Home PublicationsCommentary Event Recap: A Data-Driven Approach to Combatting Counterfeit Goods in E-Commerce

Event Recap: A Data-Driven Approach to Combatting Counterfeit Goods in E-Commerce

by Gillian Diebold

The Center for Data Innovation hosted a panel discussion discussing the impact of counterfeit goods on the U.S. market. Panelists from government and industry discussed how counterfeiting is a growing problem and offered a look at what government and e-commerce platforms believe are the ways forward. In particular, they endorsed the best practices put forth by the National Intellectual Property Rights Center and highlighted opportunities for better information sharing between government and industry to use data to reduce counterfeits in e-commerce.

More than just luxury goods

Matthew Allen of the National Intellectual Property Rights Coordination Center explained that counterfeiting and intellectual property infringement is a growing issue that negatively affects businesses and consumers. He stressed that all types of goods are susceptible to counterfeiting, not just luxury goods. Counterfeiters prey on the products people rely on daily, such as cleaning supplies and other household essentials. The COVID-19 pandemic has exacerbated this vulnerability, with counterfeiters selling fake medicines, personal protective equipment, and other essential healthcare products. 

The challenge is growing, stressed Piotr Stryszowski of the OECD. Global counterfeits account for $460 billion: a number that is on par with the GDP of some countries. In the United States, seizures made by the Department of Homeland Security have increased tenfold, growing from approximately 3,244 seizures in 2000 to 33,810 seizures in 2018. 

Criminal activity follows the money

Sara Decker of Walmart emphasized that counterfeiters are not isolated from larger criminal networks, stating that “crime organizations follow the money.” These organizations are iterative in the channels that they use to get their products out into the supply chain. Often, cartels are diversified in what they will smuggle into a country and will look for any opportunity to make money. Christa Brozowski of Amazon classified counterfeiting as a “high-revenue, low-risk crime.”

Counterfeiting is a multi-billion dollar, globalized business that exploits gaps in the supply chain, logistics, and border authorities. These criminals are not engaging in old-fashioned smuggling; rather, they use modern logistical solutions. Mr. Stryszowski stressed that counterfeiters know how to abuse e-commerce, fast parcels, and free trade zones. Moreover, trade routes and globalized and complex and many parties are involved in the process. As a result, obscuring a product’s country of origin is simple. 

Trust is key

Panelists agreed that trust is the central issue at stake with counterfeiting. E-commerce platforms like Amazon and Walmart are concerned with maintaining customer trust, but also the trust of their brand partners. Manufacturers want to avoid having their sales undercut by illegitimate competitors as much as platforms want to maintain their consumer relationships. 

Ms. Decker stated that Walmart prioritizes the verification of third-party sellers, a subject that is under consideration in Congress in bills like the INFORM Consumers Act. Ms. Brozowski detailed a number of actions Amazon and other e-commerce platforms continually take to maintain trust in their brand, such as enacting proactive controls where customers have the contact information for third-party sellers and can make complaints as needed. Platforms like Amazon are also strengthening tools for brands to find suspect goods themselves. 

Public-private information sharing

At the core of reducing counterfeiting lies information sharing between the public and private sectors. The National IPR Center produced a report highlighting best practices for both government agencies and industry actors. Information sharing will close vulnerabilities in e-commerce and trade. The more data that can be aggregated into one shared ecosystem, the easier it will be to find and prosecute bad actors. 

Mr. Stryszowski explained that groups like the National IPR Center are particularly important because they bridge the sometimes-wide gap between government and industry. No nation has a ministry or department specifically dedicated to intellectual property rights. Groups like the National IPR Center bring together different units, including actors from the e-commerce world. Panelists stressed that information sharing does not require a massive investment in technology. Rather, solutions like digitizing information currently only on paper can be critical to strengthening the data-sharing ecosystem. 

No silver bullets

No single solution will solve the issue of counterfeiting and IP infringement. While governments and industry groups are making critical progress, seizures and arrests on their own will not eliminate the problem. The panel concluded that raising consumer awareness, empowering rightsholders, and collaborating with law enforcement are all key parts of the puzzle.

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