With the continued growth of e-commerce, companies who conduct business online are increasingly more at risk of Intellectual Property (IP) infringement. While many counterfeit products are manufactured unethically and at low-cost, consumer perceptions have shifted. A 2023 report by the Organisation for Economic Co-operation and Development (OECD) and the European Union Intellectual Property Office (EIPO) found that around 54% of imported counterfeit and pirated products between 2017 and 2019 were sold to consumers who knew that they were buying fake products. Rather than buying items to last, many are now looking for cheap clothes they can wear a few times, which is ideal for counterfeiters looking to make quick cash by selling fake versions of genuine products.
Copycats have become so skilled that counterfeits and fake products are often almost impossible to distinguish from genuine ones — with the EIPO report stating that 46% of imported counterfeit and pirated products between 2017 and 2019 were unwittingly purchased by consumers. Counterfeiters are now using more sophisticated techniques to fool shoppers, by posing as real brands and posting their information on their own fake channels.
There are a number of ecological risks posed by the manufacture and disposal of counterfeits and fake products. A lack of regulation in the production of these items means the manufacturing process is likely to involve the use of toxic dyes and components that can cause air and water pollution. It may also involve the unlawful disposal of chemicals in non-sanitary and open landfills. This can have serious consequences for health and safety in the local area, as the escape of toxic leachate pollutes soils, groundwater, and inland and coastal waterways.
There has been a push at EU level to tackle the environmental challenges of product manufacturing. In March 2022 the European Commission published a proposal for the EU Ecodesign for Sustainable Products Regulation (ESPR), a framework for developing sustainable products by establishing certain requirements for all products sold within the EU — with some notable exceptions, such as food and feed.
The ESPR sets restrictions on hazardous substances, aiming to reduce their use. It also promotes energy-efficient products and encourages sustainable product design. This regulation will have a significant impact on potentially dangerous fake products, with more than three-quarters of these products imported into the EU from countries such as China.
Under the ESPR proposal, only goods that have a Digital Product Passport (DPP) a digital identity card for products, components, and materials, may be sold on the EU market. The DPP, which is expected to be introduced next year, will store relevant information to support products’ sustainability, promote their circularity and strengthen legal compliance. This means that products will be labelled with data on their environmental impact. This information will be accessible electronically, making it easier for consumers, manufacturers, and authorities to make more informed decisions related to sustainability, circularity and regulatory compliance.
Information to be included in the DPP will be identified by the Commission, in close consultation with all relevant stakeholders, and will depend on the specific product in question. This information can include:
The goal of the ESPR is to help consumers and businesses make more informed choices about the products they purchase. Implementing DPPs as part of the ESPR will also make it harder for counterfeit goods to be sold online and there are many ways this can ensure sustainable manufacturing:
Although compliance will mean a time-consuming adjustment for many companies, businesses that adapt to ESPR should recognise its benefits for both the environment and their company. Those who comply may additionally make counterfeiting more difficult for fraudsters and gain competitive advantages. It will be interesting to follow how customs will use the regulation to perform automatic checks on the existence and authenticity of the DPPs of imported products and how it will impact the overall control of counterfeit products.
Dealing with counterfeiting can be expensive and challenging, and businesses that fall short might need to go to court. Besides having the right IP protection, such as patent and trade mark registrations, complying with ESPR and creating DPPs can be used as a tool to reduce the risk of counterfeiters making unsustainable and potentially dangerous fake items to sell.
The ESPR are rules that all business selling products to the EU market need to ensure they comply with. Starting with understanding the regulations, conduct thorough research on the ESPR to understand the specific requirements that apply to your products. By now, most companies should have moved beyond the initial understanding and begun to review whether there are processes within the organization that work to meet the requirements, as well as assess their digitalization.
As companies will have to consider the new requirements that the ESPR proposes in the near future, it’s imperative that they adapt to the changes as early as possible. The key to success is viewing it as an opportunity to make products more attractive and enhance the brand, rather than just another commercial challenge. In doing so, businesses will build consumer trust and loyalty.
