Business Action to Stop Counterfeiting and Piracy
Over the past decade, challenges to consumer protection have grown in step with the acceleration of international transactions, growth of sprawling international supply chains and proliferation of online shopping. As a result, there has been a dramatic increase in the volume of products moving globally, which has created supply-chain vulnerabilities and exposed consumers directly to virtual marketplaces that boast varying degrees of quality and control safeguards. In a study commissioned by the International Chamber of Commerce’s (ICC) Business Action to Stop Counterfeiting and Piracy (BASCAP) and the International Trademark Association, it is estimated that the total global economic value of counterfeiting and piracy could reach $2.3 trillion by 2022.
Scope and scale of the problem
The extent of the social-economic effect of counterfeiting is indicative of the scale of the problem, but equally alarming is its scope – practically every product (retail and commercial) is now being counterfeited. Too often, fake items from virtually every product category are found throughout legitimate marketplaces, putting at risk the health and safety of individuals and families who have unwittingly been exposed to sub-standard products. Consequently, counterfeiting presents a fundamental new challenge to consumer protection. When a product is manufactured and distributed outside the legitimate commercial supply chain that provides safeguards to protect product integrity and consumer safety, new quality control precautions and consumer awareness tools are needed.
The automotive industry is no exception to this epidemic and has been rallying against counterfeits for many years. The amount of fake parts being made and distributed continues to rise despite efforts by national governments and industry actors (the UK Intellectual Property Office). The main driver behind this scourge is easy money: fake automotive components are a highly lucrative business for counterfeiters. The European Office of Intellectual Property (EUIPO) estimated that €2.2 billion is lost every year by the legitimate parts industry to counterfeit tyre sales and €180 million each year due to counterfeit battery sales. Yet this represents only one part of the problem, there are other automotive parts that are frequently counterfeited in huge volumes:
- Airbags help slow passenger movement and protect passengers in the event of a collision. Deployment and the timing of this deployment are critical. Airbags also work with other safety mechanisms built into vehicles and must meet exacting specifications, to which counterfeits do not comply.
- Engine and drivetrain components (eg, spark plugs, oil filters and air filters) can contribute to engine failure and pose a fire risk if they are fake.
- Brake pads have been found to be made of sawdust and compressed grass or asbestos, which negatively affect stopping ability as they smoke and disintegrate under pressure.
- Fake automotive body parts may not align with optimal crumple zones, which impact on passenger safety in a collision. They may fail to protect and instead become the cause of injury in the event of an accident.
- Electrical components that are fake, including lights, can lead to electrical failure and fire risk.
- Wheels are made to withstand speed and poor road surfaces. However, counterfeit parts have shown that integrity can be compromised quickly.
- Fake windscreens can shatter or displace, injuring or failing to provide any protective barrier to passengers.
Consumers may find it difficult to distinguish a fake from a legitimate automotive part by simply looking at the outer appearance. Consequently, consumers inadvertently purchase products that could be sub-standard and unsafe. There is always a risk of underperformance when a counterfeit product is used, as counterfeit goods differ dramatically in quality. These counterfeit parts have not been manufactured to meet regulatory standards, but they are designed to interact with other parts within the vehicle and are subject to significant and challenging conditions such as speed, temperature and varying road surfaces. Repercussions in these environments can be grave, resulting in serious accidents and loss of life.
The complex global supply chain in the automotive industry leaves several vulnerabilities for criminals to exploit. Although the industry has introduced mechanisms to trace parts to the source, criminals operate outside these established frameworks, making detention and prevention challenging. Moreover, the recent trend in online sales of counterfeit parts, especially those originating from China, is a growing problem for suppliers. Alongside the billions of legitimate online transactions, e-commerce platforms have become vulnerable to misuse and infiltration of fake and potentially unsafe products. Criminal actors have seized opportunities to gain further profits from distributing counterfeit and pirated goods in the online supply chain. In blurring the distinction between genuine products and fakes, they succeed in selling staggering quantities of infringing items.
These widespread activities to target and deceive consumers present significant challenges for national governments and businesses to investigate and stop the flow of fake and unsafe automotive parts.
Current efforts and success stories
A number of efforts and success stories include the following:
- The UK government recently joined forces with the automotive industry and trading platforms to launch a consumer-awareness campaign on the dangers of fake automotive parts. Subsequently, the UK Intellectual Property Office issued guidance on how consumers can avoid buying counterfeit automotive parts.
- To control the huge problem of fake automotive parts in UAE markets, the Emirates Authority for Standardisation and Metrology (ESMA) implemented a system to ensure that automotive parts without an ESMA quality mark cannot enter the UAE market from October 2018. Traders have been given a year to remove non-complying parts available in the market. A database containing information about all the spare parts manufactured or imported in the country will also be developed as part of the new system.
