Trends in Ecommerce: Globalization and Digital Transformation
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March 9, 2023

Notorious MCP: Let’s Rap About Counterfeits

By , , ,

On January 31st, 2023, the Office of the United States Trade Representative (USTR) released its 2022 “Most Notorious Markets for Counterfeiting and Piracy” report. The USTR is a part of the executive branch and responsible for developing and coordinating US international trade. This includes encouraging and protecting a healthy market and trade environment.

The yearly list released by the USTR highlights the problem of counterfeiting, its effects on the broader economy, and steps that can be taken to foster a market which protects intellectual property. The 2022 list includes 39 online markets in addition to 33 physical markets identified as facilitating substantial counterfeiting or copyright piracy.

It also outlines positive developments from the last year, with the goal of empowering the private sector - including banks, payment companies and other stakeholders - to prevent abuse.

The report comes amid growing attention from legislators on counterfeit products.

Our team of experts at EverC gleaned six main takeaways from the latest Most Notorious Markets Report:

  • Counterfeit sellers have made the shift to ecommerce: Spurred by the pandemic and a general movement towards the ecommerce age, many counterfeit sellers who once operated only a physical store have begun to move online. Through ecommerce, these illicit sellers have found success in evading anti-counterfeiting processes by employing techniques such as social media advertisements, hidden links, and drop shipping.
  • Downstream effect on workers: The illicit pirating of copyrighted material has a downstream negative effect on the economic security of artists, creators, actors, musicians, and other workers across the entertainment and media industries. Digital video piracy, such as illegal downloads and streaming of film and television productions, results in the estimated annual loss of up to 230,000 jobs and $45.7 billion in reduced GDP.1 This is a blow to the sustainability of the entertainment industry —if artists cannot make a living, they won’t be able to make art.
  • Increasing prevalence of streaming digital content: Streaming has come to replace torrents and other download-based methodologies as the primary means of transmitting pirated digital content. More than 80% of digital video piracy is now by streaming enabled through piracy devices and applications.2
  • COVID driven spike in online piracy: Yes, we are still experiencing the effects of the pandemic, which led to a huge spike in online piracy as traditional entertainment venues such as cinemas and concert halls remained shut. A steep rise in online film piracy was observed beginning in early 2020, and it continued throughout the pandemic.3
  • Collaboration is key: Key victories in the battle against counterfeiting have resulted from successful cooperation between governments and private entities. For example, under a memorandum of understanding from the Thai Department of Intellectual Property, a mechanism was developed in which rights holders could notify prominent online platforms of abuse of their intellectual property. Leading marketplaces such as Lazada, Shopee, and JD Central signed on to the initiative.
  • IPTV and Cyber Lockers are in focus: Zeroing in on the phenomenon of digital piracy, IPTV providers and cyber lockers are highlighted as centers of illicit activity. These services have come to be at the center of the illicit distribution of pirated content. They are increasingly making their way into the mainstream payments ecosystem – often while using transaction laundering.
  • Proliferation of new technologies enabling piracy: New technologies and services such as “bulletproof hosting”, “piracy as a service operations” and transaction laundering through hidden link schemes are becomingly increasingly popular with bad actors.

What does this report tell us? Regulators continue to treat counterfeiting as a threat to the economy, according to Ambassador Katherine Tai: “The widespread trade in counterfeit and pirated goods harms the economic security of American workers and undermines our work to craft equitable and inclusive trade policy.”

At EverC, our experts have seen how counterfeiting (especially in the pharmaceuticals industry) can threaten the health and even the lives of consumers. That’s why we’ve developed solutions to fight counterfeit products and illicit activity.

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