The growth of world trade had led to an unusual rise in counterfeiting of products both in the physical as well as the digital market. The Internet is undoubtedly among the most important inventions of modern life, not only enabling innumerable new enterprises to flourish but also drastically transforming society’s functioning.
Counterfeiting refers to the practise of making fake copies of a commodity, documentation, or currencies without permission of the original owner or consent from the appropriate authority.
Nevertheless, the incorporation of the same into almost every aspect of our everyday lives, has increased the severity and repercussions of digital counterfeiting and theft. Counterfeiting not only affects the manufacturer and investors of original product but the consumers as well. Where on one hand the manufacturers and investors suffer reputational and financial loss, the consumers suffer from the adverse effect of using fake products.
With the introduction of digital marketplaces, the counterfeited products can now be sold across the globe through the Internet. These counterfeiters present in digital market have an unmatched accessibility to buyers. Also, they can easily avoid any threat of being exposed by using false identity. Thus, piracy and counterfeiting has become a global nuisance. It is therefore important that an efficient redress system must be created.
COUNTERFEITING IN E-COMMERCE PLATFORMS
E-commerce is a system which uses electronic communication to facilitate transactions for the sale of goods and services. Using cost reductions, competition, and a stronger manufacturing process organisation, e-commerce boosts performance and expands choice. Where on one hand there are lot of advantages of having e-commerce platforms, it has certain disadvantages attached with it too. One such disadvantage is that it is used widely for sale of fake products.
Fake products are widely sold on e-commerce platforms. Whereas technology can help to verify the genuine goods, it can also help to make a copy, making it more challenging to detect the difference between the genuine and the counterfeit.
The digital market continues to be distorted by counterfeited products. E-commerce platforms are frequently exploited as a gateway for the distribution of fake products. About world’s 1/3rd counterfeited products are present in the digital market.
EFFECT OF DATA PRIVACY REGULATIONS
Protection of consumer in e-commerce has gotten a lot of consideration over years, especially from regulatory bodies, trade associations, agencies of Government, and other related entities.
The e-commerce guidelines provided by United Nations Conference on Trade and Development (hereinafter referred to as “UNCTAD”), Organisation for Economic Co-operation and Development (hereinafter referred to as “OECD”), and World Economic Forum has aided nations in developing legislations for ensuring data privacy, secure transactions, and building trust among online consumers.
Sharing of Information in the Light of Data Privacy Regulations
Due to recent changes made to data protection laws and regulations, protecting organizations and customers from the risks associated with counterfeiting has grown to be more difficult for both public and private enterprises.
Protection of data of consumers in one field might adversely affect them in another. One such example is the interpretation of the General Data Protection Regulations (hereinafter referred to as “GDPR”) made by Internet Corporation for Assigned Names and Numbers (hereinafter referred to as “ICANN”) regarding the ‘who is responsible for this domain name’ (hereinafter referred to as “WHOIS”) information.
WHOIS is basically a system where the information, regarding identity of a domain owner and relevant data related to them, is made available to public. The ICANN’s interpretation resulted in stoppage of such supply of WHOIS information. This has masked the personal data of registrants of domains which were publicly available.
The cutting-off of WHOIS information will result in incapability of brand owners in identifying the owners of unreliable domains selling fake products due introduction of restrictions on availability of such data by GDPR.
Challenges Due to Lack of Specific Laws
Presently, in India, there is no specific legislation or regulation to deal with data protection of data subjects and this issue is governed via Information Technology Act, 2000 (hereinafter referred to as “IT Act”). Section 79 of an IT Act exempts the intermediaries from any liability concerning any third party data, communication or information made available to or held by him/her.
However, such exemption isn’t available to the intermediary wherein he had the knowledge or was notified by Government about usage of such information or data for unlawful act and therein the intermediary failed to restrict its accessibility.
Thus, the IT Act has provided the intermediaries with a safeguard, which is a way to escape from liabilities and enjoy protection. Subsequently, this particular loop hole makes it easier for the e-commerce platforms to facilitate the selling of counterfeited items.
Because India lacks powerful laws against counterfeits, most of these goods are sold via online platform, with intermediaries simply taking a “hands-off” stance, acquitting themselves from any accountability for actions of the vendors who use their platforms. The Government has realized the misuse of online platforms and is apparently working to fix a few of the shortcomings through its new policy on E-commerce.
