Facebook owner Meta Platforms is struggling to stop counterfeiters from pushing fake luxury goods from Gucci to Chanel across its social media apps, according to research and interviews, as the company barrels into ecommerce.
Its platforms have emerged as hot spots for counterfeit
offenders who exploit their range of social and private messaging tools to
reach users, according to interviews with academics, industry groups and
counterfeit investigators, who likened brands' attempts at policing services
like Facebook, Instagram, and WhatsApp as a game of "whack-a-mole."
"Facebook and Instagram are the key marketplaces where
counterfeit goods get sold to members of the public. It used to be eBay 10
years ago, and Amazon five years ago," said Benedict Hamilton, a managing
director at Kroll, a private investigation company hired by brands hurt by
counterfeiting and smuggling.
Research, led by social media analytics firm Ghost Data and
shared exclusively with Reuters, showed counterfeiters hawking imitations of
luxury brands including Gucci, Louis Vuitton, Fendi, Prada and Chanel.
It identified more than 26,000 active counterfeiters'
accounts operating on Facebook in a June-October 2021 study, the first time its
counterfeit research had focused on Meta's flagship app, and it found more than
20,000 active counterfeiters' accounts on Instagram, up from its count the
previous year but down from a 2019 peak when they identified about 56,000
accounts. About 65% of the accounts found in 2021 were based in China, followed
by 14 percent in Russia and 7.5 percent in Turkey.
Ghost Data is an Italian analytics firm founded by
cybersecurity expert Andrea Stroppa, who is also a data analyst consultant for
the World Economic Forum. The firm has a track record of exposing the use of
social media by counterfeiters, Islamic State supporters and for digital
propaganda.
A Reuters search of keywords identified dozens of Instagram
accounts and Facebook posts that appeared to promote counterfeit goods, which
Meta removed for violating its rules after Reuters flagged them.
Online commerce is a key priority for Meta, which has pushed
new shopping features that could help grow its revenue as it faces pressures
like ads tracking changes and sputtering user growth, and has signaled a hard
stance against counterfeiters. Instagram said luxury brands like Dior,
Balenciaga, and Versace had adopted shopping features on its app and said some
like Oscar De La Renta and Balmain were using in-app checkout.
But users exploiting its platforms to sell fake goods
present a persistent problem for the company, which also faces scrutiny from
lawmakers and regulators about its content moderation.
"The sale of counterfeits and fraud is a problem that
has always persisted with new technology," said a Meta company
spokesperson in a statement. "We are getting better every day at stopping
these sales and cracking down on fraudsters," the person added.
'Playing catch-up'
Most buyers know they are not getting the real deal when
they pay $100 for a handbag that retails for over $5,000. But harms include
hits to brands' sales and reputation, potential safety issues of unregulated
goods, and ties between counterfeiting and organised criminal activity, experts
said.
Meta has joined ecommerce sites and online marketplaces in
grappling with the sale of counterfeit goods. But unlike public listings on
sites dedicated to shopping like eBay and Amazon, social platforms also provide
offenders multiple channels to post in closed spaces, send private messages and
use disappearing content like Instagram Stories, experts said.
"They're creating a lot of unique opportunities for
counterfeiters to hide," said Lara Miller, vice president of corporate
strategy at the International AntiCounterfeiting Coalition. "We're all
playing catch-up."
Counterfeiters took advantage of features like WhatsApp
product catalogs, which are unencrypted and available through the app's
"business profile" option, to show their wares, the Ghost Data report
said.
Ghost Data's Stroppa said he had seen an increasing trend of
whole counterfeit transactions occurring on the company's platforms, rather
than linking out to external sites.
Some high-end labels remain wary of the ability of a broad
spectrum of major online platforms, from ecommerce sites to social apps, to
deal with counterfeiters.
In 2020, Chanel, Lacoste, and Gant left a European
Commission initiative aimed at increasing cooperation between brands and sites
including eBay, Alibaba and Facebook's Marketplace to fight counterfeiting,
saying it was not effective.
Chanel finance chief, Philippe Blondiaux, said in an
interview last year that Chanel, which only sells cosmetics and perfume online,
did not believe Facebook or Instagram were "the right environment to sell
luxury items," adding the brand wanted a "very protected" and
intimate environment for its customers.
The Organization for Economic Cooperation and Development,
which estimated the global trade in counterfeit products was as much as $464
billion in 2019, has said a boom in ecommerce in 2020-21 led to massive growth
in the supply of online counterfeit goods. Academics said the fraud had
mushroomed during the COVID-19 pandemic, while legislation in the United States
and European Union remained unable to combat it.
Chanel, Gucci, and Prada said their fight against
counterfeiters resulted in hundreds of thousands of social media posts taken
down last year, but did not comment specifically on Meta's services. Vuitton
and Fendi owner LVMH, which in a filing said it spent $33 million to fight
counterfeiting in 2020, declined to comment.
According to a lawsuit Meta filed with Gucci last year, the
platform has struggled since 2015 to shut down a woman in Moscow accused of
selling fake goods on is services via a network of more than 150 accounts.
Battling counterfeiters
Meta having more user shopping data could help with ad
targeting, filling an information vacuum left after Apple started letting
owners of its devices block companies from accessing user information.
Meta legal directors told Reuters that cracking down on
counterfeiters was key as its commerce plans ramped up. "As commerce has
become a strategic priority for the company and as we've been building new
shopping experiences, we've recognised that we want to make sure those
experiences are safe and trusted for brands and for the users," Meta's
director and associate general counsel for IP Mark Fiore said last summer.
Meta, which says it has 3.59 billion monthly active users
across its apps, in October launched an updated tool for brands to search and
report counterfeits in posts, ads or commerce features, and says it typically
responds to complaints of such infringements within 24 hours.
In a recent report, the company said it removed 1.2 million pieces of counterfeit Facebook content, including accounts, reported to it from January to June 2021 and about half a million on Instagram. The company said in this period it also proactively removed 283 million pieces of Facebook content violating counterfeit or copyright infringement rules and about 3 million on Instagram, either before they were reported by brands or before they went live. © Reuters
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