Gone are the days when consumers actually visited their favourite shops. Not only has online shopping replaced window shopping, but it has also opened a Pandora’s box of trading – and shoppers have welcomed it without hesitation. It also turns out that the authenticity of online offers is rarely questioned.
The counterfeit industry is one of a kind: it makes a fortune out of fake goods, while free-riding on the reputation of well-known brands. According to the Global Brand Counterfeiting Report 2018 by Research and Markets, the total counterfeiting activity for 2017 amounts to “1.2 Trillion USD and is bound to reach 1.82 Trillion USD by the year 2020”. It would be easy to illustrate the magnitude of this amount by comparing it to the expected gross domestic product of Canada for 2019 – $1.85 trillion, according to Focus Economics. Online shopping has become a labyrinth, in which many have lost their way and suffered under scams conveniently premeditated by anonymous hands thanks the convenience of fake social media profiles.
Fighting online counterfeiting is the digital world’s biggest battle to date. As in any war-like scenario, brand owners must build a successful strategy to combat the online IP plague. Hold on tight and enjoy the ride!
Why is it important?
Brand owners should anticipate the next hot forms of communication which counterfeiters will use to kick-start their illegal businesses. After intermediary liability for internet service providers was introduced in the United States and Europe, counterfeiters gradually shifted their efforts towards social networks – but why social media?
The reasons are economically driven: creating a profile on social media is free, with no fees necessary for domain set-up and maintenance. Social media networks are also easy to use and accessible on any operational system. There is also an attractive privacy aspect: the only personal information requiring verification is an email address or phone number, as opposed to extensive WHOIS information provided by a domain owner. Almost anything can be manufactured by a scammer without creating a financial burden.
There is no doubt why the UK Intellectual Property Office called social media the “most distinctive medium for communication” for counterfeit businesses and a “breeding ground” for counterfeit goods (July 2017). Recent developments suggest the same. In May 2018 joint investigations by Europol’s Intellectual Property Crime Coordinated Coalition, the Italian Guardia di Finanza and law enforcement authorities from nine EU member states closed 10,000 online shops over different social media platforms. This operation – the biggest enforcement action ever – underlined the dangerous nature of social networks and the need to educate and warn consumers of criminal networks on social media.
Globally, Facebook still holds the first place with 2.2 billion active users as of April 2018 (Statista), followed by Instagram and WeChat. These three social networks, although essentially different in nature, have the propensity to adapt to the current legal landscape.
Changes and developments
New face of Facebook
Undoubtedly, Facebook is the social media leader and logically online retail is big on this network. As a result, the platform has adopted new features, taking online business to new heights.
Facebook targeted advertising: This tool is business-oriented. Anyone can place an advertisement for their webshop here, depending on the desired target group based on age, gender, relationship status, territory and interests. Facebook detects all websites visited while logged onto Facebook and adjusts the displayed adverts according to the user’s tastes.
Facebook Marketplace: Released in 2016 and significantly expanded in 2017, Facebook Marketplace is a feature dedicated to sales taking place within a specific geographic area. Since June 2018, it allows users to pay to promote their listings. Facebook Marketplace is an add-on to the already existing Facebook application. CEO Mark Zuckerberg announced that 800 million people in 70 countries are now using Marketplace to promote their goods.
Insta-fever – how Instagram came to stay
It is safe to say that Instagram is a massive hit. Having reached the 1 billion monthly global community in June 2018, it has become the fastest growing social platform at a rate of almost 5% per quarter. Its attractive layout and hashtag function enables users to find exactly what they look for in no time. Then again, “the owls are not what they seem”: the visually eye-catching picture storage platform has had to run an extra mile to achieve this success.
Instant-shopping feature: Instagram shopping is now live – ‘See. Tap. Shop’ – although it is still in a testing phase and limited to only several countries. It grants users the opportunity to explore products ‘with a single tap’. Tapping on a product will show the user:
- an image of the product from the post;
- a description of the product;
- how much the product costs; and
- an external link that takes the user directly to the website where the product is sold.
This feature is meant to provide a faster path to purchasing. Companies that have tested the new ‘shopping basket’ have announced increases from 25% to 40% in website traffic and some notable increases in revenue.
IGTV: Introduced in June 2018, IGTV is a new app within Instagram allowing users to watch long-form videos. This means videos are no longer limited to one minute; users can now upload videos up to 60 minutes long. Anyone can create a channel and the entire Instagram community can tune in simply by opening the app.
Follow the hashtag: The option of following specific hashtags of interest was introduced in December 2017 and, according to Instagram, more than 100 million users worldwide use it. The new Explore outlook, divided into different spheres of interest, also suggests hashtags to users.
This is how WeChat
With more than 960 million active users, WeChat has become the most widely used multi-function messaging social media and mobile payment app in China and the fifth most widely used worldwide. Thanks to the huge base of active users, it is also an attractive playground for counterfeiters.
Private sellers and public profiles: A user can open a private account by providing only a phone number. In addition, an official or public account can be applied for where the registered user can publish posts, attract followers, send push notifications or redirect followers to an external website. Both types of account can be accessed by a unique QR code. From a counterfeiter’s viewpoint, this is a cost-effective way to build an infringing social network and distribution channels.
