World
Trademark
Review
Anti-counterfeiting
2013
Industry insight
Drakopoulos Law Firm
A Global Guide
Industry insight
International strategies for
fast-moving consumer goods
Contributing firm
Drakopoulos Law Firm
Authors
Panagiotis Drakopoulos and Adrian Roseti
In recent years counterfeiting has reached
unprecedented levels. A number of factors have
contributed to this situation.
First, the former communist countries of
the Eastern Bloc opened their doors to the global
market without having either the culture or the
legal framework to tackle counterfeiting. On the
contrary, this behaviour was tolerated and at
times even supported by local authorities.
This situation was compounded by the
opening of the borders of China and other Asian
countries to international trade, resulting in a
global epidemic of immense proportions.
South America has also joined the trend, with
the infamous La Salada market in Argentina
often making global headlines for the wrong
reasons. The list goes on.
Production facilities for counterfeiting are now
commonplace in many parts of the world, especially
in the aforementioned regions, and advanced
shipping logistics allow counterfeit goods to reach
consumers more easily than ever before.
The situation regarding fast-moving
consumer goods (FMCGs) is even more alarming
as, in addition to negative effects among traders,
the use of counterfeit products could result in
disastrous consequences for consumer health
and safety.
Strategies
In order to fight counterfeiting in the FMCG
sector, reliable strategies should be employed by
all stakeholders, such as manufacturers, traders,
38 Anti-counterfeiting 2013 – A Global Guide
distributors, industry organisations and state,
regional and global authorities.
Anti-counterfeiting strategies must be
consistent with the nature of FMCGs which,
given the speed at which they enter the markets
and are purchased, could easily escape the
authorities’ controls when counterfeited. In
addition, such strategies should be adjusted to
reflect the realities of the current financial crisis.
Finally, they should respond to the need to
guarantee consumer safety.
In this context, the following issues should
be considered:
•Labelling – counterfeiters of FMCGs look for
cheap, fast ways of manufacturing products,
which means that attention to detail is
not always a priority. In this respect, labels
can distinguish original products from
counterfeits; in addition, regularly refreshing
the content of labels and informing customs
authorities, market investigators and local
marketing teams should make it easier to
identify counterfeit products.
•Manufacturing updates – in the same
way, introducing periodic updates to
the manufacture of products and using
sophisticated ‘must match’ replacement parts
make it more difficult for counterfeiters to
keep up with changes in a realistic and costeffective manner.
•Stock auditing – counterfeits often find
their way to the production facilities of
licensed outsourced manufacturers and to
distributors’ warehouses. In such instances,
stopping counterfeits before they reach
the market is preferable. Employing
mechanisms that would allow for the
www.WorldTrademarkReview.com
Industry insight
auditing of stock would help to monitor
potential counterfeiting activity, which
sometimes comes from licensed outsourced
manufacturers and distributors.
•Central investigation of consumer complaints
– consumer complaints/product returns are
usually handled locally and mostly in store
by replacing the faulty product, refunding
the purchase price or giving the customer
another form of compensation; in most cases
the faulty product is thrown away. By keeping
and investigating faulty products, valuable
evidence leading to counterfeiters could be
obtained.
•Market investigators– the market presence
of FMCGs is usually monitored by local
marketing teams, whose members may fail
to spot counterfeits on shelves. Also using
professional market investigators who are
trained to identify counterfeits would greatly
improve results. Furthermore, professional
investigators have ways of gaining access
to warehouses and loading points, and may
even interact with counterfeiters, posing as
potential buyers. Such activities are usually
beyond the capabilities of ‘civilians’.
•Internet sales – sales of counterfeit FMCGs
over the Internet are becoming increasingly
widespread. People tend to buy both services
and FMCGs by simply placing an order on the
Internet and having the products delivered
to their door. This makes it impossible for
consumers to check whether the products
are counterfeit, as they are judging from a
photo at best. Usually only the product name,
a short description and a code number are
made available. Placing a test order and then
tracing the seller’s electronic footprint could
result in the apprehension of counterfeiters.
•Industry associations – even among fierce
competitors, counterfeiters are a common
enemy. Sharing information via industry
associations would lead to better mapping
of counterfeiting activities; information on
the origins and trade routes of counterfeit
products could thus be compiled centrally
and shared with all stakeholders.
•Customs authorities – customs officers may
not always be on the lookout for counterfeit
products, especially FMCGs, which come and
go through Customs swiftly and frequently.
By maintaining a close working relationship
www.WorldTrademarkReview.com
with Customs and constantly updating it
on product upgrades and changes, as well
as possible infringements from other parts
of the world, the chances of intercepting
counterfeit goods could be greatly increased,
since customs officers would know what to
look out for and where to look for it.
•Publication of penalties – catching
counterfeiters and locating counterfeit
products is sometimes under-reported.
Although successful raids in counterfeit
production facilities or warehouses make
great news, the outcomes are not always
reported. Drawing attention to infringers
and to the penalties imposed on them
would help deter future illegal activity.
The media can be a great partner in
communicating this message.
