern is that 10% of these respondents were prompted to buy counterfeit goods by social media endorsements, while only 3% of them proactively sought to actually buy counterfeit goods.
Another study noted that over 20% percent of the fashion product related posts on Instagram endorsed counterfeit goods. There are researches that have concluded that 15% of all luxury brand’s hashtags were by accounts that were involved in counterfeiting activities. The Global Brand Counterfeiting Report of 2018 recorded that luxury fashion houses like Gucci and Chanel lost over 30 billion Dollars to counterfeited goods.
The European Union Intellectual Property Office (EUIPO) in the European Observatory on Infringement of Intellectual Property Rights’ report titled “Monitoring and Analysing Social Media in relation to IP Infringement” is said to have studied 4 million online conversations and has revealed surprising data. Around 11% of these are expected to be related to counterfeiting. While privacy concerns and related issues constitute a whole other debate, this figure is significant because over 76% of the buyers are actually ready to have social media conversations for identifying their purchase prospects.
Counterfeiting: The most significant IP concern on social media
Intellectual property (IP) infringement on social media can take multiple forms. These include unlawful use or distribution (piracy) of content- texts, photographs and videos, misuse of trade marks- registered and unregistered and infringements of designs. However, the most prominent, and the most rapidly growing concern of these is the rising sales of counterfeiting goods on social media.
While counterfeiting involves imitation of the products themselves with the intention to deceive and trademark infringement involves a competitor promoting their goods by simply using an identical or similar trade mark which is already in use to cause confusion, there is an overlap. Counterfeiting can be described as a special kind of trade mark infringement because the products are imitation of the original ones made to deceive the public and people of trade. However, counterfeiting is dealt with a stricter burden of proof when compared to trade mark infringement. It is the duty of the plaintiff, in cases of trade mark infringement, to prove that their registered mark is used by an unauthorized party. Whereas, in cases of counterfeiting, mere existence of deceptive goods is enough to initiate actions. Besides, while the punishments are civil in nature in cases of infringement and penal in cases of counterfeiting. Yet, the overlap between the two does not reduce the intensity of IP distortions in such instances. Moreover, a penal action against the accused also deprives the proprietors of their chance to recover losses and hence, the recent times have witnessed numerous trade mark infringement cases.
Mercado Libre, which is one of the leading e-commerce operators across major Latin American countries- Argentina, Brazil, Colombia, and Mexico- reported availability of high volumes of counterfeited goods across all of its national platforms in 2019. Mercado Libre, in December 2019, launched its Brand Protection Program, which consists of 3,100 right holders representing 12,700 brands and trade marks. Mercado Libre started proactively monitoring counterfeit listings. Right holders are encouraged by the IP enforcement team at Mercado Libre to continue improving its IP enforcement and collaboration efforts. Chanel filed a suit against several domain names for infringing its trade mark while offering counterfeit goods. Chanel argued sustaining losses at the hands of counterfeiters abusing their trade mark. This is simply an example of the growing trend. Amazon filed a case against two influencers and almost a dozen third party sellers for peddling fake goods in 2020. In 2021, they announced a settlement for a false designation of origin along with violation of Washington Consumer Protection Act.
The modus operandi
Review of Notorious Markets for Counterfeiting and Piracy of 2020 by the US Trade Representative Office highlighted examples of e-commerce platforms that facilitated substantial counterfeiting. Traders who traffic in counterfeited goods, have also evolved their tactics to evade and overwhelm the roadblocks placed in their way.
Counterfeiters have taken great advantage of social media- messaging websites and mobile applications- by subverting detection controls and consequently tricking the consumers. One of the fastest, easiest and the most inexpensive tactic is setting up accounts on social media in order to use posts or targeted advertisement campaigns for advertising their counterfeit and pirated goods. These posts and advertisements seem authentic because they contain the same or at least confusingly similar keywords, images or hashtags as used by the brand. The ads direct consumers to websites designed for evading detection. They often ask consumers to communicate through a messaging app for details about the authentic-looking counterfeit good. The payment services have become online and are typically connected to or affiliated to the social media application, which enables secure and quicker completion of transactions.
Another trick used by the sellers of counterfeited products is the use of hidden links. These links allow the seller to promote seemingly counterfeit product but then direct the purchaser to buy a different product on some e-commerce website. To understand, a hidden link advertisement of let’s say shoes of a famous brand would be linked to a page of a well-known e-commerce platform that offers generic socks for sale. The hidden link may also instruct the purchaser to not ask questions or leave reviews on the e-commerce platform. Such an insidious process is designed to evade the detection systems of e-commerce providers from detecting the counterfeits.
Right holders have also expressed concerns that usually the social media providers do not verify or make the effort to vet the identity of advertisers that would promote infringer accounts and that they do not have fully developed or enforceable repeat infringer policies. It is also alleged that social media providers do not have effective tools to detect or remove offers for counterfeit and pirated goods either. They do not sufficiently detect/ control the links to sites where consumers are deceived and directed to purchase the counterfeited goods. Besides, these providers lack transparency about their internal proactive detection processes, which may include the use of artificial intelligence.
Traditionally, counterfeit and pirated goods were sold on street corners, from trunks of cars, or from the unscrupulous physical markets. Consumers who found themselves at such locations could discern the risk of purchasing the illegitimate good simply by the “red flag” indicators- the suspicious location of the seller, the poor-quality packaging, or the substantially discounted pricing. However, on e-commerce platforms, consumers are exposed to counterfeit goods in settings that make the articles appear authentic and genuine. These online markets, unlike the physical ones, do not contain the same “red flag” indicators. The true location of the seller is not known, the pictures of the items from the authentic product are used, and the illegitimate good is comingled with the authentic good.
Regardless of the challenges- as pointed out by the right holders and as brought in by the changing circumstances- it is crucial that the social media providers as well as the right holders take necessary steps to protect their intellectual property. Internal procedures are important. Implementing social media policies to help educate, train and enable employees to identify and report possible infringements can be some of the initiatives.
With social media being increasingly used as an instrument to manipulate counterfeit sales and infringe the rights of IP proprietors, it is not in distant future that social media applications and websites will be forced to push their standards of vetting.