- In an industry-led effort, automotive manufacturers in the United States represented by A2C2 have collaborated to take a stand against counterfeiting. A2C2 is actively lobbying change in the area and has succeeded in enacting legislation in several states. Based on A2C2’s efforts, 17 states have passed an anti-counterfeit airbag legislation. In 2018, in collaboration with Interpol, A2C2 released its first automotive-related ‘orange notice’ for use by law enforcement. This notice is a warning of imminent threat to public safety posed by fake automotive parts.
- Online platforms, such as Amazon and eBay, have issued guidance on buying aftermarket vehicle parts. Alibaba introduced an automotive parts policy and announced the ban of listings offering airbag and related components on its platforms.
ICC BASCAP’s engagement on consumer safety
BASCAP is an ICC initiative, with a mission to increase awareness of the economic and social harms of counterfeit and pirated products and, among other things, protect consumers from these risks. BASCAP unites the global business community across product sectors to address these pressing issues and to petition for greater commitments by local, national and international governments to safeguard consumers against potentially harmful counterfeit and pirated products found both in the physical and online world.
In 2017 BASCAP released “Strengthening Consumer Protection: Measures to adapt the UN Guidelines for Consumer Protection to guard against counterfeiting and piracy”. This paper addresses the new challenges and additional responsibilities to governments and businesses to adequately protect consumers from potentially hazardous counterfeit goods. The paper also highlights the scale of the counterfeit problem, including its proliferation in e-commerce, and assesses the health and safety risks presented by counterfeits across multiple sectors.
Additionally, the paper evaluates key provisions from the 2015 revised United Nations Guidelines on Consumer Protection, which can be adapted into national consumer protection programmes to better safeguard consumers against risks from counterfeit goods. The paper amplifies the resolution’s recognition of:
- the importance of combatting sub-standard, falsely labelled and counterfeit products that pose threats to the health and safety of consumers and the environment, and also decrease consumer confidence in the marketplace; and
- the need to devote special attention to the development of effective consumer protection in e-commerce, which should be understood to include online shopping platforms, mobile commerce and social networks.
Critically, the paper lists a set of recommendations to assist governments and industry to cooperate in building a robust national and regulatory framework to better safeguard consumers against counterfeits that are available across sectors. BASCAP calls on consumer protection bodies to:
- Increase transparency for consumers by providing access to information – appropriate disclosure of information is crucial to help consumers and regulatory authorities identify illicit traders and differentiate them from those conducting legitimate business operations. This includes adoption of know-your-supplier and know-your-customer programmes, implementation of regulations to mandate the display of the legal name of the manufacturer on consumer products, along with customs care numbers and effective monitoring and compliance efforts.
- Implement consumer education and awareness programmes – education is an effective tool to warn consumers of the dangers of purchasing counterfeits. This is supported by research indicating that, while most consumers are unaware of the risks related to counterfeits, when they have sufficient knowledge they refrain from purchasing fake goods that potentially threaten their health and safety. In an effort to improve this awareness, BASCAP has developed the ‘fakes cost more, I buy real’ consumer safety and awareness campaign to educate consumers on the health, safety and economic risks of counterfeiting and piracy. This campaign has been tailored for use in nearly 30 countries and is available at no cost to national governments to strengthen consumer awareness.
- Increase consumer protection in e-commerce – encourage online shopping platforms to adopt robust due-diligence systems across all platforms and services; develop programmes and mechanisms with cooperation from the private sector to assist consumers to develop the knowledge and skills necessary to purchase legitimate products online; and encourage platforms to take appropriate steps to address advertisements that lead consumers to sites that sell illicit goods.
- Strengthen legal framework and increase penalties – strengthen rules and legislations to better protect consumers from counterfeit goods; and implement higher penalties to remedy or remove from commercial trading those who fail to provide effective consumer protection measures.
Trade in counterfeit automotive parts is lucrative and has been facilitated to a certain extent by some unscrupulous online marketplaces, resulting in an alarming growth rate worldwide. Regrettably, an increasing number of shoppers are deceived into purchasing fake products that do not benefit from product controls and redress systems that underpin genuine products. This, in turn, presents significant health and safety risks for consumers and dictates that national governments and businesses must reinvigorate their efforts and establish focused programmes and policies to inform and protect consumers.
BASCAP welcomes an expanded role by governments and consumer protection agencies to address these problems, in collaboration with business and other government agencies responsible for consumer welfare, to drive policy, legislative and regulatory solutions. BASCAP supports further action by governments and the private sector to strengthen consumer protection, particularly in an era where consumers are significantly and increasingly exposed to fake, fraudulent and harmful counterfeit and pirated products, including those increasingly available on online platforms.