Protecting your beauty brand from Counterfeit products

One of the main problems facing the beauty industry is the spread of counterfeit cosmetics. These fake goods enter the market without the original owner's consent, via unofficial channels called the "gray market."

Using counterfeit products can cause major health concerns, including infections, skin sensitivities, and even long-term harm. 

Brands targeted by counterfeiters not only lose sales but also risk reputational harm. When a customer has an adverse effect from a counterfeit item, trust in the actual brand decreases. Counterfeit products have additional legal danger due to the Modernization of Cosmetics Regulation Act (MoCRA) and new sustainability rules.

So, how can companies safeguard their copyright and reputation when selling products online? 

In this blog post, we’re uncovering how to deal with counterfeit cosmetics.

Why It's Critical to Guard Your Brand

Producing and releasing a product is just one aspect of building a brand. Reputation is something every brand has, and you can't buy a good reputation. This is true even when brand owners invest time and resources in creating an identity that matches their values, expertise, and visions.

Reputation develops with market experience and satisfied customers. Brands gain the trust of consumers over time, yet that trust can be quickly diminished because of counterfeits.

Although eliminating counterfeits may seem unachievable, there are steps you can do to safeguard your brand. Taking the right actions is essential if counterfeits cause harm to your company's reputation in the marketplace.

Creating a Robust Legal Basis

Building a strong legal basis is the best way for brands to protect themselves against counterfeits. The following components should be considered when developing your brand:

Intellectual property(IP) rights: This is the start of the legal groundwork. These are trademarks, copyrights, patents, and customs registration. Brands can register products with customs authorities, which can help prevent counterfeit products from entering the country.

Authorization: Implement a transparent system to monitor who is selling your products and where. To implement this, promote authorized resellers on your website and implement specific controls on online marketplaces.

Unique marker/traceability: Consider adding a unique, hidden marker to products to make it harder for counterfeiters to replicate.

Pricing policy: Establish a Minimum Advertised Price (MAP) and pricing policies for your products. This helps maintain control over pricing and protects value in the marketplace by ensuring stable and predictable dealer margins.

Differentiating Counterfeits, Knockoffs, and Unauthorized Sales

It's important to understand the legal distinctions between counterfeits, knockoffs, and unauthorized sales. Counterfeit products bear your trademark and are clearly illegal. Knockoffs imitate your look and feel but don't use your trademark, which can be more legally complex. Unauthorized sales of authentic products, through liquidation or leaks in your distribution network, can potentially constitute false advertising.

Implementing a consistent and aggressive system for monitoring the market and enforcing your IP rights is crucial. People go to great lengths to obtain unauthorized products. By establishing a solid legal foundation and enforcement strategy, you can better protect your brand and customers.

MoCRA: Combatting Counterfeits

Customers can report bad experiences to the brand, even if they didn't buy the product from an authorized seller. According to recent federal legislation, brands are responsible for these kinds of accidents.

MoCRA's emphasis on consumer safety is transforming the regulatory environment for cosmetics, posing new risks and challenges for brands. Adverse event reporting and record keeping, along with safety substantiation, are among the newest components of MoCRA.

According to MoCRA, the FDA "shall not consider a cosmetic product or ingredient harmful to consumers simply because it may result in mild side effects or transient reactions."

Serious adverse events under MoCRA can include infections or severe disfigurements. These disfigurements may manifest as persistent rashes, burns, hair loss, or changes in appearance. These effects shouldn't be happening during normal use. A medical or surgical intervention to prevent these outcomes can also be a serious adverse event.

If a brand discovers a significant issue, it must inform the FDA within 15 days according to MoCRA guidelines. This is a requirement for companies to report any major problems promptly.

Brands need to figure out if the product is at fault or if there is another reason for the problem. This can be challenging with all the distractions. They must carefully analyze the situation to identify the root cause. It is important to focus on finding the true source of the issue.

Some may misdiagnose the potentially problematic chemical or product, or they may have a concurrent ailment that results in an unfavorable reaction. To secure a refund, other customers will assert that they experienced an unfavorable event. Determine whether the product is real or counterfeit before taking any action.

How Amazon Prevents Counterfeit Fraud

Amazon provides a comprehensive set of resources to stop counterfeiting and bad actor abuse. Programs such as IP Accelerator, Project Zero, Amazon Brand Registry, Counterfeit Crimes Unit, and others are available to brands.

Regardless of if you sell goods on Amazon's marketplace, brand owners can look into the brand register. With the help of this free tool, businesses can verify that they are the owners of the intellectual property and initiate preventive measures that help stop negative listings. Simply upload a legitimate trademark that is either completely registered or pending.

Project Zero is an invitation-only service that gives your brand instant protection against counterfeit goods. Companies with a high rate of using the Report a Violation feature can join the program. Project Zero allows brands to instantly take down fake listings without having to go through Amazon.

The Transparency program from Amazon is a preemptive way to shield your company's reputation and clientele from fake goods. To identify individual items and stop counterfeits from getting to buyers, it uses secure, unique codes.

Products cannot be sold or shipped on Amazon without valid transparency codes. This is true if the order is by Amazon or directly by the seller. This initiative has already safeguarded 47,000 brands on Amazon.

Amazon is committed to protecting brands and customers from fraud, counterfeit goods, and other abuses. They won't close down unapproved merchants if they are offering genuine products, and they won't get involved in legal disputes.

To prevent intellectual property theft, Amazon blocked 700,000 accounts last year before they could post items for sale. The company also spent $1.2 billion on trademark protection. Additionally, Amazon located, apprehended, and properly disposed of almost 7 million counterfeit goods globally last year.

Conclusion

If a retailer not part of your network is selling your goods, there are actions you can take if you establish a legal framework first.

If you disclose a warranty exclusive to customers who purchase directly from an authorized seller, there's legal recourse for trademark infringement. Pursuing unlicensed vendors may seem like a losing battle. You'll have a better chance of stopping them if you have patent protections in place and are selective about the IP protections you file.