Ensuring brand protection and integrity in the times of Covid-19

By Jagvinder Brar and Mustafa Surka

Illegal trade and counterfeit products hinder an organisation in varied ways – slowdown in growth, potential reputational threats and at the same time, adversely impact the welfare of the society. While globalisation of trade and rapid technological progressions have boosted the growth of business organisations in the past decades, there has been a parallel rise in organised crimes involving illegal trade and counterfeiting.

According to the March 2019 report issued by the Organization for Economic Cooperation and Development (OECD), trade in counterfeit products contributes 3.3 percent of world trading. The Global Brand Counterfeiting Report (2018) stated the total value of counterfeit products on a global scale to be USD1.20 trillion in 2017 and expected it to surge by more than 50 per cent to USD1.82 trillion by 2020.

For developing nations like India, the rise in illegal trade can have crippling effects on its economic progress and lead to lower collection of taxes for the government. Counterfeiting incidents reported in India have risen by 24% from 463 incidents in 2018 to 572 incidents in 2019, as per the report ‘The State of Counterfeiting in India – 2020’ by Authentication Solution Providers’ Association (ASPA). The menace of counterfeiting has been hampering economies since long and is increasing by the day.

Rise in malpractices due to COVID-19

The spread of COVID-19 is still on the rise in various countries across the globe and the damaging impact of the pandemic on economies, organisations and individuals is immeasurable. This crisis has already disrupted the first half of 2020 and there seems to be no immediate respite in the near future. The prolonged impact of COVID-19 has opened avenues for immoral individuals to take undue advantage of the situation and defraud organisations and individuals.

Manufacturing and supply of various products had been deeply impacted due to various challenges, such as raw material availability, transport restrictions, manpower shortages and supply chain disruptions, posed by COVID-19. Opportunistic fraudsters are exploiting this situation by illegally selling counterfeit products in the market. Also, large quantities of damaged and expired products are being put back into circulation by tampering the batch numbers and manufacturing dates printed on these products or changing their packaging. A normal consumer is generally not able to detect the differences between the genuine and counterfeits or tampered/damaged/expired products and falls prey to the fraudsters by purchasing these products.

Outlook in the near future

As the government gradually unlocks the COVID-19 lockdown restrictions, organisations and consumers are starting to adopt the ‘new normal’ lifestyle, taking required safety and hygiene measures in their daily routines. Consumers have become more conscious of health and hygiene. With the global pandemic, focus has increased multifold on safety and hygiene standards adopted by organisations. Consumers may refrain from purchasing a product of a particular organisation if the requisite safety and hygiene standards are not adhered to. Further, the ever-increasing issue of illegal trade and counterfeiting has been adversely impacting organisations leading to:

  • Loss of revenue and profits due to reduced sales

  • Risk of losing proprietary intellectual property information

  • Fraudulent product warranty and product liability claims

  • Higher spend for curbing illegal trade and counterfeiting

  • Putting the safety and trust of consumers at risk

  • Damaging the reputation of brands.

What should organisations do to safeguard themselves and their consumers?

Brand protection and compliance with safety and hygiene norms are mounting concerns in the current scenario. Organisations could take the following proactive steps to safeguard themselves from financial and reputational losses caused due to the surge in illegal trade of counterfeit, tampered, damaged and expired products.

  • Brand integrity reviews to identify existence, source and quantum of counterfeit products available in the market and take necessary steps to minimise such counterfeiting

  • Undertake supply chain investigations to identify existence, source and quantum of damaged and expired products in the market

  • Perform food safety assessments to identify possible violations of the requisite safety and hygiene standards by restaurants, franchisees and other channel partners in the distribution chain

  • Due diligence checks for new and/or existing vendors and channel partners to avoid any association with unethical or inappropriate third parties

  • Employee background checks to screen prospective and/or existing employees.

Safeguarding an organisation’s brand integrity and consumer’s safety is now of utmost priority than ever before, owing to an increased efflux of counterfeit, damaged and expired products in the aftermath of the COVID-19 outbreak. Governments and the private sector need to work together and keep up their guard to shield themselves from the perils of illegal trade and counterfeiting to protect the welfare of the society at large.

Jagvinder Brar is Co-Head – Forensic Services, KPMG in India and Mustafa Surka, Partner – Forensic Services, KPMG in India.

Ensuring brand protection and integrity in the times of Covid-19 Ensuring brand protection and integrity in the times of Covid-19 Reviewed by TechCO on 8/30/2020 Rating: 5

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