In this article, Rouse global head of enforcement Nick Redfearn and consultant Isabel Liang discuss the impact of regulatory inconsistencies and evolving technology on online enforcement in China and Southeast Asia.
Online counterfeiting remains a significant challenge in the rapidly expanding e-commerce landscape, particularly in Asia. As digital marketplaces become primary sales channels for counterfeit goods, the problem has intensified, especially since the pandemic accelerated online shopping. IP owners now face the daunting task of tracking counterfeiters, combatting fraud and ensuring product authenticity across multiple platforms.
The rise of e-commerce and its relationship with counterfeiting is one of the biggest issues that IP owners face. Rights holders must navigate regulatory challenges and the role of technology (including AI) in facilitating and combatting illicit activity.
The fight against counterfeiting is complicated by a lack of regulatory harmonisation and coordinated online enforcement systems.
Shopee maintains a dominant position in the Southeast Asia market, with a 48% e-commerce market share. This is followed by TikTok Shop (28.4% market share), which has acquired a controlling stake in Tokopedia, and Lazada. In China, Alibaba’s platforms (eg, Taobao and Tmall) control 50% of the e-commerce market and JD around 15%. Pinduoduo comes in third with 13%.
As platform owners expand, they set up new platforms to target additional markets, customers and price points. For example, PDD Holdings (Pinduoduo) set up Temu to compete with AliExpress and SHEIN in the low-cost, international B2C segment. Meanwhile, Alibaba set up GooFish to target the China domestic second-hand market. Often, IP enforcement mechanisms on new platforms can be more lax.
China has relatively advanced secondary liability rules, deriving from a combination of statues (eg, the E-commerce Law, tort law, the Copyright Law and the Civil Code) and case law. Precedents tend to impose liability only where internet service providers had knowledge of the infringement and failed to act to stop it. For instance, in Eland Company v Du Guofa and Taobao, Taobao was found to have failed to remove infringing online listings, despite multiple requests from Eland Company.
To comply with the law and because of their global position, most platforms observe typical notice-and-takedown procedures to avoid gaining knowledge of infringement. However, the sheer volume of violations and the low return on investment for enforcement work mean that counterfeit goods often remain widely available online.
In many Southeast Asian countries, secondary liability rules are not established for the following reasons:
As a result, marketplaces can exploit regulatory gaps, opting for minimal action against the proliferation of counterfeit goods.
In developed markets, high damages and costs awards typically deter marketplaces from permitting extensive sales of counterfeit goods by their merchants. However, in regions where the worst-case scenario involves a small fine or minimal damages, platforms may choose to overlook counterfeit products or implement cumbersome IP proceedings. After all, platforms profit from every item sold – whether it is legal or illicit – and face commercial pressures to maximise revenue.
China also presents a unique challenge because all counterfeit goods sold online tend to originate locally. This creates a complete local supply chain, which rights holders can target. Outside China, it remains critical to target merchants, but they typically import the counterfeit items.
The Association of Southeast Asian Nations is currently focusing on online anti-counterfeiting measures and some national IP authorities (eg, in Vietnam and Indonesia) have expressed interest in regulation. Without a global regulatory model, though, regulation may be unclear or inconsistent.
IP owners are investing more resources into removing fake listings and engaging with marketplaces. However, e-commerce marketplaces often adopt unique and varied IP protection processes, causing IP owners to have to handle dozens of systems to take down items one by one.
Additionally, IP owners must implement strategies that bridge online and offline deterrence against traders. E-commerce platforms increasingly control their logistics, payment gateways and supply chains, complicating efforts to intercept counterfeit goods. For example, Alibaba offers logistics services through CaiNiao, while AliExpress offers logistics services through Choice services.
In some instances, intermediaries that may be owned by e-commerce companies, or that may operate independently, can source counterfeit items from Chinese suppliers, store the goods in warehouses, and fulfill orders directly to overseas consumers through small consignments and drop-shipping on a multitude of platforms.
In August 2024, Chinese shopping agent Pandabuy was sued by a number of fashion brands in New York. The case demonstrates how new platforms can exploit supply chain integration to hide alleged illegal activities. Pandabuy was a ‘reverse buying agent’ platform, which enabled foreign buyers to purchase Chinese products in China through marketing systems, a network of Chinese online sellers and over 20 related sourcing and shipment businesses. An enormous enforcement action in April 2024 uncovered warehouses full of counterfeit goods destined for Europe and United Kingdom.
The vast flow of small-volume shipments makes border interception increasingly challenging. Customs authorities cannot inspect millions of small packages flowing across Asia to uncover counterfeit goods and their systems may miss inconspicuous packages. China actively seeks to control exports through seizures. In Southeast Asia, only Thailand and Vietnam appear to make meaningful customs seizures against imported counterfeit goods.
Infringers are leveraging technology to enhance their operations and mask their digital presence. By concealing their identities, using false information and operating multiple storefronts, they can supply large volumes of counterfeit goods.
AI is also being used to generate false content (eg, deepfake images, fake reviews, fake authorisation documents from IP owners and fictitious user accounts). Some infringers are using AI chatbots to communicate with their customers and hide their identity. Data indicates that 3% of counterfeit product purchases now occur through AI chatbots.
On the other hand, AI can significantly improve the efficiency and accuracy of platform anti-counterfeiting measures through proactive monitoring and detection, by:
Automation can also significantly relieve the burden of manual surveying, certification and notice and takedown for IP owners. Some IP owners face thousands of suspect infringing listings a month in Southeast Asia. Given that they must hire people and service providers to monitor and detect online infringement, the costs of goods are simultaneously increasing.
However, the use of AI presents other challenges, particularly those concerning data privacy and security. E-commerce platforms frequently cite merchant data privacy as a reason not to use and share data on IP infringers. Yet this is almost never personal data. Singapore has already made it clear that data used primarily for business will not be treated as personal. Other countries should do the same. Second-hand platforms, where traders claim to be selling used items as individuals, are often overrun with infringers protecting their identity through data privacy regulations.
As the Asia-Pacific region grapples with online counterfeiting, effective enforcement is essential for protecting trademarks online. The rapid growth of e-commerce, combined with regulatory inconsistencies and sophisticated tactics employed by counterfeiters, complicates the landscape for IP owners. While advancements in technology offer potential solutions to monitor and combat counterfeiting, they also introduce new complexities regarding data privacy and regulatory compliance. Government responses are varied, with some countries fostering e-commerce growth while others impose stricter controls. Ultimately, a coordinated effort among stakeholders – including governments, e-commerce platforms, and brand owners – is crucial for developing a robust framework that effectively addresses counterfeiting and supports a fair and thriving digital marketplace.
This article was first published by WTR in Feb 2025.
