Red Points Unpacks the Latest Counterfeit Trends Forecast

• Dispersed channels and grey markets are a chief concern of trademark experts
• Blockchain and AI are part of continued shift in expected investigation methods
• China trade war will see increasing need for protections in alternation jurisdictions

Brand protection company Red Points has released a report documenting the counterfeit trends it expects to shape brand protection efforts in 2020. Particular attention is paid to the rise of emerging counterfeit networks and new technology that bad actors will increasingly be utilising. W TR had a read through to identify the most valuable takeaways from the report and the actions that brand owners should be taking.

According to the report, counterfeiting recorded by Red Points was estimated to have increased by 40% between 2018 and 2019. As a growing problem for trademark practitioners, the company focused on the methods through which counterfeiters will plague right owners. In all, the report identified five trends that it expects will significantly affect the online brand protection landscape from next year onwards:

• An expansion and dispersion of the typical channels that counterfeiters have exploited
• The utilisation of grey and white markets for IP infringement
• How Blockchain and other technological advancements will dominate brand priorities
• The continued shift of investigation procedures to online tactics
• How international relations will increasingly affect the way brands police their IP

To gather the results, Red Points complied data from over 2,000 different products that the company protects and analysed the year-on-year growth in counterfeits per product across H1 in 2018 and 2019. For the report’s trend predictions, over 100 IP experts were surveyed, with results supplemented by interviews with industry specialists.

Dispersed channels

The first of the trends identified in the report is the increased dispersion of counterfeit markets. Of respondents, 42.3% believed large-scale counterfeit networks to be having the “biggest impact” on eroding brand value. The large-scale movement of counterfeit trade to online spaces will not be a
surprise to most readers. However, particular attention was paid by the report to burgeoning social media apps which enable bad actors to connect consumers to illegitimate e-commerce accounts. Chinese video app TikTok was highlighted as an often-overlooked platform for this form of counterfeiters. W TR has covered the risk of TikTok and best practices for tackling fake goods (and other brand protection issues) on the social media platform. Other highlighted apps with similar risks were Wanelo, Google Shopping, and Yandex.

With the rise in apps like TikTok, the report also noted the increased market for anonymous and encrypted payments. Spurred on by a systemic distrust of social media platforms in the wake of the Cambridge Analytica/Facebook scandal, greater numbers of consumers are turning to privacy touting apps. Encrypted messaging apps, including Telegram, WeChat, and WhatsApp, are seeing growth across markets. For example, WeChat has 79% of China’s messaging market share, while Telegram grew by three million users during this year’s scandal. Importantly, WeChat and Telegram both allow for P2P payments – a godsend for counterfeiters.

Talking to WTR , Daniel Shapiro, director of global strategic partnerships at Red Points, noted: “It would be a mistake for IP professionals to think that their brand protection efforts are fulfilled by solely implementing their anti-counterfeit strategy on the mainstream platforms.”

Grey markets

The second most problematic source of brand value erosion is the grey market, according to 33.7% of respondents. A natural solution for canny consumers trying to get a bargain, grey markets and parallel imports can put legitimate goods perilously close to illegitimate. The white market was also brought under the spotlight, with the study noting the potential for legitimate sellers to inadvertently sell products onto the grey market. The takeaway advice, therefore, is that brand owners must remain vigilant across all partner and dealer activities with Minimum Advertised Pricing (MAP) policies and reward measures to encourage compliance.

Blockchain

Nearly half (46%) of respondents believe blockchain technology will have a big impact on brand protection in the next year. Thematically in keeping with a market desire for encrypted messaging services, blockchain has the potential to be an asset to brand owners in the future. Allowing end-to-end tracking of products, brand owners will have far more transparency over the distribution side of their operations. With near-field communication chips (NFC), consumers will also be able to verify the legitimacy of their purchases.

International relations

When considering global trade’s impact on brand protection strategies, the US-China trade war is an inescapable part of the conversation. Trump’s tariffs have caused many brands to move operations from China to Vietnam, with Shapiro commenting that “trademark practitioners should start registering their trademarks in Vietnam to pre-empt issues linked with the escalating US-China trade war”. The report hypothesises that the tariffs on China may encourage the country’s counterfeit operations to “become more sophisticated – brands may see fewer low-quality knock offs coming out of China and a higher number of super fakes at the same time”.

Furthermore, the report also focused on the Universal Postal Union (UPU) for its role in international counterfeit trade. Already singled out by Trump’s administration for costing the US $300 million a year in subsidising China’s reduced postal rate, counterfeit sellers have been able to exploit cheap shipping rates compared to brands. With the US withdrawing from the UPU, China will pay at least 70% of the standard cost, potentially eliminating sellers who can’t afford the higher rates. On the flipside, it may also cause a quality race to the bottom for the counterfeits shipped to the US from China.

The report makes clear that all trademark practitioners need to be increasingly shrewd and forward-thinking when considering brand-protection strategies. As the producers and sellers of fake goods become more innovative, so too must the entire trademark community.