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Counterfeiting is stalling the growth of E-commerce in Kenya

14 August 2019
– 9 Minute Read

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In Kenya, various online shopping platforms and apps that allow Kenyans to access and purchase a wide variety of goods and services have cropped up. According to the United Nations Conference on Trade and Development B2C E-Commerce Index 2018, Kenya was ranked next to Nigeria and South Africa with the highest number of online shoppers on the continent.

The move from traditional methods of conducting transactions has however not eradicated all the issues that surround the sale and purchase of goods. The question of customer satisfaction comes to mind, particularly if consumers who purchase a product online end up receiving ‘fake’ branded goods or goods of poor quality. These experiences, which are growing in number by the day, have prevented consumers from fully trusting online shopping platforms, leading to stagnation of e-commerce.

In as much as the internet has created new distribution and marketing avenues for legitimate goods, it has done the same for counterfeit goods. Trade in pirated and counterfeit goods has risen steadily and now stands at 3.3% of global trade, even as overall trade volumes have stagnated, according to a March 2018 report by the Organisation for Economic Cooperation and Development and the EU’s Intellectual Property Office.

Some of the practices adopted by counterfeiters are the use of images of original products for fake product listings and creation of fake profiles to give the impression that products emanate from genuine sources.

Kenya’s stance on counterfeiting

The main statute is the Anti-Counterfeiting Act (the Act), which deems counterfeiting as manufacturing, labelling or packaging of a product which so closely imitates or copies the appearance of another product as to mislead a consumer that it is the other product. The Anti-Counterfeit Authority (ACA) is mandated to combat counterfeiting, trade and other dealings in counterfeit goods in Kenya. The ACA has had little success in comprehensively fighting this menace, and this could be attributed to the rampancy and rapidness of its growth, and the secrecy surrounding counterfeit trade.

The law has not kept up with technology, and this is one of the reasons why counterfeiting continues to flourish in Kenya. The approach of the law in combating counterfeit trade is more traditional as it mainly concentrates on the manufacturing and importation points of the supply chain.  Laws touching on enforcement of counterfeit trade do not expressly or sufficiently provide for e-commerce, creating a gap that allows the sale and listing of counterfeit products on online platforms to thrive.

The Consumer Protection Act (CPA), for example, briefly touches on e-commerce by providing for internet agreements. These are consumer agreements formed by text-based internet communications – mainly on the terms of service a consumer is required to read before clicking ‘accept’. Moreover, the CPA provides that a consumer should have an express opportunity to accept or decline the agreement and to correct errors immediately before entering into it. It is very common for consumers to click ‘accept’ without interrogating the devil in the details.  However, even where a user would be uncomfortable with a certain condition, most online platforms and apps do not have an option where the consumer can amend errors. The only options provided are accept and delete buttons which do not sufficiently meet the legal requirements.

In an effort to deal with some of the challenges, recent amendments were made to the Act to firm up enforcement of counterfeit trade at its root, that is imports and exports.

Recordal system in the pipeline

Notably, a recordal system has been proposed, which will require intellectual property right (IPR) holders to record their registered intellectual property rights with the ACA. This system is yet to be implemented, however. The ACA enacted the Draft Anti-Counterfeit (Amendment) Regulations (the Draft Regulations), 2019, which will oversee the implementation of the IPR recordal system. The recordal of these IPRs will include a sample of the mark and the goods of the IPRs holder, as well as require an importer to demonstrate that it has an IPR holder’s authority to import its goods. It will allow rights holders (or their legal representatives) to be informed of any suspect shipments at the border and hopefully prevent infringing goods from entering the Kenyan market. The Draft Regulations are yet to be published as public participation on stakeholder proposals is still ongoing through stakeholder working groups that the ACA has formed.

Recordal systems have proved quite successful in a number of countries. In Dubai and China for instance, this system has undoubtedly assisted customs officials to target, intercept and confiscate shipments of infringing goods at the border entry.

The challenge is that although the recordal systems have helped in fighting offline counterfeiting, there has been an increase in online counterfeiting. From an online shopper’s perspective, it is a matter of closing the stable door after the horse has bolted.

