Stopping online counterfeiters a big challenge

Cracking down on counterfeit goods in a developed country like Japan normally isn’t a big problem. When fraudulent items are sold in a brick–and–mortar shop, inspectors can march up to the counter, examine the merchandise, and then arrange to quickly have the offenders shut down or arrested.

But when the goods are sold on the Internet, it’s a different matter. Inspectors’ access to the merchandise becomes much more difficult, if not impossible. Enforcement requires close cooperation with Internet providers, financial institutions, customs officials and, possibly, even trade negotiators.

Still, the EBC Intellectual Property Rights Committee has been reporting progress in Japan on stemming the flow of fake goods sold on the Internet. The committee praises Japan’s laws and the energy behind enforcement activities.

“Some of its approaches are even more advanced than those applied in Europe or the USA,” the group says in the EBC 2014 white paper.

The National Police Agency reported 247 incidents involving counterfeit brand goods in fiscal 2014, with 381 people apprehended and 118,464 items seized. Both numbers were up from the year before.

But the shady sellers haven’t been sitting idle. And in one area, they are managing to keep one step ahead of the authorities.

The committee points to online sellers whose operations, including computer servers, are offshore and, thus, out of the reach of Japanese authorities. These setups are typically in China, but target shoppers inside Japan. The sites can be detected by their use of odd Japanese language and extremely low pricing.

Such a problem tops the list of the committee’s key issues and recommendations in the latest white paper, which states, “fundamental solutions are yet to be found”.

Authorities in both Tokyo and Beijing are showing an adequate level of concern, according to committee chairman Laurent Dubois, who says he would like to see a bilateral agreement to tackle the problem. He doesn’t expect to see such action anytime soon, however.

“I don’t think the Japanese will be able to do anything directly with the Chinese given the current political situation … It has got even worse since the Senkaku issues between the two countries,” Dubois says, referring to a territorial dispute that flared nearly three years ago over islands in the East China Sea.

For now, zeroing in on customers’ payments made in Japan is key to halting the practice, according to Dubois, who also is the Tokyo representative of the Union des Fabricants (UDF), the committee’s main organisation protecting intellectual property globally.

The main payment methods are credit cards and cash transfers to bank accounts. Laws and industry regulations limit the actions the UDF can take, nonetheless.

“For payments by credit card, we cannot directly obtain the closure of the seller’s account, as there is no way for us to know account numbers,” explains Dubois, who is a partner at TMI Associates in Tokyo. So one option available is to contact the card company and request that payments made to a certain seller be rejected. Current banking industry regulations don’t oblige the card company to comply; the decision would have to be voluntary.

It’s a similar limitation with bank payments. “The police may ask the bank informally to close [bank accounts],” says the committee chairman. Opening a bank account in Japan tends to require more paperwork than in other countries. According to Dubois, many of the accounts are opened by Chinese students in Japan, who then “sell” them to the overseas retailers.

The EBC committee, through the efforts of the UDF, has been waging its war on counterfeiters for many years, a battle that intensified in tandem with the proliferation of online auctions and shopping malls. Yet, in the latest white paper, a new issue was added that even Dubois admits is “surprising” — and seems a throwback to earlier days.

The issue concerns a street market in Osaka. The group claims that around 30 of the shops in a Korea town in the Tsuruhashi district are routinely selling counterfeit goods, mostly fashion-related.

Why can’t the police simply shut down the operators, given that their trade is conducted openly in a country with strong laws and active enforcement? Dubois shrugs before saying, “It’s a matter of numbers, and they are very efficient at creating new sales spots; and so, then, we have to act on it again and again.”

In other words, the authorities are trying to whack the proverbial mole. “The fact that these stores are run by ethnic Koreans adds a social problem to the intrinsic difficulty of the crackdown,” he continues.

In the EBC white paper, the committee urges police to launch a “full-scale control operation under the Penal Code”.

“The life of the counterfeiter is not all that easy now, but it is easy enough for them to continue; and it’s enough for us to continue with our work,” says Dubois. “Our function is to protect, and we will not survive if there are no more fake goods in Japan. Our intention is not to survive.”

EBC white paper highlights

Counterfeit goods on websites hosted outside Japan – Japan should work with other countries to ensure that all legal and other necessary action is taken against the site operators.

Online auction sites – Closer cooperation needs to take place among ISPs, Japanese authorities and rights holders to check the authenticity of products auctioned on the sites.

Tsuruhashi market – Police should launch a coordinated and extensive operation to end the sale of counterfeit goods at the market in Osaka.

© Japan Today