In February 2017, counterfeit bottles of Jergens moisturizer found their way onto stores’ shelves. The brand’s parent company, Kao USA, quickly identified the issue and encouraged customers to verify UPC codes and product packaging on their own bottles of lotion.

It wasn’t the first time a name brand found itself dealing with fakes. Some of the largest retailers in the world, like Alibaba, Amazon and eBay, provide an unintentional platform for counterfeit goods and unauthorized sales. Amazon has been accused of refusing to fight against fakes, a move that has sacrificed partnerships with companies like Swatch, which backed out of a deal after Amazon refused to “proactively police” for counterfeit sellers. Alibaba also deals with consistent accusations of counterfeit goods.

Dealing with fake products and scam sellers is nothing new for beauty companies. As the internet makes falsified goods more readily available, companies including E-Enforce and Oris Intelligence have been founded as watchdogs to locate and suppress counterfeiters and unauthorized retailers.

Taking action against unauthorized sellers
“Enforcement is unfortunately a way of life in e-commerce; if you have a brand that people want to buy, you’re always going to have this problem to some degree,” said Bruce Anderson, director of global operations and investigations at E-Enforce, which works with beauty and skin-care companies, as well as luxury and automotive clients. “[Major companies have] been playing whack-a-mole: You knock one down, 100 come back. [Our system] is designed to drive that 100 down to a negligible number and keep it there.”

E-Enforce uses a methodical process to take down individual sellers: First, it sends cease-and-desist letters to every unauthorized seller. According to Anderson, just one letter is enough to scare away 40-70 percent of shady sellers. Those left are people “who don’t believe you’ll enforce, who don’t believe you have the capability, or who have too much product on their hands and don’t want to lose money.” The next step is investigative: E-Enforce will identify the seller’s name and location, and send another, hand-delivered cease-and-desist letter to their house. The process escalates from there until, eventually, a lawsuit is threatened. Most often, the threats are enough; lawsuits are rarely filed.

“Since we’ve been doing this since 2012, there have only been two lawsuits,” Anderson said. “One was intentional, by a global company that wanted to make a poster child out of one of their distributors.”

Beauty companies must also be sure to close their own legal loopholes.

“It’s important to always have a strong collection of registered intellectual property rights throughout the world — not just in your home country and where your customers are but also in countries where counterfeit manufacturing or trafficking is prevalent. Think: Asia, the Middle East and Eastern Europe,” said Kelly McCarthy, partner at the intellectual property-focused law firm Sideman & Bancroft LLP. McCarthy works with clients like Kat Von D Beauty, Fenty Beauty, Ole Henriksen and Bite Beauty to shore up their supply chains and shut down unauthorized sellers.

In addition, McCarthy encourages companies to establish customs programs that make it possible for them to keep tabs on international shipments of counterfeit goods. Finally, the companies should monitor (or hire a company like E-Enforce to monitor) the major online marketplaces that give a platform to unauthorized sellers.

“With these systems in place, a company can then identify how to best identify targets of all sizes and triage incidents for escalation, whether that be in the form of legal letters, reports to law enforcement or litigation,” McCarthy said.

Fending off copycats internally
Beauty companies are also working from within to inform customers of the potential risks of illegitimate product. Skin-care company Murad devotes a section of its website to unauthorized sellers. The featured banner asks, “Are your Murad products authentic?” Over the years, the company has identified nearly 100 companies that are selling Murad products but are unauthorized to do so, said Van Vuong, the company’s svp of digital sales and e-commerce.

Each Murad product is marked with a holographic seal with a unique code, which serves as both an indication to customers that product is legitimate and a tracking system for the company. (The company declined to share specifics of what information exactly the seal is able to provide.) “This is an important step to ensure customers are receiving authentic and high-performing products,” said Vuong.

For Urban Decay, the downside of cult-brand status has been the number of counterfeit and unauthorized products it’s forced to contend with; countless Chinatown vendors and eBay stores sell Urban Decay’s iconic makeup palettes. The company encourages customers to verify products with an FAQ section on its website, entitled “How do I know if my new UD product is legit?” In the answer, Urban Decay recommends shoppers purchase product exclusively on the website or through authorized retailers including Sephora and Macy’s.

“Counterfeit products are a major concern of Urban Decay,” said a company spokesperson. “There are many well-known sites such as Alibaba, eBay and Amazon selling unofficial products, and we do our best to delist them as quickly as possible. We’ve also seen smaller websites and flea-market sellers posing as authorized retailers and selling counterfeit products.”

In response, the company has developed a corporate security team, which takes a “very aggressive stance” against unauthorized sellers. The spokesperson confirmed the brand uses MarkMonitor, an online service that delists Urban Decay postings on eBay and Alibaba. The company also “conducts criminal raids on manufacturers and distributors of counterfeit products in the U.S. and abroad, and has successfully seized millions of dollars’ worth of fake merchandise,” the spokesperson said.

According to Anderson, illegitimate products are often sourced back to loopholes in the company’s supply chain. As the product moves from manufacturer to distributor to retailer, counterfeiters can siphon formula or actual product for illicit resale. “A lot of a company’s [success rate] with eliminating counterfeits depends on what it’s willing to do to close those holes,” he said.

But, on the bright side, as McCarthy reiterated, a counterfeit problem is a sign of popularity: “We like to say, ‘Congratulations, you have a counterfeit problem!’”

By Leah-Prinzivalli

 

 

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