Lessons to be learned

Liability

To curb e-commerce in counterfeit products, some countries have enacted or are in the process of enacting laws that strictly cater for this. India, for instance, has come up with the draft national e-commerce policy. This policy places liability on both the vendor and the owner of the online platform where a sale of a counterfeit product occurs. The draft policy requires the owner of the platform and the vendor to enter into an agreement where the vendor will provide evidence of the genuineness of a listed branded product.  In the event that a counterfeit product is sold, then the owner of the platform has to reimburse the consumer and blacklist the vendor from selling on its platform.[1]

In the EU, the member states have signed a memorandum of understanding in Brussels with regards to the online sale of counterfeit goods. Known as the Memorandum on the Online Sale of Counterfeit Goods, the MoU provides for notice and take-down procedures where a rights owner has the ability to notify an online platform of a seller engaged in the sale of counterfeit goods.[2] The online platforms have to ensure that the listing is removed and disabled from the platform once, on verification, the notice has been deemed valid.

Moreover, China’s e-commerce law provides that where Intellectual property rights holders perceive infringement of their IPRs, they have a right to notify the e-commerce platform operators to take the necessary measures such as deleting, blocking or disconnecting links and terminating transactions or services.[3] If this is not done, then the platform operators are liable together with the vendor.  

Know your vendor

Listing of the vendors’ details allows for ease of tracing when a counterfeit product is sold. In China, a vendor who wants to be listed on a platform to sell goods should provide truthful information including his or her identity, address and contact details, specifically a phone number and an active email, which should be listed. This is intended to ensure that IPR holders have an avenue to easily enforce their rights when infringed upon.

Involve IPR holders

India proposes to enact stricter policies which involve the IPR holder also registering on the online platform. This registration will allow brand owners to receive notifications when their goods are put up for sale. Brand owners will be able to verify if the product listed is genuine or counterfeit, and to notify the platform if the goods listed are counterfeit. This will increase transparency and efficiency in tracking infringers, blocking the vendors listed and deleting their accounts.

In curbing the sale of infringing goods, online platforms in Kenya, IPR holders and the ACA should work together to incorporate these processes into the online shopping platforms and apps. It would certainly be welcome to see a situation where ACA collaborates with IPR holders to issue take-down notices to online counterfeiters, as well as working with the relevant authorities to have the said counterfeiters blocked from online trading in Kenya. It would also be great to have a list of blocked vendors available on the ACA website to enable consumers to be vigilant.

Encourage online platforms to be proactive

Most online platforms have adopted certain measures to aid in preventing the sale of counterfeit products online. They appoint secret shoppers who flag potential counterfeit products by buying the products. These secret shoppers are selected representatives who have been trained to compare a genuine product and a counterfeit product. Once they notify the online platform of counterfeit listings, the platform takes action by either deleting or blocking the vendor. This protects consumers from purchasing counterfeit products while protecting the reputation of the online platform.

Additionally, some online platforms are educating consumers on how to distinguish between genuine products and counterfeit products. Once a consumer notices suspicious listings of products and sellers, they are able to report that listing to the relevant online platform, either through email or a self-service tool. These measures can be adopted to aid in minimising sales of counterfeit products online.

Conclusion

E-commerce evolves every day and is here to stay. Laws in Kenya must recognise this and cater to the growth and development of e-commerce. While the ACA is mandated to spearhead the fight against counterfeits, all players must be alive to the fact that it cannot do so by itself. Online shoppers and platform operators have a role to play. Platforms should provide mechanisms for consumer complaints and comments, and fully investigate and address them. The IPRs holders should be allowed to view these complaints and comments on various products and approach the ACA if they suspect an infringement on their brands.

Though countries such as China and India have different market dynamics, Kenya’s legal system would allow for regulations and policies similar to those they have enacted. Such regulations and policies can be adapted or adopted into the Kenyan legal system to assist in curbing the counterfeit menace. A law that ensures transparency on vendor identity, protects brand owners, places liability where it is due, outlines the obligations of vendors and platform operators, bars offenders from engaging in counterfeit trade, and in the end protects consumers from unscrupulous traders, is long overdue.


[1] Part III C (3.15) of the Draft National E-commerce Policy in India.

[2] Article 2(11) of the Memorandum of Understanding on the online sale of counterfeit goods.

[3] Article 42 of the E-commerce Law of the People’s Republic of China