Online marketplaces emerge as a preferred hub for counterfeiting and smuggling activities: FICCI CASCADE – Grant Thornton report

As perpetrators of counterfeiting and smuggling activities become sophisticated, online marketplaces are increasingly coming to be a preferred hub for illicit trade, owing to their wider reach and ease of access. In the absence of any specific e-Commerce legislation in India, there is need for a separate e-Commerce law in the country to make online shopping a safe experience for the customers, says FICCI CASCADE – Grant Thornton report: Emerging Challenges to Legitimate Business in the Borderless World which was launched today at FICCI CASCADE International Conference on Illicit trade – Threat to national security & economy.

While every industry and sector in the country is plagued by counterfeiting and smuggling problems, the presence of these activities is dominant  in FMCG packaged foods, tobacco, personal goods, mobile phones, alcoholic beverages,  etc., causing billions of losses to industry and the government. As far as the factors driving such activities are concerned, the report suggests that inadequate enforcement and lack of consumer awareness boost counterfeiting in India, while high tax differentials between neighbouring areas primarily favours escalation in smuggling activities.

“It is evident that illicit trade in India is not limited to a few cities or regions. However, there are specific areas which predominate in such activities and these are exploited as a transit point by illegal operators. In terms of the tactics, e-Commerce is the newest channel adopted by counterfeiters to effectively reach a wider audience. With online marketplaces witnessing a phenomenal growth in India, the space has also become an easy prey to fake goods,” said Vidya Rajarao, Partner, Grant Thornton India LLP.

Counterfeiting and smuggling lead to weakening of the local industries, loss of revenues in the form of duties and levies and loss of consumer’s trust on the manufacturers’ brand. It also affects the consumers as they pay higher price for an inferior product. However, one of the lesser known yet severe consequences of such activities is terror funding which directly poses a threat to the national security of countries.

The report recommends that endeavours such as increasing consumer awareness, adopting anti-counterfeit technologies, strengthening of the legal system and investing in research and development can help in combating the counterfeiting menace. It also suggests setting up a nodal governance agency which can help coordinate national efforts and intelligence against illicit trade. Another significant facet highlighted in the report is the government’s Make in India initiative which accentuates manufacturing and promoting authentic products in the country as well as stresses upon Intellectual Property Rights (IPR) as critical to innovation.

“In our country laws have been introduced that are not only compliant with our international obligations but are in many ways progressive. Moreover, given the emphasis on the current ‘Make in India’ campaign bringing in economic development and the much anticipated growth; an effort therefore needs to be made to examine how illegal trading activities can be curbed,” said A Didar Singh, Secretary General, FICCI.