The COVID-19 outbreak has caused disruption to manufacturing operations on a global scale. Lockdown measures have put a strain on supply chains and stockpiling has exacerbated the problem. News of factory closures and social distancing measures aroused consumer stock piling and fuelled an upsurge in ecommerce. Product shortages in keys sectors are a natural consequence of these challenges.
Unfortunately, periods of turmoil create opportunities for unscrupulous individuals to capitalise on the vulnerabilities of a weakened global economy. The explosive mix of self-isolation and scarcity has bred an environment in which counterfeiting, fake news and domain name hijacking has flourished.
Counterfeits and grey goods
The most obvious victims of the sale and distribution of falsified products appear to be the fast moving consumer goods (FMCG) and pharmaceutical industries. Incidentally, these industries have been the most drastically impacted by shortages caused by limited supply chain resources and unprecedented consumer demand. The last few weeks have witnessed the seizure of millions of counterfeit medical supplies from all over the world. During the ‘week of action’ 3 - 10 March 2020, INTERPOL law enforcement agencies participating in Operation Pangea uncovered 2,000 online links advertising medical counterfeits related to COVID-19, among which substandard surgical masks were the most commonly sold online. Customs authorities also seized more than 48,000 packages containing counterfeit medical items, including anti-cancer medication, painkillers, dermatological agents, vitamins, HIV and glucose self-testing kits and various surgical instruments
Operation Pangea is an international project coordinated by INTERPOL, combining the resources of police, customs, regulatory bodies and private sector companies to disrupt the organised crime networks behind the illegal online trade of counterfeit health products. Between 2008 and 2019, Pangea has removed more than 105 million units (e.g. pills, ampoules, sachets, bottles) of illicit medical items from circulation and conducted upwards of 3,000 arrests. Furthermore, the recent ‘week of action’ in March has revealed that seizures of unauthorized antiviral medication has increased by approximately 18 percent and more than 100 percent for one particular antimalarial medication, since 2018. Indeed, these trends could be symptomatic of the outbreak of COVID-19.
One could speculate that the proliferation of counterfeit listings online could increase the likelihood of consumers unknowingly purchasing falsified products. The internet is such that it is already difficult for consumers to discern an authentic product from a fake. Indeed, panic buyers in search of out of stock items may be less inclined to scrutinise the legitimacy of a listing for a sought after product.
It is important to note that the methods employed by counterfeiters to infiltrate the market is likely to depend on the intensity and duration of the pandemic. The longer the duration of the pandemic, the greater the pressure on supply chains and distribution operations. Whilst the FMCG and pharmaceutical sectors appear to be the worst hit under the current circumstances, continued lockdown restrictions, such as factory closures and reduced workforce numbers, could spawn new opportunities for counterfeiters to expand into new sectors, such as DIY products or even food and beverage consumables, given the popularity of home improvement projects and home baking during lockdown.
A further possible consequence of the crisis is an increase in commodities produced in manufacturing outlets authorised by the brand owner but sold without their consent, commonly known as ‘grey goods’. Back door sales are often the by-product of a surplus, or failure to pass quality control tests and often originate from China as it is a desirable manufacturing location. Initial lockdown restrictions in China are likely to have reduced the amount of grey goods making their way into consumer hands. However, with social restrictions having been lifted and the Chinese workforce gradually returning to work, there is a very real possibility that operations involving grey goods and counterfeits will recommence at a faster rate than customs agencies, working to reduced capacity, are able to obstruct them.
Cybersquatting is another area in which a surge of activity has been detected during the pandemic. Reports indicate that there has been a spike in the registration of domain names containing a brand name followed by variations of ‘covid-19’ and ‘coronavirus’. A recent instance involved telecommunications giant Verizon, entailing the discovery a number of fraudulent domain name registrations including ‘verizoncovid19.com’, ‘verizoncovid-19.com’ and ‘verizoncovid19.info’. Fortunately, the cybersquatter gave up the registrations once Verizon filed a Disclosure of Registrant Information with the domain name registrar GoDaddy. Astutely, Verizon then employed the defensive tactic of registering the domain names to circumvent future fraudulent actions of this nature.
Other registrars have responded proactively to the rise in abusive COVID-19 registrations, introducing measures to deter and tackle cybersquatters. EU domain name registrar EURid has announced that “additional checks on the registration data of both existing registrations and newly-registered domain names that contain keywords relating to the current pandemic” will be carried out. For example, registrants of these domain names will be prompted to submit a statement confirming that their domain name was registered in good faith.
Further reported incidents of malicious falsehoods include the spread of branded misinformation, otherwise known as ‘fake news’. Recently, UNICEF reported that an erroneous message indicating false information about preventing the onset of COVID-19, purporting to originate from UNICEF, was disseminated online. UNICEF urged perpetrators to “STOP. Sharing inaccurate information and attempting to imbue it with authority by misappropriating the names of those in a position of trust is dangerous and wrong.”
In the UK, the National Health Service (NHS), announced having taken action against coronavirus fake news online. One of these measures involved collaborating with Google to provide “easy access to verified NHS guidance when someone searches for coronavirus” in order to minimise the circulation of misinformation via links on the results page. Other initiatives included liaising with social media platforms to verify or ‘blue tick’ over 800 accounts owned by NHS organisations and directing users who search for ‘coronavirus’ on Twitter and Facebook to the NHS website.
Brand enforcement and anti-counterfeiting strategies
We are undoubtedly living in unusual and uncertain times. These fraudulent operations threaten not only brand integrity, but public health and safety. In order to safeguard brand assets and public safety, brand owners can take a proactive approach; whether that be devising defensive strategies to put in place now or forward planning ready to take action once we return to normality, depending on the issue at hand.
Brand owners may wish to consider the following brand protection and enforcement strategies:
- Trade mark watching service – this third party software tool checks official journals worldwide at frequent intervals. A notification is generated when a potentially confusingly similar mark is published, enabling the brand owner to file a timely opposition to prevent registration of the mark. In addition, further investigation could lead to the discovery of infringing use of the mark, or even a counterfeit operation.
- Company name and domain name watching service – another branch of third party software that monitors company names databases and domain name registries in anticipation of potential conflicts.
- Internet monitoring software – a broader form of third party technology which monitors the internet at large, including social media and retail platforms, for infringing listings.
- Liaising with technology companies and online retail platforms – once a threat has been identified, communicating with social media providers, ISPs and online retail platforms could result in takedowns and open a discussion about further defensive actions. Some social media platforms and online retailers, such as Instagram and Amazon, have specific mechanisms for reporting infringement and counterfeit goods.
- Self-reporting consumer forum – directing consumers to a webpage or email address where they can self-report instances of counterfeiting, fraudulent domain names and fake news is a cost-effective and popular strategy favoured by big brands such as Apple.
- Ensuring their trade mark and design portfolio is robust – obtaining trade mark and design registrations locally in countries where goods are manufactured, sold and distributed is not only a powerful weapon against counterfeits and grey goods but also a deterrent to supply chain breaches.
- Registering COVID-19 domain names – a defensive technique to neutralise the threat of cybersquatters. It is advisable to seek further advice on this issue in particular before proceeding, as it will be important to ensure the registration would not be considered abusive. Furthermore, you may be required to demonstrate that the domain name was adopted in good faith, as we know to be the case for .eu domain names.
- Hiring a private investigator – although investigative operations are limited under the current circumstances, test purchases and intelligence can be gathered in preparation for the appropriate actions to be taken once lockdown measures are lifted.
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