For personal accounts, a counterfeiter can post online images of products with a QR code attached and interested buyers can scan that code to find the seller and request details. In addition, there is a feature called ‘Moment (朋友圈)’ which offers products for sale. However, only WeChat users who are on the seller’s contact list can see the posts and get in touch for more information.
For official accounts, posts are usually visible to the public and infringers post huge sale promotions to attract customers who are responsive to prices. However, even in such cases, it does not mean that the seller is completely exposed to the public. More often than not, customers which show interest in a post must still contact the sellers personally, meaning that the transactions remain secret.
Mini program: Launched in 2017, mini programs are now one of the most eye-catching features embedded in WeChat. According to the latest report, the total number of WeChat mini programs has climbed to 1 million, with 1 billion users globally. Simply put, a mini program is an application that can be run instantly within WeChat.
With mini programs sellers can offer products in new ways, such as through group-buying deals. For instance, WeChat users in a certain group chat can buy some products together and enjoy discounts from 10% to 50%. As a result, more brands have decided to launch their own mini programs on WeChat.
Breaking Bad – from trends to threats
Challenges and threats to IP rights are affected by time, efficiency and user-friendliness.
Compliance rates of notice and takedown requests: For the first time, Facebook published a comprehensive transparency report on IP infringements displaying takedown request data for 2017. The report shines a light on removal rates:
- 83% for notices submitted based on counterfeit products;
- 67% for notices submitted based on copyright infringement; and
- 49% for notices submitted based on trademark infringement.
Both rights holders and agents can report violations to Facebook and Instagram.
When it comes to WeChat, the platform removes the infringing content. In the strictest cases, such as those involving repeat infringers, WeChat may decide to restrict certain account features or temporarily block the account. A permanent block is also possible, but is rarely seen. Even if blocked, the user can still register a new profile with a different phone number, making enforcement against infringement on WeChat more like a ‘whack-a-mole’ game.
Another example is paid Instagram and Facebook advertisements. The occurrence of such advertisements is usually based on location, cookies and preferences. This imposes restrictions on the ability to locate infringing advertisements and viewing these on another device. Advertisements do not allow users to copy the digital location of advertisements. Additionally, there is no effective way of reporting advertisements on either platform by third parties (eg, brand protection agents).
Privacy also makes a difference on WeChat. Posts on personal accounts are visible only to the user’s contacts, which poses a real challenge for detecting infringement. For rights holders, they must send out a request to the user, and the posts are visible only on approval.
In special cases, if the user’s profile includes sensitive keywords (eg, 1:1 replicas or high-quality replicas) the account can be reported without the need to see the seller’s posts. However, such cases are a drop in the ocean compared to the huge number of infringing sellers.
Reporting difficulties: Listings on Facebook Marketplace can be easily reported through the online counterfeit report form. However, Facebook does not block the seller from the Marketplace – there is more to it. Whereas a user or page can be blocked when posting a large number of counterfeit items, it is not possible when the large amount is posted only on the Marketplace. This places restrictions on the ability to report infringements, as there is a large amount of infringing content on the Marketplace. This became increasingly important as the platform started allowing paid promotions in June 2018.
As for WeChat, online reporting is time consuming. At this current stage, reporting methods for official accounts and mini programs are different from those for personal accounts. When reporting an infringing official account or mini program, the complaint must address company name, business ID, address and contact information. It must also upload required supporting files, copies of business certificate and IP rights. The form must be printed, sealed, scanned and uploaded to the system.
Complaints against personal accounts can be filed under ‘promoting for sale of counterfeits’, where the brand which the counterfeit product infringes against can be selected by explaining the complaint reason and uploading screenshots of dialogue with the seller. The complaint will go to the brand owner’s inbox in the online reporting system. However, the brand owner must join the IP protection programme in the first place. The brand owner can review the reported products and decide whether they are counterfeits. Once the reported product is confirmed as a counterfeit by brand owners, WeChat will take over and decide if any action needs to be taken against the account.
Potential weak spot: IGTV can impose significant threats on rights holders. The shopping feature can speed up the process of seeing an offer to buying it on a website in just minutes. Not to mention that this feature can feed the assumption that the items are genuine.
This new feature has the potential to put copyright owners at great risk, as the length of videos that can be posted can reach an hour.
Recommendations for brand owners
What next? There is light at the end of the tunnel.
Commerce & Ads IP Tool
Facebook has created a shortcut for reporting infringements, the Commerce & Ads IP Tool. It is designed exclusively for brand owners and allows them to search for their registered trademarks in advertisements, Marketplace posts and ‘for sale’ groups. All brands need to do is fill out an online form (www.facebook.com/help/contact/423912757973851) and submit the relevant documents. The only downside is that this feature is not open to third parties and agents.
Weixin brand protection platform
WeChat provides brand owners with the possibility to create an account in order to report IP rights violations or review flagged cases by individual WeChat accounts (www.wechatlegal.net/). The brand can also appoint a liaison person, within the company or an agent, to review the escalated complaints. After confirming that the items are counterfeit, WeChat has the final say on whether the infringing product will be removed. Compared to Facebook’s tool, WeChat has opened up to third parties and left brand owners filtering the infringing cases that they want to report.
There is a strong need for a direct line of communication between brand owners and social networks. There is no ‘one size fits all’ solution and effort to meet each other halfway is required from both ends.