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USTR names Snapdeal for selling counterfeit goods, company calls findings ‘ill informed’

Credit: Soumyarendra Barik

Snapdeal has hit out at the United States Trade Representative (USTR) after being named in its latest report for allegedly selling counterfeit products on its platform. Calling the findings of the USTR report “ill informed”, in a press statement the company said that the report “reflects a poor understanding of the governing law in various jurisdictions, including India”.

It also contended that the USTR failed to understand the difference between a marketplace and a seller, and in that process ignored “clear and well-established regulatory and legal frameworks under which marketplaces operate”. This is the second time that the company has been named by the USTR in its reports.

What the USTR report said about Snapdeal

The USTR report—released on January 14—includes examples of online and physical markets that reportedly engage in or facilitate “substantial” piracy or counterfeiting. The organisation said that the availability of counterfeit goods on e-commerce platforms “harms” the American economy, and American consumers as well. Aside from Snapdeal, it also names Amazon’s operations in the United Kingdom, Germany, Spain, France, and Italy, among others.

The report said that Snapdeal “remains a concern for right holders who report that the volume of counterfeit products on this platform has increased over the past year”. Referring to a 2018 survey, USTR claimed that 37% of buyers reported that they had received a counterfeit product from Snapdeal. “Right holders have also sued Snapdeal for selling counterfeit goods,” it added. It also claimed that in July 2019, Snapdeal’s founders were accused of criminal conduct in India for selling counterfeit products there.

“There have been no criminal accusations against the founders for selling counterfeit products,” Snapdeal said in a statement. “Such negligent statements and unverified reporting by USTR is defamatory and unacceptable.The lack of diligence is further evident in including reference to related sites that have ceased to operate four years ago,” it said.

“The process of collating inputs by USTR continues to be outdated, opaque and based on unverified inputs. We firmly disagree with the “findings” of the report, specifically in its observations relating to Snapdeal.’ — Snapdeal in response to the USTR report

In November 2018, Snapdeal had launched ‘Brand Shield’ where companies could report counterfeit products being sold on its platform. Snapdeal claimed that it would take down any listing that infringes third party Intellectual Property rights within one working day after being assured that provided that the violation can be established with evidence, and is reasonable. The feature is limited to seller complaints, and not for users.

Karnataka HC says intermediaries like Snapchat can’t be held liable for sellers’ actions

Earlier this month, the Karnataka High Court quashed a criminal complaint against Snapdeal and its executives Kunal Bahl and Rohit Bansal. The complaint had alleged that Snapdeal and its executives violated the Drugs and Cosmetics Act by allowing the sale of Suhagra 100, a prescription medicine used for erectile dysfunction.

The court said that an intermediary — such as Snapdeal — and its executives cannot be held liable for the actions of the sellers, who make use of its marketplace to buy or sell items.

India’s Foreign Direct Investment (FDI) policy for e-commerce allows 100% FDI in B2B e-commerce platforms or those that follow marketplace mode, according to Press Note 2 (2018). However, e-commerce companies operating marketplaces have to meet certain conditions. Among other things, they cannot exercise ownership over any inventory sold on their marketplace, or influence the sale of goods directly or indirectly.

Snapdeal’s response to USTR’s report

Here’s Snapdeal’s full statement:

“The report released by USTR tarnishes the image of world’s leading marketplaces, including Amazon, Mercado Libre, Pinduoduo, Shopee, Snapdeal, Taobao, Tokopedia and many others basis incorrect understanding of the practices and the laws applicable to various markets.

The report reflects a poor understanding of the governing law in various jurisdictions, including India. While Courts in India continue to uphold and assert the distinction between marketplaces and sellers, the USTR report wilfully blurs this distinction to further a flawed point of view. In doing so, it ignores clear and well-established regulatory and legal frameworks under which marketplaces operate.

The comments made with regard to Snapdeal are factually incorrect and repeat the falsehoods contained in the 2019 report, which Snapdeal had strongly rebutted. There have been no criminal accusations against the founders for selling counterfeit products. Such negligent statements and unverified reporting by USTR is defamatory and unacceptable.The lack of diligence is further evident in including reference to related sites that have ceased to operate four years ago.

The report omits to mention the various on-going, proactive & preventive anti-counterfeiting efforts of Snapdeal. These include Snapdeal’s robust reporting and swift takedown process  program – Brand Shield, which has been in operation now for more than 2 years. This has led to close and effective collaboration with leading national & international brands, building on which Snapdeal has formed alliances with various brands to provide additional protection for brands with registered trademarks.

The report also fails to acknowledge the continuing close co-operation between platforms, brands and law-enforcement agencies, all of which have led to significant and productive outcomes.

The USTR report reflects a blinkered and flawed view of the world. The report not only fails to make a distinction between the respective roles of brands, sellers and platforms, but also wilfully ignores the applicable laws in various jurisdictions, including in India.

The process of collating inputs by USTR continues to be outdated, opaque and based on unverified inputs. We firmly disagree with the “findings” of the report, specifically in its observations relating to Snapdeal.”

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