By Carol King
A 2017 report from the Commission on the Theft of American Intellectual Property says intellectual property theft, which includes counterfeiting, deprives American businesses and individuals of between $225 and $600 billion income annually. Eighty-seven percent of all counterfeit goods entering America originate in China (60 percent) or Hong Kong (27 percent.) The top five counterfeit product categories are: apparel/accessories, footwear, watches/jewelry, handbags/wallets, and consumer electronics.
According to research by the international Anti-Counterfeiting Group (ACG), last year 31 percent of shoppers unintentionally bought fake products online—up from 24 percent in 2018.
Counterfeiting is big business. Twenty-three percent of those items were bought through social media sites like Facebook and Instagram via posts or sponsored advertisements. ACG discovered big brand names like Dooney and Burke, Calvin Klein, Nike, and Tommy Hilfiger had been impersonated in sponsored social media posts. The adverts feature real photographs of retailers' stock in the posts with branded images. When consumers click through the link, it takes them to a scam website that looks the same as the retailer's but has a different URL. Phil Lewis from ACG expressed concern because, “in the midst of a pandemic, more people are opting to shop online from the safety of their own home.”
One account, under the name of Brand Store Clearance Online, posted sponsored advertisements on Facebook, with a page for Under Armour and another for Tommy Hilfiger. Chinese company Shenzhen Global Egrow E-Commerce Co., Ltd., a repeat offender in IP theft, uses images to sell knock-off replicas via fashion sites it operates including Dress Lily, Rose Wholesale, Rose Gal, Sammy Dress, Zaful, Nasty Dress, Twinkle Deals, and Trends Gal.
Here, Dress Lily takes a picture of a $31.99 sweatshirt from the Ivory Ella brand—a company that donates some of its profits to help save elephants. Dress Lily puts in its own watermark to add to the illusion of authenticity. Another example finds Sammy Dress is using Instagram influencer Kome Osalor’s images. And on another, an Instagram user's face was cut off to be used by Sammy Dress.
Facebook earns most of its revenue from ads. Its rules prohibit stolen pictures and “deceptive, false or misleading content," yet, advertisers continue to pilfer images from across the web, including from Instagram (Facebook-owned) or Etsy, using them to bait-and-switch users into buying poorly made imitations. This happened to an UncoverDC staffer, who got no resolution from complaints. She was left footing the bill for a low quality, fake Dooney and Burke pocketbook, that was not the same as the image from the ad. Facebook frequently fails to act when users are aggrieved. Chris Jarvis reported six cases of intellectual property theft and Facebook replied with over 100 auto-responses. Her complaints were left without resolution.
Facebook says they review every advertisement before it is published on the website, so it may be the case that some fraudsters are working around this via middlemen like MeetSocial the “No. 1 agency for Facebook marketing in China." Its clients include all the sub-companies associated with Global Egrow. It says they use "profound understanding of Facebook and Instagram" to help Chinese companies build their reputations and attract sales overseas. Still, that does not make up for poor customer support and auto-responses by Facebook customer service. In response, Facebook groups like “Knock Off Nightmares” (30,889 likes), “Rose wholesale Scam” (3,596 likes) “Sammy Dress, Rose Gal, Rose wholesale Is a Scam,” have popped up and people are sharing photos of how their Facebook-advertised order is a poor representation of the advertised photo.
Previously, Facebook was not prepared to get involved in instances where users were unhappy with a product bought via a Facebook ad. Even if thousands of people feel like they got the wrong item, the company said it is not technically a violation of Facebook’s guidelines. In 2016, Facebook's then Vice President of Ad Pages Andrew Bosworth told Buzzfeed that the company was sifting through more than 50 million active businesses on the platform to identify which were "delivering products and services that are overwhelmingly unsatisfactory to people."