•Distributors and wholesalers – often
distributors and wholesalers, when caught
red-handed, claim that they had no way
of knowing that certain products were
counterfeit due to a lack of information
enabling them to tell which product was
which. Regularly updating distributors
and wholesalers with detailed, specific
information on product characteristics not
only removes this excuse, but also renders
them partially co-liable in cases of offences.
•Consumers – in addition to affecting
market function (which hurts financially
not only manufacturers and traders, but
also consumers, since it leads to price
increases in order to make up for lost sales
and market share), counterfeit FMCGs may
pose a major threat to consumer heath and
safety. Stakeholders should communicate
this to the public as effectively as possible
through public announcements and media
campaigns. For example, opinion leaders such
as prominent scientists or artists could be
used as spokespersons in order to amplify the
message conveyed and to evoke strong public
opinion against counterfeit goods.
•Criminal proceedings – companies usually
tackle counterfeiters in the civil courts,
seeking cease-and-desist orders and
compensation for damages, but only when
infringers are large enough to make court
action worth it. Criminal action is not usually
taken, since companies often fail to see
tangible benefits in achieving a conviction.
Anti-counterfeiting 2013 – A Global Guide 39
Drakopoulos Law Firm
Further, pursuing small isolated acts of
counterfeiting through criminal proceedings
might appear to be cumbersome and not cost
effective. However, criminal prosecution can
prove beneficial in various ways. Within the
course of a criminal investigation, valuable
information could be obtained not only
with regard to the infringement at hand,
but also in relation to other infringers and
counterfeit sources and distribution channels,
since defendants in most jurisdictions can
benefit from clemency if they reveal such
information. Furthermore, taking criminal
action against every infringement sends a
strong message to potential future infringers.
Case examples
An interesting example of how the absence of
proper anti-counterfeiting strategies can prove
detrimental recently arose in Romania. A shipment
with a large number of counterfeit products was
stopped by Customs on the basis of information
received from a market investigator. Customs
called the company to check and provide proof
that the products were counterfeit, but even after
detailed examination of the products the company
could not provide such proof, since the products
seemed genuine in all respects, including bearing
officiall serial numbers. As a result, the products
were released onto the market. It was only later
that the truth emerged: after some months the
authorised Chinese manufacturer reported that
the serial numbers related to products that had
failed production quality control checks and
were due to be destroyed. An employee from the
Chinese factory had sold the serial numbers to a
counterfeiter.
This extreme case shows that companies
should employ all anti-counterfeiting strategies
available to them. In that particular instance,
the company had an investigator in place and
Customs was informed and cooperated, but
the counterfeit products still managed to enter
the market. However, if the company had been
performing audits in the Chinese factory and
monitoring production, a loss of millions of euros
would have been avoided.
Even in less sophisticated cases, experience
shows that when time passes and no action is
taken, the chances of eradicating counterfeiting
decrease considerably, and greater and more
expensive efforts are then required in order to
40 Anti-counterfeiting 2013 – A Global Guide
deal with the damage. Therefore, it is vital to
be proactive and stay constantly on top of anticounterfeiting activities.
Comment
In the long run, combating counterfeiting can
prove beneficial to businesses in all respects:
•A company can secure a strong brand, giving
consumers a good impression of the quality
of original product.
•It’s reputation will not be unjustly tarnished
in cases where public health and safety are
threatened by counterfeit products bearing
its name, or even just by poor performance of
counterfeits.
•Reduced counterfeiting encourages research
and development and innovation.
•Sales and market share will no longer be
affected by the circulation of counterfeits,
resulting in sustainable financial results.
Equally, state authorities should collaborate
with businesses in order to familiarise themselves
with the FMCGs on the market. They should
also enhance cross-border cooperation. Finally,
legislative measures should be adjusted from
time to time in order to deal effectively with everevolving counterfeit activity.
All stakeholders in the FMCG sector should
seriously consider employing such strategies in
order to prevent the international marketplace
from becoming a global La Salada.
www.WorldTrademarkReview.com
Contributing profiles
Drakopoulos Law Firm
Drakopoulos Law Firm
332 Kifissias Avenue
152 33 Halandri, Athens, Greece
Tel +30 210 68 36 561
Fax +30 210 68 36 538
Web www.drakopoulos-law.com
Panagiotis Drakopoulos
Senior partner
pdrakopoulos@
drakopoulos-law.com
Adrian Roseti
Partner
[email protected]
Panagiotis Drakopoulos
is the founder and senior
partner of Drakopoulos Law
Firm, a regional firm with
fully fledged IP practices
in Greece, Romania and
Albania. He has over 20 years’
experience in prosecution
and contentious work
regarding various IP rights.
Mr Drakopoulos represents
foreign and domestic clients
in a variety of IP matters
and is regularly involved in
large-scale cross-border deals
involving IP rights.
Adrian Roseti is a partner
in Drakopoulos Law Firm
Romania. He represents
several domestic and
multinational clients,
mainly with regard to
infringement disputes, and
has an impressive track
record in litigation relating
to trademark infringements,
successful raids on
counterfeit production and
storage facilities and seizures
of shipments of counterfeits
by Customs. Mr Roseti is
also a contributor to various
prestigious IP publications.
www.WorldTrademarkReview.com
Anti-counterfeiting 2013 – A Global Guide 41