While 2022 has been the year that many aspects of daily life finally returned to normal since the pandemic, it’s also proven that some things have permanently changed. Ecommerce fraud and counterfeiting are problems that grew dramatically during COVID-19's high point and show no sign of subsiding.
We’re seeing how these issues are being addressed, and what these trends might signal for 2023. Read on to see what to watch for.
An expansion in counterfeit and fraud enforcement
Combating these problems isn’t just about who’s committing the crimes—it's about who can be held accountable and penalized for online fraud and the sale of counterfeit goods. That’s why payment providers and marketplaces need to pay attention.
1. Large-scale collaborative enforcement efforts — Law enforcement and other stakeholders in online marketplaces are stepping up efforts to battle online fraudsters. A recent operation coordinated by Europol’s European Cybercrime Centre (EC3) and the Merchant Risk Council is a great example.
This operation involved cooperation from 19 countries and direct assistance from merchants, logistics companies, banks, and card schemes. The operation targeted scammers who were purchasing high-value items from online websites using stolen credit card information, and culminated with raids on the physical locations where the illegally-purchased goods were stored. A total of 59 scammers were arrested and new investigative leads were triggered throughout Europe with the information obtained.
2. Regulatory and law enforcement agencies seek more power to issue penalties and fines — A number of agencies have called for more authority to address online fraud and counterfeiting, as well as impose accountability on a broader set of players.
For example, the U.S. Department of Homeland Security (DHS) has recommended that U.S. Customs and Border Protection (CBP) be authorized to expand fines and penalties associated with online counterfeiting to any party with financial interest in a shipment.
This includes third-party platforms, financial institutions, freight forwarders, carriers, and others. In the existing framework, the CBP focuses only on issuing penalties against the importer of the IP-infringing or counterfeit goods. This is just one of many examples of an agency that is seeking greater authority to keep pace with ecommerce fraud.
3. Sharp increase in eTROS filed by brands — While there have been many lawsuits filed by brands and sometimes jointly by brands and marketplaces, the dramatic rise in emergency temporary restraining orders (eTROS) by brands is very telling. According to ipwatchdog.com, the number of eTROS in the U.S. rose by 70% from 2019-2021.
Brands are said to be increasingly using eTROS and preliminary injunctions to remove listings of fake products to quickly reduce the harm and risk they create, as well as to immediately freeze the financial accounts of those tied to the fraudulent online sales. The majority of cases in the country were filed in five federal district courts, including the Southern District of Florida, which saw a sharp increase in cases attributed to its close port access.
What do these enforcement trends signal?
These examples seem to indicate that the crackdown on counterfeiting and other types of ecommerce fraud will continue to intensify, and that marketplaces and payment providers could face increased liability as law enforcement and regulatory agencies seek to broaden the responsibility for fraud protection. Also, stakeholders such as brands are taking matters into their own hands.
For marketplaces, payment providers, and other stakeholders, the burden to mitigate the risks associated with ecommerce fraud and counterfeiting will keep growing. Tougher regulations could lead to higher penalties, and a broader scope of participants in the payments process now be held liable.
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