South Africa: Online selling of counterfeit goods: countering the courier
The considerable diversion of consumers from shopping malls to online trading platforms, further driven by the Covid-19 pandemic, presents huge challenges to authorities in stopping unlawful goods from being distributed. Amazon took welcome initiative last year when they filed two separate joint US law suits with Valentino and KF Beauty against 4 companies and 16 individuals for selling counterfeit versions of the last mentioned copied products on Amazon’s market place website.
Most prominent e-commerce retailers in South Africa have measures in place to remove advertisements of counterfeit goods from their websites via takedown notices. However, there is a more concerning trend where many unscrupulous counterfeiting dealers are simply creating their own websites and extending their sales to other social media platforms like Instagram, Facebook market- place and even messaging platforms such as Whatsapp and Telegram. The perfume industry, in particular, have been targeted with adverts popping up everywhere of the most prominent brands. In some cases, the advertisements make deceiving claims that the products are “rejects” to convince customers to ignore the suspiciously low prices.
To compound the headaches of brandholders, the online counterfeiting dealers mostly make use of independent courier companies to deliver the counterfeit products countrywide to customers. One particular courier company, recently identified as the delivery medium in a case where an online trader sold counterfeit perfumes, have depots in 8 provinces. This company further allows for customers to print their own labels and for easy and quick payment methods like e-wallet. Although the customer application form makes provision for details like the company name, VAT and registration numbers to be completed, it is unclear what verification process is followed by the courier company in this regard. Through investigations, our investigator placed an order for a counterfeit perfume which was delivered to him by the independent courier. The label applied by the counterfeit goods dealer to the package, had the address details of the said company redacted. To add insult to injury, the first details of the company was noted on the package as “Dropawf T/A…” which raised further doubt as to the verification process implemented by the courier company (if any) to limit traders of illicit goods making use of its services. Fortunately, the online trader did such a bad job at redacting its address details, that the address was still legible which made further contemplated legal correspondence to the courier unnecessary.
However, in the context of tracing online counterfeit goods dealers and the base of their operations, this raises serious concerns and challenges. The informal structure described above, will enable online traders to “set up shop” at any location and, arguably, even enable them to arrange for collection of the illicit goods from a premises not all linked to the trader. It will not be practical for brandholders or their attorneys to merely lodge a search warrant application for the faceless, untraceable counterfeit goods dealer. In many cases, the contact numbers provided by the online traders on the websites cannot be traced by any online searches and were not properly registered through the RICA system (the so-called “burner phones”). Due to privacy concerns, most companies will refuse to disclose the details of customers / clients, unless the seeker of the disclosure is able to make the request through law enforcement (usually in terms of S. 205 of the Criminal Procedure Act) which may take a considerable time.
So what are brandholders to do (other than simply taking down the website only to witness two more popping up the next day)? The Counterfeit Goods Act specifically authorises and entitles “interested persons” (proprietors, licencees etc.) to obtain court orders compelling third parties to disclose the source(s) of the counterfeit goods as well as the identity of the persons involved or ostensibly involved in the dealing process. There is case law that supports a legal argument for this information to be sought from a third party who is in possession thereof where this information will enable the interest person to take legal action against the actual counterfeit goods dealer. However, a proper legal basis should be laid for this demand which further necessitates proper prior investigations. Online dealing in counterfeit goods has changed the enforcement landscape dramatically and the brandholders who fail to adapt their strategies will suffer the most damages in the process. What the purchasing public should also realise is that dealers in counterfeit goods have long since moved on from selling only counterfeit clothing articles. Although some people may be shrugging their shoulders and argue that their may be more pressing criminal offences and claims to pursue, just imagine the mixture of possible harmful chemicals contained in perfume items. Now go a step further and imagine the counterfeit goods dealer extending his/her operations to counterfeit pharmaceuticals…maybe even unauthorised Covid vaccines…
By:Jan-Harm Swanepoel, Partner and Trade Mark Attorney at Adams and Adams