Counterfeiting threatens legitimacy of rapidly growing markets

While the convenience offered by e-commerce is good news for both retailers and consumers alike, it is also proving to be highly attractive to counterfeiters, especially given the anonymity of the Internet.

The trade in counterfeit goods can be broadly pided into sales where the consumer is aware that he or she is purchasing a fake product and those where they are deceived into doing so.

In the latter case, consumers are deceptively lured into unknowingly purchasing fake products that are either sold at the same or a slightly lower price as the genuine goods resulting in huge profits to criminal enterprises.

To better understand the problem, one must take a deeper look at the business model of some of the large online e-tailers such as Amazon and Lazarda. Most e-tailers such as these use a marketplace business model with suppliers storing goods on their behalf and then delivering them once orders have been placed.

This means that these e-tailers contract directly with many local suppliers located in Vietnam to deliver goods to the consumer after an online order is placed. This business to business model in turn places competitive pressure on the e-tailer to increase its supplier base to provide goods at the most competitive prices.

Widely reported studies in other countries have shown that it is the lack of due diligence by the e-tailers to check out the qualifications of their suppliers that has allowed for the increased proliferation of counterfeit goods.

In the alternative, business to consumer model, it is the retailer located in Vietnam that maintains its website and sells its products directly to the consumer.

In this case, the retailer either takes physical possession of the goods from its suppliers or produces the product itself. The retailer is either in the analogous situation as the e-tailers and is deceived by its suppliers into selling fake goods— or alternatively is part of the criminal conspiracy to manufacture and/or distribute the counterfeit products.

Smartphones

As smartphones have become ubiquitous in Vietnam and around the globe, there has been a concurrent rise in the incidence of fake goods.

Smartphones provide criminals the ability to access the latest global trends, designs and brands and capture images of products displayed in official outlets and use them to copy and sell counterfeit products through internet applications.

Virtually anyone can create an internet application and use it to sell products directly to consumers in Vietnam, and for that matter, most other countries.

These criminal enterprises using readily accessible internet applications undermine the legitimate e-tailers that use a business to business model and retailers using a business to consumer model by selling fake brand name products at a cheaper price to unsuspecting consumers.

As such groups are currently unregulated or underregulated they, for all practical purposes, escape legal or regulatory compliance either when the criminal enterprise is created or at a later stage in its operation.

Legal framework

Specific laws governing online counterfeiting, trademark infringement, and intellectual property rights are inadequate and the Vietnam government is aware that much more need be done.

Combating the problem is an extremely complex process that has led Deputy Prime Minister Truong Hoa Binh to ask the national 389 Committee and the Subcommittees to address in the coming months.

In their review the Committee will review IP related rules, procedures, practices and guidelines for clarity, simplification, streamlining, transparency and time bound processes in administration and enforcement of IP rights.

Economic experts with near unanimity wish the Committee and Subcommittees success. The sale of counterfeit goods in Vietnam is having a negative impact on consumers, the government, the economy and brand owners, in addition to damaging the trust that consumers have in a brand product.

The availability of counterfeit goods is also having a negative impact on innovation and growth in the Vietnam economy and affects its attractiveness as an investment destination.

A strong legal framework for combating counterfeiting and piracy will only serve the best interests of the country as fake goods are threatening the legitimacy of the rapidly growing retail markets.