Domain names have become crucial identifiers for a brand’s online presence. As the online space continues to grow, so does the threat of cybersquatting and the sale of counterfeit products. These two issues often go hand in hand, posing significant challenges for brands, especially in the fashion and luxury industries. Cybersquatters exploit domain names incorporating well-known brand names to attract internet users to their websites, often with the intent of deceiving visitors into purchasing counterfeit products.
The word ‘counterfeit’ has become synonymous with the word ‘dupe’. However, a dupe (duplicate) is a replica of a product that lacks trademarked logos and features, making it distinguishable from the genuine item. In contrast, counterfeit products copy the trademarked details and logos to pass off as the real thing. As the counterfeit trade continues, it becomes increasingly challenging to differentiate between authentic and fake products.
The allure of counterfeit products lies in the perceived status, prestige, and exclusivity associated with brand names and recognisable logos. The combination of a low price tag and the ability to pass off as genuine products makes counterfeits highly appealing to consumers. Attitudes towards purchasing counterfeit products are driven by a focus on the perception of the product rather than the authenticity. But what is the true cost of the cheap price tag?
The true cost of the sale of counterfeit goods is directly felt by brand owners. Loss in revenue, reputational damage and loss of customer trust are some of the consequences of the sale of counterfeit products. The rise in the sale of counterfeit goods cost brands in the fashion industry more than $50 billion in potential revenue in 2020. This also holds true for luxury brands which counterfeiters often target, as prestige drives popularity and potential revenue.
Beyond financial losses, brands also suffer from a loss of customer trust. Counterfeit products erode the exclusivity and prestige that luxury brands strive to establish. According to a 2018 study, the U.S. Government Accountability Office found that almost two out of five products they bought from popular consumer websites were counterfeit. Furthermore, studies have found that 66% of consumers lost trust in a brand after unintentionally purchasing counterfeit goods. This loss of trust has a direct impact on brand revenue.
While some consumers knowingly buy counterfeit goods, many are deceived into believing they are purchasing authentic products. Consumers face different, more personal risks compared to brands. These consumers face exposure to cybercriminals when entering personal details on fraudulent websites when purchasing these goods. There is also the added possibility that the purchased item never arrives.
Furthermore, the counterfeit industry is not just a financial threat to brands and consumers. In 2019, the OECD estimated that the volume of international trade in counterfeit and pirated products amounted to as much as USD 464 billion in that year, or 2.5% of world trade. Given the counterfeit industry’s connections to organised crime, purchasing these goods can further fuel this criminal activity.
Cybersquatters often use terms related to renowned brands or products to create deceptive domain names. For example, words like “genuine”, “real”, “cheap”, and “online”, combined with brand names, often deceive users into believing the website is affiliated with the brand.
For brands in the fashion industry, terms such as “shop”, “store”, and “sale” are commonly used for this purpose. This makes domain names with such terms particularly attractive to cybersquatters. To combat such use, brand owners should invest in the monitoring and renewal of domain names, even on a protective basis, as studies have shown that domain names left to expire by brands are frequently re-registered by others to sell counterfeit products.
As the counterfeit industry shows no signs of slowing down, brand owners must invest in online brand protection strategies, as well as various forms of Intellectual Property protection. This includes registering and enforcing trademarks, registering design rights, and enforcing copyright protection.
Since the counterfeit trade often operates through complex networks, tracing where these products are manufactured can be a complex task that requires collaboration with law enforcement agencies.
To combat the online sale of counterfeits through infringing domain names, brand owners can utilise the out-of-court procedure, the Uniform Domain Name Dispute Resolution Policy (UDRP). The UDRP is designed for clear-cut cases of cybersquatting and addresses all types of infringing activity. Successful UDRP disputes can result in the transfer of the domain name, allowing brand owners to reclaim and defensively protect infringing domains.
It appears that the issues of counterfeiting and cybersquatting have only intensified over the past decade. As early as 2011, WIPO reported that over 20% of UDRP cases involved some type of counterfeit activity. While the UDRP cannot directly take down websites, it is a valuable tool for brands to regain control and assert their rights.
As long as the internet exists, the sale of counterfeits through fraudulent domain names is going to persist. To protect brands online, the counterfeit problem requires a collaborative approach involving technology, legal frameworks, and global cooperation.
For consumers, it’s vital to recognise that purchasing counterfeits goes beyond price; they impact industries, brands, and people. For brands, investing in protection management is essential to prevent domain name expiration and safeguard trademarks. Engaging in proactive enforcement action, including use of the UDRP, can further mitigate the risks associated with counterfeiting, protecting both a brand’s integrity and consumer trust.
Maddison Taylor
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