The Consumer protection (E-commerce) Rules, 2020 (hereinafter referred to as “E-Commerce Rules”) provides the methods to prevent counterfeiting. Under Rule 5(3)(a) of the E-commerce Rules it is expressly stipulated that every seller’s information must be made accessible and clearly stated by marketplace e-commerce entities with respect to all goods and services, and an undertaking must be given by the sellers to marketplace entities regarding legitimacy of their goods.
It also requires the e-commerce entities to provide its users with the information such as its legal name, office address, contact details and details regarding its website. Thus, it ensures that the consumers are provided with vital information to make decision before making purchase and to ensure legitimacy of product.
Even though the world has seen an enormous growth of e-commerce, the consumers in India are still unable to trust the digital market fully and a major reason behind it is absence of specific law on data privacy and protection. Dealing with unknown sellers make a consumer hesitant to make purchase or to rely on the goods provided by it.
Governments all around the globe acknowledge the problem of counterfeiting, which has resulted in a variety of anti-counterfeiting policies and methods, both domestic and international. Evidently, the criminal aspect of counterfeiting as well as the breadth of its detrimental impact on customers, businesses, and economies has necessitated the creation of comprehensive legal frameworks which may function on multiple levels.
It might be challenging to consider that any effort might totally eradicate counterfeiting, however the goal must be to render it unappealing for counterfeiters to attack the company’s goods. Anti-counterfeiting policies, technologies, and legal regulation are the 3 primary components of private-sector anti-counterfeiting measures.
By framing an effective anti-counterfeiting policy, the company can mitigate the risk of counterfeiting. For instance, the anti-counterfeiting policy of Amazon strictly restricts selling of counterfeited goods and makes it the liability of seller to ensure that the goods sold by them are genuine. It provides for termination of the privilege of selling on its platform if the seller is found to be selling counterfeited items. Furthermore, Amazon uses the Artificial Intelligence to safeguard the brand sellers and it also obtains certain data about their products to keep a check on counterfeits.
Similarly, eBay has also made investments in machine learning and other such tools for identification of counterfeits and to remove it from their platform. A program called Verified Rights Owner has been designed by it so that the holders of trademark, copyright or other intellectual property rights can report presence of infringing products in the platform.
Furthermore, the exercise of due diligence by the companies acts as a dynamic way of reducing the adverse effect of counterfeiting. It allows the company to figure out most of the potential risks and employs effective measures accordingly to prevent it. It is required that there must be coordination between enforcement agencies and private entities so that the information can be shared amongst them, and identification of counterfeiters become easy and thereby ultimately safeguarding the consumers.
The Indian Judiciary is also trying to eliminate counterfeiting by being strict with intermediaries and increasing the obligation of intermediaries to conduct due diligence.
In the present digital era, the Internet has become the part and parcel of everyone’s life. The Internet has brought a sweeping change in global economy by the introduction of e-commerce or digital marketing. Though there are certain advantages of online market such as cost reduction, less consumption of time and easy accessibility, it also has certain demerits too. One such disadvantage of e-commerce is increase in sale and presence of counterfeited good in the market.
Counterfeiting not just affects the investors and manufacturers but it also has an adverse impact on the consumers of goods. It affects their health, security, and privacy.
Ironically, the data protection legislations in the e-commerce platform, instead of protecting the consumers of the counterfeit goods, protects the counterfeiter by restricting the accessibility to the information about the domain registrant. Where on one hand it is important for protecting of personal data of high-profile domain owner, on the other hand it provides the platform for fake domain owners to hide their identity and sell counterfeited items easily.
It is also a threat for the personal data of consumers who submit their data on such fake websites while purchasing goods from it. Thus, the data protection laws haven’t been effective in protecting consumers from counterfeiters.
In India, at present, there is lack of specific legislations to deal with counterfeiting and data protection. Such absence of legislation creates certain challenges for the brand owners as well as consumers. Thus, it is the need of hour that effective legislations must be framed to deal with such issues and provide safeguard to consumers.
– Team AMLEGALS assisted by Ms. Surbhi Jhanwar (Intern)
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