S Murlidharan

The sale of counterfeit goods is not just an online problem

S Murlidharan | Updated on March 26, 2020

The new e-commerce policy is taking steps to address the sale of counterfeit products online. But the practice is just as rampant in offline stores, too

The government is comprehensively addressing some of the abuse e-commerce platforms face by sellers. Counterfeiting is rampant in e-commerce, and affects the reputation and sales of original equipment manufacturers (OEM) as well as hurts consumers who come to reputed e-commerce portals like Amazon or Flipkart for genuine and price-competitive products.

In the absence of strong regulations in India against copycats, many such products get pushed through these platforms with the intermediaries conveniently adopting a “hands-off” policy — absolving themselves of any responsibility for the behaviour of the sellers using their platforms. The marketplace model provides them a convenient shield. The government is aware of the abuse of the marketplace model and is also reportedly plugging some of the loopholes in its new e-commerce policy.

The most common counterfeiting seen online is for electronic goods, apparel, cosmetics and over-the-counter pharmaceutical products. According to the Authentication Solution Providers’ Association (ASPA), India suffers a loss of over ₹1 trillion a year owing to the sale and purchase of counterfeit goods by consumers.

Intermediaries have enjoyed a level of protection because of the Information Technology Act (2000), that gave them an escape route. The government will have to do away with this clause while drafting the new policy. The government’s new e-commerce policy being drafted is expected to focus on four broad areas — data access, anti-counterfeiting, regulations around market-place and inventory models, and consumer protection measures.

The Delhi High Court in Christian Louboutin SAS vs. Nakul Bajaj and others has already set precendent for judging whether an online marketplace should indeed be absolved of blame, if they are involved on one or more activites. These include providing transport, warehousing and quality assurance for products listed on the platform, re-packaging the product, advertising and providing authenticity guarantees. Provision of one or more of these services or facilities by the e-commerce platform should lead to the assumption that marketplace is a mere alibi and the e-commerce platform is indeed practising the inventory model, which is not allowed under the extant FDI policy.

Coming back to the issue of counterfeiting, it must be conceded that while the problem may be rampant with e-commerce sales, it has its origin in offline manufacturing. So we need a comprehensive legislation to address this problem without being fixated with e-commerce firms. The extant trademark, patent and other intellectual property laws are proving to be inadequate. In many countries, laws that require a seller to offer certificates of authenticity, identification details that allow tracing and creating an overall platform that is much more consumer-friendly and transparent, have come into place.

Copycats and reverse engineers have been having a field day ever since invention started.

What the e-commerce policy can do is to stop them from boarding the anonymous juggernaut. In other words, the new policy should put the onus on the e-commerce platform to verify whether the goods being sold through it do not fall foul of the intellectual property rights laws. It would be a tall order, but it is necessary.

The writer is a Chennai-based chartered accountant

Published on March 26, 2020

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