Covid-19 bolstered the number of counterfeit goods being sold via social media
The ACG reported a 2,490 percent increase in sales of unsafe face masks in March and April this year. An investigation by the UK Sun Newspaper found unsafe face masks and low-quality hand sanitizer, being sold on Instagram from at least 10,450 scam accounts based in China. Social media analyst Ghost Data, which also looked into the problem, found that Facebook banned ads or listings selling medical face masks, but unscrupulous sellers moved to Instagram accounts. There, masks could be sold on a main page or by using Instagram features, including "stories," where posts vanish after 24 hours of live video. Ghost Data said that while some of the vendors on Instagram might be selling protective gear legitimately, at a fair price, many others are likely scammers.
In fact, Instagram removed several accounts that were brought to its attention by investigations for rule violations. A spokeswoman said, “We use several automated detection mechanisms to block or remove this material from our platform. We’re focused on preventing exploitation of this crisis.”
Further, Interpol warned one of the five global threats from Covid 19 is fraudulent, counterfeit trade in personal protective equipment, and anti-viral pharmaceuticals. One week in March they made 121 arrests across 90 countries, seizing dangerous pharmaceuticals worth over $11 million. Director-General Jürgen Stock said, “The pandemic provides incentives and opportunities for criminal groups. Law enforcement is learning precious lessons, fast. The illicit trade in such counterfeit medical items during a public health crisis shows a total disregard for people's lives.”
Meanwhile, police in Thailand arrested two Chinese nationals and seized 45,000 fake Covid-19 test kits, 350,000 medical masks and 1,200 infrared thermometers. In addition to being inauthentic, they were being sold for far higher than market value prices.
China's government has a direct interest in the success of domestic e-commerce companies selling overseas and pushes for the country's industrialists to trade. Premier Li Keqiang spoke about the importance of "innovative business models, e-commerce enterprises developing overseas warehouses for export products." The government has also approved 12 pilot international e-commerce ports, including one in Global Egrow's hometown, Shenzhen.
A hopeful collaboration
Three weeks ago, the U.S. government’s National Intellectual Property Rights Coordination Center (IPR Center) and Amazon announced the launch of a joint operation against counterfeiting. The operation will be led by Amazon’s Counterfeit Crimes Unit, supported by U.S. Customs and Border Protection (CBP), USPS and DHL to conduct inspections and analyze data at U.S. ports to keep counterfeit products out of the U.S. supply chain.
More than 90 percent of all intellectual property seizures are done in the international mail and express mail arenas. The IPR Center and Amazon will use evidence from the operation to expand ongoing investigations. Director Steve Francis stated in November that “The IPR Center plays a critical role in securing the global supply chain to protect the health and safety of the American public, however, our efforts are increased with partners like Amazon to identify, interdict, and investigate individuals, companies, and criminal organizations engaging in the illegal importation of counterfeit products.”
They will target shipments containing suspicious goods, levy civil fines, investigate those who seek to violate trade laws, harm consumers, and damage the U.S. economy. Dharmesh Mehta, Amazon's Vice President of Customer Trust and Partner Support (CTPS) added:
“Counterfeiters don’t just attempt to offer their wares in one store, they attempt to offer them in multiple places. Now, by combining intelligence from Amazon, the IPR Center, and other agencies, we’re able to stop counterfeits at the border, regardless of where bad actors were intending to offer them."
Social media companies’ priority is to enhance their ad revenues before addressing the consequences of sham companies, so this might give them an idea of how they will need to work with other agencies to make a real dent in tackling the proliferation of counterfeit goods. Otherwise, the user experience on their sites will continue to decline. Amazon knows if its sellers are selling fake goods, customers will not shop with them for the long term.
Carol King received a first-class Bachelor of Arts in History and Politics from Stirling University, along with an exceptional commendation for a study on U.S. public opinion and foreign policy. She also completed a year of study at University of London before taking up a Graduate Proctor Fellowship at Princeton University. She further completed a Master of Philosophy in American Politics at Dundee University.