Flipkart has filed a police complaint against its senior-level executive and one of its vendor Macrowagon Retail (MRPL) for alleging for cheating, fraud, forgery, and breach of trust, reports The Economic Times.
The publication reports that Flipkart had a contract with MRPL to sell products like Skechers shoes on the platform. But apparently, Flipkart’s director who was handling the vendor and MRPL were importing cheap counterfeit products and were selling them as genuine products. Flipkart reportedly found about the sub-standard products after a third-party forensic audit. The employee at the company had reportedly forged the bills, and the company had paid for things like taxes, import duties etc for the products perceived as genuine products.
However, MRPL’s spokesperson has denied charges, in a statement shared with ET, the vendor said that Flipkart’s charges are baseless. and that Flipkart connected the vendor to the suppliers and asked it to import “these” goods for a fixed margin. “Their multiple teams have worked on this and even visited the factory in China. How can they blame me to be a fraud in this case? I have all legal contracts on which Flipkart has indemnified us from any IPR claims,” the spokesperson added.
Note that in December sports-wear brand Skechers had filed a case in Delhi High Court against five companies Flipkart, Retail Net, Tech Connect, Unichem Logistics and Marco Wagon for selling Skechers’s counterfeit products in India.
Govt Mechanism on fake products
In March, The Department of Industrial Policy & Promotion (DIPP), along with the Department of Consumer Affairs (DCA) along with various e-commerce platforms were reportedly discussing a proposal for setting up a cashback or compensation mechanism for counterfeit products sold via online platforms. However, the proposed cashback system was to be voluntary in nature, which actually defeats the purpose. DIPP official had 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.
Now that the government is expected to come out with a national e-commerce policy this year, it should add a policy on fake products on online marketplaces, as it is a prevalent issue.
The Nuisance of Counterfeit Products
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.
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.
Intermediary Liability
Section 79 of the Information Technology Act offers safe harbour 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 honour 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 honoured. Only in a few cases did brands explicitly say that warranties will not be honoured if products are bought online.
Following this, we had contacted some of 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 honour 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?
Also Read: How Amazon India deals with Fake Products
