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Online Retail Emerges As Key Channel For Piracy And Counterfeits: CBEC Head

Weak enforcement of intellectual property rights laws and low brand awareness among consumers is seen as a big reason for growth in illicit trade of goods

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India, with its significantly large uninformed consumer base and inadequate protection and regulatory mechanism, has always been a safe haven for illicit trade mainly comprising counterfeit and spurious products. But the fast emerging e-commerce trade in the country has worsened the situation, says the Central Board of Excise and Customs (CBEC).

According to CBEC chairman Najib Shah, e-commerce has emerged as a major channel for illicit trade, prompting the CBEC to ask the e-tailers to have a voluntary code of practices.

The department is also organizing a conference shortly to discuss, among other measures, the need for this voluntary code by the e-commerce players, said Shah while speaking at an international conference organised by the Federation of Indian Chambers of Commerce and Industry (Ficci) on Illicit Trade – Threat to National Security and Economy in New Delhi on Friday (15 January).

E-commerce culture is spreading in India with changing lifestyles and internet growth. While hundreds of dedicated e-tail companies have already started business in the country, several established retailers have also jumped onto the online bandwagon.

While the absence of the touch and feel experience for the customer to check the quality of products that they purchase is the major drawback of e-commerce, a lack of traceability of inventory movement is another big evil of the digital trade.

At the same time, the weak enforcement of intellectual property rights laws and low genuine brand awareness among consumers is the main reason for the growth in illicit trade in traditional and online retail.

Industry data from 2012 shows that seven most affected sectors - automobile, computer hardware and software, alcohol, tobacco, electronics and FMCG - together had a total sales loss of Rs 72,969 crore due to piracy and counterfeit in India.

A joint study by Ficci's Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) and ICC Business Action to Stop Counterfeiting and Piracy (BASCAP) in 2013 estimated that counterfeit automobile parts account for nearly 30 per cent of the market and contribute to 20 per cent of road accidents in India.

Half of all alcohol consumption comes from illegal production, posing an elevated health risk. Eighty per cent of consumers buying fast moving consumer goods are duped into believing they are buying authentic products. Computer hardware, mobile phones, tobacco, movies and pharmaceuticals were also found to be vulnerable to counterfeiting, piracy and smuggling.

Inaugurating the Ficci conference, Union Minister of Consumer Affairs, Food and Public Distribution Ram Vilas Paswan said: "India’s role as a global economic powerhouse is increasingly linked to its ability to ensure that intellectual property rights are protected with strong IPR rules, and strong enforcement of the laws and regulations. As India continues to take its place as a major economic power globally, its views on IP rights and enforcement domestically will become increasingly important to its international trading partners and to prospective business investors."

The minister added that the national IPR policy, which is in the offing, would give the much-needed push to the pursuit of economic growth and fulfilment of the country’s socio-cultural developmental agenda.

Paswan said that the Ministry of Consumer Affairs has taken several steps in the interest of consumers and their protection against exploitation. Consumers have to be aware, not only of the commercial aspects of sale and purchase of goods, but also of the health and security aspects, he said.

"We have, over the years, initiated several mechanisms to ensure consumer safety and check unfair trade practices. We must empower consumers to seek discontinuance of certain unfair trade practices, defects or deficiencies in services, and to stop services or withdraw hazardous goods from the market," he said.

The CBEC chairman also observed that there was an urgent need for a structured dialogue between businesses and enforcement agencies to counter the menace of illicit trade. "There was a lack of enthusiasm amongst businesses in registering the IP right, a step that was essential in enabling the authorities to check malpractices by IPR violators," he added.