DEFEAT THE COUNTERFEIT!

Licensing in India has come a long way in the past few years with the coming of new international intellectual properties and success stories of domestic properties. Although it is just the beginning as India contributes only 1-1.25 per cent to the global market size of $186 billion, there is a long way we can go with retail getting organised and consumer demand rising.

In every industry, which is seeing a tremendous growth year on year, there will always be some challenges. The challenge that the brand licensing arena is currently facing is counterfeit or fake products.

Counterfeiting in India

Counterfeiting is a menace that keeps eating away the strength of any industry from within if not dealt on time. In terms of licensing, it has been observed that a lot of fake products are sold in India even when the particular IP is not available in the country, and even if available, it is not operational in that particular product category. It’s a big challenge that keeps on hitting both the licensees and licensors.

According to industry sources, it is a well-observed fact that the brands incur almost 20-30 per cent of their losses due to the selling of counterfeit or fake products.

While The Associated Chambers of Commerce and Industry of India (ASSOCHAM) survey recently stated that globally, the trade in counterfeit and pirated goods cost the economy $650 billion annually, as the segment roughly represents 9 per cent of total world trade. Some industry estimates say the fake products market in India results in an annual loss of `15,000 crore to the government exchequer.

Moreover, the more prominent an IP the more are the chances of it being counterfeited as prominence calls for larger demands. The IPs that are most counterfeited include Disney, Angry Birds, Chotta Bheem, Doraemon, Manchester United, Amitabh Bachchan and Being Human. These counterfeits are not just being sold in tier II or tier III cities, but also in metros and sub-metros.

“Doraemon is one of top five counterfeited IPs of which publishing, apparel, toys, footwear and melamine products are the most exploited categories,” informs Nitin Kalra, Director-Licensing, AI Licensing India Pvt Ltd.

Why does counterfeiting happen?

The counterfeits, according to the industry, are not just being produced in India, but also being imported from various regions in Asia of which China is the biggest contributor. The importers are mainly the small retailers and distributors.

Special Initiative

Steps are being taken against counterfeiting, and one of them, across categories, has been taken up by Federation of Indian Chambers of Commerce and Industry (FICCI). The body through its Committee on Anti-Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) has been bringing all the industries together to discuss and chalk out best practices to overcome counterfeiting and smuggling. According to Meenu Chandra, Joint Director, FICCI – CASCADE, “We are proactively coming up with various consumer awareness programmes to ensure consumers’ involvement and understanding of the issue. We had run a joint publicity campaign with the Ministry of Consumers Affairs under the Jaago Grahak Jago, which created awareness among consumers that buying fake products will cause health loss; taxes of the government will go waste. This campaign was run across the country and released in more than 160 newspapers.”

CASCADE recently concluded the National Consumer Rights Week in December.

Counterfeiting in India is happening due to various reasons. According to Rajeev Uppal, CEO, Suncorp Exim, “The biggest reason is that fake products enter the Indian soil through imports, which are not being checked upon. A lot of fake products are imported from China where the products are being made not by our appointed licensees. These imports are not being stopped at the port itself calling for a complete failure of the government authorities.” With Suncorp Exim, Uppal brings to India IPs, including GAS Footwear, Looney Toons, Tweety, Tom and Jerry, Scooby Doo and others.

Adding to this Kalra says, “There are a number of restrictions when it comes to taxes and customs that inhibit us in terms of importing products or even pricing them correctly in India. Import, at times, becomes difficult as the processing time here is high.”

Apart from government policies, duties and customs, the Indian retail market is so large and unorganised at times, that it becomes difficult for the original products to reach everywhere. Licensed brands always need an organised space to sell products and cater to the consumers for the basic nature of products and its pricing. “One licensee cannot reach across the country but demand in Indian market has grown really high.”

With higher demands and less supply, the room is created for fakes to enter the market and capture it too. Along with the demand, the whole chain of the products being procured by the retailers is so huge that by the product reaches the shelf; the burden is all loaded on to the consumer’s pocket through huge MRPs.

Moreover, these fakes are priced very low that also helps them gain greater acceptability among the price sensitive consumers.

Steps need to be taken

With understanding various factors that push counterfeiting in brand licensing, a strong need has arisen of having stronger government policies and strict import laws in order to stop the entry of fakes through ports. “The government needs to get stricter in terms of authorisation papers of the importer and exporter in order to understand whether someone is eligible to import or export or is an authorised licensee. Although things are happening now, the need is to create a legal fear among wrongdoers,” suggests Uppal.

GST will come across as a strong boon in order to rationalise the pricing structure and taxation across the country.

It’s not just about creating awareness among consumers, the need is to understand that the Indian consumers are price sensitive, so the price needs to be worked upon.

While Kalra says, “Looking at the demand and supply graph, the need is to have a strong infrastructure to fulfil the demand coming from the organised retail. The logistics and warehousing need to get stronger with higher perks to reach out. Additionally, for retailers, they should try to reach the source directly or cut down the distribution channel in order to cut down on the prices further promoting sales of the original products.”

Lastly, a 360 degree approach by the whole industry will further push the government to understand the menace. The need is to create forums to discuss and act on the people producing and selling illegal products.

The Laws

The Indian legal system protects the counterfeiting and trademark infringement through various laws, some of them are as following:

Trademarks Act 1999

Patents Act 1970

Designs Act

Customs Act 1962