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Govt plans compensation mechanism to prevent sale of counterfeit products online: reports

The Department of Industrial Policy & Promotion (DIPP), along with the Department of Consumer Affairs (DCA) and various e-commerce platforms operating in the country are currently discussing a proposal for setting up a cashback or compensation mechanism for counterfeit products sold via online platforms, reports PTI. However, this proposed cashback system will be voluntary in nature, which probably defeats the purpose.

As per the report, customers who have been sold a counterfeit product will be given the option of filing a complaint, following which some sort of an investigation will be conducted to establish if the product in question is in fact a counterfeit or not. Since, the discussions are still at a preliminary stage, it’s not clear how exactly this mechanism will function.

It’s worth noting that a DIPP official told BusinessLine that the compensation mechanism will primarily look to address cases which do not fall within the usual 30 day replacement period offered by most e-commerce platforms. For example, a customer might be made aware that a mobile phone bought online is counterfeit only when it is sent for repair, a few months after the purchase, which is well past the standard replacement period, the official said.

DIPP has organised a National Conference on Counterfeiting and Role of Enforcement Agencies, to be held on March 13 and 14, 2018, where experts will “have a dialogue and exchange best practices for the benefit of enforcement agencies, attorneys and industry representatives and provide fresh ideas for further strengthening the Intellectual Property Rights (IPR) protection ecosystem.”

The Nuisance of Counterfeit Products

This isn’t a new phenomenon at all. Over the past three years there have been several reported cases of fake or counterfeit products being sold on all the major e-commerce marketplaces in India.

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January 2015: Shopclues had been slapped with a legal notice from audio devices manufacturer Harman International, which sells speakers and headphones under the JBL brand, for selling fake and counterfeit products from various vendors on its website. L’Oreal, Tommy Hilfiger, Skullcandy and RayBan had also initiated legal actions against Shopclues for sale of counterfeit goods.

May 2015: Pan-India saree distributor Shree Meena Creations filed a lawsuit against Flipkart, Amazon and eBay, along with about two dozen sellers on these marketplaces for allegedly selling replicas of its copyrighted sarees.

At the time, Amazon India had told MediaNama that:

We take the issue of fake & counterfeit products being sold on our marketplace by sellers very seriously. Sellers are mandated to sell only genuine and original products on Amazon.in and they sign an undertaking to do so.  If it is brought to our notice that sellers are using our marketplace platform to sell fake or counterfeit products, we work with the sellers to bring such products down from our website. In case of repeat offenders we do not hesitate to take strict action and may even go to the extent of delisting them from our marketplace.

While, Flipkart had told MediaNama:

All our sellers are expected to adhere to certain guidelines if they sell with us. Any violation of these guidelines is taken very seriously. We take strict action against sellers who attract negative feedback about their service or are found to be engaged in selling products that are fake, in violation of copyright or any other applicable laws of the land.

June 2015: Nalli Sarees served Snapdeal a cease and desist order for allegedly having its registered trademark Nalli as a search word and copying images from its website for back-grounding an offer on silk sarees.

January 2017: German luxury products manufacturer Montblanc sued e-commerce portal digaaz.com for selling counterfeit pens manufactured by the company online at cheaper rates.

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Intermediary Liability

Section 79 of the Information Technology Act offers safe harbor to intermediaries, provided they address complaints received and do not knowingly allow the usage of their platform to break the law. However, as we have pointed out several times earlier there is a need for better understanding of the responsibility, accountability and liability of platforms, marketplaces and aggregators. There’s no doubt that online aggregators and marketplaces are good for consumers and competition. But then who is accountable, when things get screwed up? And what about the liability of these platforms?

Historical Context

Back in 2014, when discounts on e-commerce platforms were at an all-time high in the country, several consumer brands, including Lenovo, Dell, HP, Toshiba, Asus, Nikon, etc., had issued statements vaguely hinting that they might not honor warranties on products sold through e-commerce stores/marketplaces. While some brands merely asked consumers to check warranty entitlements, others said “representations, benefits and other entitlements” (what does this mean anyway?) will not be honored. Only in a few cases did brands explicitly say that warranties will not be honored if products are bought online.

Following this, we had contacted some of the the major e-commerce marketplaces, including Amazon India, Flipkart, eBay, Snapdeal, Shopclues, etc., and asked them thee basic questions about warranties:

  • Have you come across any instances where manufacturers have refused to honor warranty agreements with consumers who buy products from your website? How have you addressed this?
  • What is the legal basis for you to offer manufacturer warranty when the manufacturer has revoked it (through press releases or on its website)?
  • If a consumer does buy a product from your website but is later denied warranty by the manufacturer, what remedy does the customer have in case of a defective product?

Here’s what they had to say.

Also Read: How Amazon India deals with Fake Products

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