Fight against counterfeiting in the food supplement industry

Counterfeiting impacts industries of all kinds. In the dietary supplement industry, where a brand’s reputation is closely linked to the effectiveness of a product and the health and safety of the customer, the challenges of combating counterfeiters have never been greater. big. On July 15, the Council for Responsible Nutrition (CRN; Washington, DC) and Informa hosted a webcast examining the topic, titled “Counterfeit Dietary Supplements: Reducing Your Risk and Fighting Back,” in which speakers painted a dire picture of issue and suggested best practices for trademark protection.

The growth of counterfeiting

Counterfeiting is rampant around the world. In fact, counterfeit and pirated products accounted for up to 2.5% of global trade entirely in 2019, said webcast speaker Zorita Pop, senior legal advisor on intellectual property and digital and anti-counterfeiting manager at Nestlé SA. The COVID-19 pandemic may have compounded the problem, Pop noting that “it is estimated that during the pandemic the illicit market has actually increased.” In the case of dietary supplements, for example, counterfeiters were able to exploit the gaps between skyrocketing demand for these products and severe supply chain disruptions linked to the pandemic. “Counterfeiters take advantage of this because obviously the market still wants the products,” she said. It is also a mistake to assume that counterfeiting only happens in luxury goods, she added. “This is no longer the case. If there is a demand in the market for a certain product, the counterfeiters will take advantage.

Nestlé, whose history in the food industry spans over 150 years, is now focused on the fight against counterfeiting in the VMS (mineral vitamin supplement) market because Nestlé Health Science has acquired brands in recent years. of supplements like Garden of Life, Pure Encapsulations, and Vital Proteins.

What tools do they use? Pop described some critical steps. First, she said, it is essential to establish intellectual property protection globally and to ensure that its “brand names are registered as widely as possible”, especially because it is difficult to enforce infringement in a country if a product does not have an intellectual property registration in that country. “We start first with the markets where we sell the products, then the markets where we make the products, and third the so-called markets where the counterfeit products can be made,” she explained. . It is inexpensive and includes application fees, administration fees and registration fees. She also highlighted the soon to be implemented Eurasian Economic Union agreement regarding trademarks that will allow businesses to file a trademark application for clear protection in several countries.

Another important step is to take advantage of anti-counterfeiting technologies. Although they are “not a silver bullet,” she said, and should be used in conjunction with other tools, printing and packaging technologies are available inexpensively from our. days and are more easily accessible. Yet, she noted, “there are situations where counterfeit products are executed so well that it is quite difficult to determine through the use of these authentication technologies which products are genuine or not. . Of course, there could always be a forensic investigation, but it takes time and is always expensive. “

The company also examines market behavior. Sudden and unexplained declines in sales could indicate a counterfeiting problem, she said. Tracking negative customer reviews is also a good way to identify if a counterfeit may be occurring. Internally, the company selects very carefully who has access to confidential information, including label and print files that could be used for counterfeiting if placed in the wrong hands. It also trains its employees in the identification and treatment of counterfeits. Online monitoring service providers are also useful in helping to track the market and, she said, “have a very reasonable fee.” It is also important to establish good relations with customs authorities and online sellers.

Protecting the brand from counterfeiting is paramount, she said. Although the problem of counterfeiting is global and threatens all businesses, it is the business that ends up being counterfeit that suffers. She said: “There is always the danger that consumers associate counterfeit products with this particular company, not the industry, and they may believe that the counterfeit products are just a problem with a specific company or to specific companies, not to all who are taking action. in industry.”

She concluded: “Strength is in numbers. The more brand owners react to and repel counterfeiters, the more likely they are to actually cut back on their business… It’s not easy. Sometimes it is an effort that gives the impression that it will not succeed because one counterfeiter falls, another appears. But it’s worth trying at least to contain the problem.

Work in progress

The mechanisms for capturing counterfeiters are imperfect, commenters on the webcast pointed out.

