Social media: a “breeding ground” for counterfeit goods?

The UK Intellectual Property Office has published a critical commissioned study, which identifies social media as the “most distinctive medium for communication” for sales of counterfeit goods, thereby undermining brand protection and resulting in both loss of revenue and damage to brand reputation, as well as causing issues for both government and consumers.

The Share and Share Alike – The Challenges from Social Media for Intellectual Property Rights report discovered that 17.5% of online transactions were for counterfeit goods. The results were obtained using two methods: a 3,000 person strong online survey and an offline survey considering social media triggered purchases; and an online tracker, used to follow twelve products (two from each of the alcohol, cigarettes, clothing, footwear, perfume and watch industries).

The report particularly identifies as a “breeding ground” the role of closed groups on Facebook, requiring an invitation to access content. Whilst 8.3% of communications in open groups were found to contain communications promoting counterfeit goods, some 40.8% of closed groups were found to contain such suspect communications. The report suggests closed groups provide “relative safety” to those looking to sell counterfeit goods, with transactions simpler to complete given the ease with which one can link to payment sites outside Facebook’s infrastructure.

The report however notes that its data provides merely a snapshot of activity in 2015, and, as such, does not paint a definitive picture of the sale of counterfeit goods on social media. Further, there has been some reluctance to share key information like loss of revenue figures – no doubt due to the confidential nature of this information.

Of course, the counter arguments from social media businesses would include the fact that  current legal processes are fragmented, putting the onus on the Government to reform.  The report notes in particular a “reactive attitude” on behalf of social media companies which has “created a climate of distrust and suspicion between these platforms and rights holders, which is made worse by what are seen as cumbersome takedown policies.”

However, some sites are given credit in the report, such as Bing which has sought to educate consumers as to the risk involved in buying counterfeit medicines online. The report notes the importance of public education, particularly in relation to the problem of complicit buyers, a group which makes up 88% of all those purchasing counterfeit goods through social media.

The report notes that social media companies may only become proactive once the issue affects their own profit margins, suggesting “online platforms are most likely to act against illicit activity on their sites if their own business interests (such as advertising) are under threat”. Until that point, it seems likely that a laissez-faire attitude will continue to prevail in relation to counterfeit transactions on social media sites.