Mastercard

iOffer Putting A Dent In The $1.5T Counterfeit Goods Business

In the U.S. and worldwide, counterfeiting is a large, lucrative business worth between $1.2 trillion and $1.5 trillion annually, according to the International AntiCounterfeiting Coalition (IACC). Fake fashion items and accessories alone represent a $500 billion global business per year, but counterfeiting is much bigger than fake purses and shoes.

Everything from makeup to clothes, prescription drugs to household cleaning products and electronics to baby formula has a counterfeit variation that is doubtlessly being sold online right now. In addition, the instances of it are going up every year, not down, John Verdeschi, group head and senior vice president of customer performance integrity at Mastercard Worldwide told Karen Webster.

“There is no doubt, as eCommerce grows and all of these products are more accessible than ever before, consumers are ever-more likely to encounter counterfeiters across these channels,” he said. “For us, [that’s why] it was important to take a stand here, and make sure consumers can have a good experience while they are shopping online.”

It’s also why being able to announce a win in the ongoing trillion dollar-plus struggle with global counterfeiting, as Mastercard and the IACC are doing this week, is particularly satisfying.

iOffer, a popular online consumer marketplace, has a reputation for being the kind of place where a consumer can buy anything. Unfortunately, according to Bob Barchiesi, president of the IACC, since “anything” often includes counterfeit goods, iOffer has been a “tremendous point of frustration for brands and the [intellectual property (IP)] community.”

“We hope iOffer will take this opportunity to protect [its] customers by building systems and processes to mitigate against fakes on [its] site,” Barchiesi said.

It’s a big win in an area where all wins are hard fought, Verdeschi told Webster — and an excellent example of how good actors can, and should, fight off the fraudulent players wrecking the experience for everyone else.

Creating A Chain Of Pressure

Mastercard has worked with the IACC for a number of years, Verdeschi said, which puts the firm in contact with the 250 or so IP rights holders that make up the organization. The sheer number of brands in the group alone, he noted, attests to how widespread the problem has been.

The partnership allows the brands via the IACC to reach out directly to Mastercard when they notice their IP rights being violated online. (In the case of iOffer, it wasn’t just a case of one brand complaining, but of multiple member complaints over time.) From there, upon investigating, Mastercard reaches out to the merchant acquiring banks and notifies them that counterfeit goods are being sold. They are asked to confirm or deny that, and to please cease and desist their illegal activity.

What happens at that point can vary, Verdeschi said, depending on the case and what kind of answers they get from the acquirers. In this instance with iOffer, it meant that processing on the site was largely shut down, until iOffer was able to demonstrate the problem had been remedied.

The goal in such cases, he noted, is consumer protection. While there are some consumers in the world who are happy to buy a faux Fendi or make-believe Birkin bag (if it looks convincing enough), the reality is that most customers don’t want to buy a fake anything. This is doubly true when one considers items like cosmetic products or pharmaceuticals, where getting something that is not as advertised might actually mean getting hurt or sick, or even dying.

“This is a complicated issue, and the average person who is looking at these goods on a screen will find it difficult to determine if they are real or legal, or not,” Verdeschi said.

Stemming A Rising Tide

Given the volume of cases Mastercard takes on each year, he said, this week’s good news is already old news because the firm is on to the next set of complaints in an ever-expanding field. While there is no clear winner among categories for counterfeit, and there is “a lot to be had here,” fake pharmaceuticals have been a growing industry as of late.

“The dynamics are different between areas. When it is luxury goods counterfeiting, the IP rights holders themselves are more likely to bring it to our attention. Things like pharmaceuticals or other more dangerous situations, we tend to hear about from law enforcement and regulators,” he explained.

The underlying process is largely the same: Mastercard pursues the counterfeiters, and leverages its connection to the acquiring bank to shut down the flow of funds for counterfeit goods. It’s a better outcome, ultimately, for the entire ecosystem — the IP rights holders aren’t being robbed, customers aren’t getting fake and possibly unsafe items, and issuing banks aren’t fielding phone calls and managing chargebacks for the angrily ripped off.

There is more that can be done. That’s why, Verdeschi said, Mastercard has also partnered with places like the Center for Safe Internet Pharmacies (CSIP) for consumers who want to buy pharmaceuticals online, and use a reference guide for reputable, safe online pharmacies. In addition, consumers do need to be good stewards of their own digital destiny, and accept that if a deal looks too good to be true, it very well might be.

However, he noted, the fraudsters are out there, which means that with one set of problems at iOffer down, it’s on to the next one.

We have many things we are working on. It never ends,” he said.

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