Webcast speaker Jason Rosenberg, partner at Alston & Bird, described how his company helped his client, supplement company Nutramax Laboratories Inc., sue third-party sellers on Amazon.com who sold counterfeit Nutramax supplements.

Third-party sellers, he said, are a big part of the counterfeiting problem. “I’ve found that consumers don’t appreciate the fact that often when they make these purchases on Amazon, they’re actually… trading directly with a third-party seller,” he noted. “The fact that there is also this Fulfilled by Amazon program also adds to this confusion for consumers. So, third-party sellers can store their merchandise with Amazon, and Amazon will store and ship those merchandise, even if your transaction is not directly with Amazon. Often, consumers are prompted to buy from third-party sellers based solely on price.

Unfortunately for legitimate consumers and brands, it is extremely easy to become an Amazon third-party seller, with Amazon doing minimal control of the businesses. And even though Amazon institutes a “takedown” from a counterfeit site, Rosenberg described the effort as a “Whac-A-Mole” game, as counterfeiters “can almost always quickly move to a new storefront and keep selling.” . Still, he said, instituting a withdrawal is essential and most major platforms are “quite responsive” when faced with a breach case.

In the case of Nutramax, the company intended to catch counterfeiters because the counterfeit products had received safety complaints from consumers. However, the process of trying to identify counterfeiters (who used fake addresses and names), subpoena Amazon for information, and tracking counterfeiters through banking and card companies credit was a two-year “trip”, as Rosenberg describes, “messy,” “expensive” and “slow”. (In the end, the company ended up finding what they thought were the wrong actors, and the Amazon counterfeiting stopped. “One can only suspect that we had found the right people, we had knocked on the good doors, we had made people nervous enough to have probably moved on to handy fruits, ”he said.)

Catching counterfeiters isn’t easy, but it’s especially important for brands in the supplement and wellness industry, he added. “The question is always, ‘Is it worth it? And, if you sell sunglasses and someone sells counterfeit sunglasses, maybe not, but I would say for many in this group that if the problem is a health and safety issue, then be aware of what more you can do beyond withdrawal, although it can be much more expensive. Protecting your brand from the “irreparable damage” that can result from trademark infringement that can “erode consumer goodwill” is worth the cost.

Other speakers gave additional advice. One, from webcast speaker Raj Sapru, COO of e-commerce service provider Netrush, had to be selective about who your distributors are. You need to “really streamline your distribution,” he said. “You really don’t need multiple sellers selling the same product on Amazon. It does not increase demand at all. This only causes fragmentation.

Also, he said, make sure you have strong monitoring and data reporting practices, adding that “there are many service providers.”

Among the mechanisms put in place by online merchants, Sapru said, like Amazon, “it’s just not as efficient as it should be,” meaning brands will have to continue to be vigilant and to take measures and precautions themselves. As for the Amazon Project Zero and Amazon Transparency programs, he said, “they are largely ineffective and they are not very brand-centric,” which means that a lot of the attention is paid to them. ‘Amazon relies on its valuable platform of third-party sellers.

On the positive side, lawmakers and advocates are pushing for legislation to offer brands more protection in this sales environment. Webcast speaker Nicholas Ahrens, vice president of innovation at the Retail Industry Leaders Association, spoke on behalf of the Buy Safe America Coalition which broadly supports a recently introduced bipartisan law called the INFORM Consumers Act. The bill, introduced in March 2020, would require online retail markets to better verify the identity of third-party sellers, including acquiring such information from sellers, such as contact details, tax identification number. and bank account information. The bill would also require online marketplaces to disclose whether the purchases were made by a seller other than the seller listed on the product listing page.

Ahrens said: “There are fundamental things we can and should do in terms of legislation to try to change the way it works and to make sure that the only answer is not everything you do. [the brand] can do; it’s something they [online marketplaces] should do, because not everything should be up to a brand to protect itself. There should be protections in the market because there has clearly been a market failure here.