5 Common Types of IP Violation in Indonesian E-Commerce

5 Common Types of IP Violation in Indonesian E-Commerce

The presence of e-commerce has changed the shopping habits of Indonesians. Statista Market Insights data predicts that users by the end of this year will reach 196.47 million, or an increase of more than 22 million since 2022.  The Central Bank of the Republic of Indonesia also stated that the value of e-commerce transactions in 2022 will reach IDR 476.3 trillion. This number is predicted to continue to increase because active e-commerce users in Indonesia still account for only around 30% of transactions in cyberspace.

 

By now, opening an e-commerce site or app is the easiest way to compare the cheapest product we want. However, with all this convenience, you must still be aware of the potential for Intellectual Property violations in e-commerce. You need to remember that even though the platform organizers have tried to carry out sorting even with AI, it will only be helpful if you, who have self-screening capabilities, are easily tempted by the low prices of products that should be expensive.

 

Counterfeit goods are not the only potential for Intellectual Property (IP) violations in e-commerce; there are at least 5 (five) types of IP violations, which we can describe as follows:

 

1. Sale of Counterfeit Goods
Even when selling fake goods, the method is more sophisticated, not blatantly using names or products with very different qualities.

a. Photos taken from the official site;
Suppose the seller is not an official store but uses an official photo. In that case, you should immediately be suspicious and use your right to ask for some actual photos of the product before making a transaction.

 

b. Preloved with invoice;
If the seller uses pictures that show an invoice with the product, like pretending it was purchased from an official store, please don’t hesitate to ask for some photos of the actual product before making a transaction.

 

c. Normal price for a counterfeit product;

If you are a collector of specific brands, you must know the shape, color, or placement of the official logo on the product. You may also know how many variants are produced for this season, including the look of the limited variants. So you won’t be deceived when you find a product with a different color, which shouldn’t be available in the market, even though it is the same price as the original product.

 

d. Using the word ORI or SUPER ORI or HIGH GRADE;
The word “ori,” which means original, should only be used for authentic products. However, sellers of counterfeit goods have recently used this word to attract buyers. Moreover, if the inclusion of the word “ori” is coupled with the price of the item being much cheaper, you should be suspicious of its authenticity.

 

e. Cheap products directly from the factory.
It would be best if you were also wary of this description when you find a cheaper good on e-commerce. Only official stores or distributors can do this if the product comes from Indonesia and gets wholesale price benefits. Another possibility is stolen goods that are not complete or of bad quality. Are you sure you still want to buy something like that?

 

2. Promoting Product Without Verification
This type is the same as in the first category; the difference is that it involves the lure of a big discount, which results in the price being much lower than the market, but it is not sold by official stores or distributors (which in the same time are not providing the same promotions). Apart from the possibility that what is being sold is not a genuine product, it could also be that the product is smuggled without paying official import taxes, with questionable completeness and quality.

 

3. Selling Irresponsibly Through E-Commerce
Sometimes, some health and beauty products are sold using a “direct selling” scheme, and sale activities via e-commerce are prohibited. Because their exclusive products are only sold through direct selling methods to downlines/registered members. So direct sales to the public (non-members) are a violation because they destroy the agreed business scheme and membership system.

 

4. SOPs for IP Violations in E-Commerce Are Not Yet Standardized
Even though e-commerce has acted as an intermediary that will hold funds from buyers and return them if there is a problem with the goods, there are still loopholes that allow transactions to be completed even though the goods have a problem. For example, the buyer forgets to unbox with a video or only immediately checks the item’s authenticity after the deadline. If you are caught in this problem, the procedures of complaint from each e-commerce are not standardized. The absence of customer service that truly understands the situation makes this even more difficult. Especially if the customer service is entirely automated without involving humans.

 

5. Borderless E-Commerce Platform
With the increasingly open cross-border international trade through e-commerce, you must understand the risks of purchasing goods outside Indonesia. If you find lower prices for goods, even though they are shipped from abroad, and you know that there is an official distributor in Indonesia, your vigilance needs to be increased even more. Because there could be an IP violation in the form of distribution without permission/violating the law/not paying import tax, which is not impossible, within the time frame of the order process, the police arrest the seller in the country of origin, and you will not get the goods you want.

 

All of the IP violation practices above harm you as a buyer and significantly impact the country. These losses include:

• • Negative Reputation of Indonesian
    From the latest Priority Watch List (PWL) 2023 report, released by the United States Trade Representative (USTR), Indonesia, along with Argentina, Chile, India, Russia, China, and Venezuela, is still on the investment blocklist because it is prone to piracy practices. In particular, the Notorious Markets for Counterfeiting and Piracy 2022 report, also released by USTR, lists several local e-commerce sites as places for piracy practices. Of course, if this practice continues, Indonesia’s ranking will not move.

 

• • Loss of Trust (Investors) from Abroad
    With that image, investors from various business sectors will think twice about injecting their money into Indonesia. Without guarantees of good Intellectual Property protection, the significant investments they make will be eroded by piracy practices.

 

• • Unfair competition
    In marketing a product, we recognize that a licensee or official distributor has the right to sell or distribute the product in a country. To become an authorized license holder or distributor, we must pay a fee and fulfill all regulations set by the license owner and the government. Imagine if another party smuggled the product by buying it directly in its country of origin and selling it now in Indonesia via e-commerce without following the applicable regulations. Of course, this gives rise to jealousy and unhealthy competition, which must be dealt with immediately.

 

• • Financial Loss for Trademark Holder
    The practice of piracy and selling counterfeit goods in e-commerce certainly reduces the sales potential of Trademark Holders. Products that have previously been calculated will be absorbed entirely in the market, will be a lot left over, and can incur additional costs in the future.

 

• • Potential Consumer Losses
    You will face all the risks as a consumer who needs to be more careful or already knows but still buys. At least you will get a product without an official guarantee, or it will break quickly because the quality doesn’t match the original.

 

• • Tax Loss
    If the sales are related to imported goods, the state’s losses in the form of taxes will be even more significant. They are starting from import taxes and luxury goods taxes (if any) to lose more income, for example, from processing Indonesian National Standards (SNI) and distribution permits from the Food and Drug Supervisory Agency (BPOM).
    

 

• • Reduces Creativity and Innovation

If the practice of selling pirated goods cannot be overcome, the creative and innovation industries will suffer further. Because the practice of piracy will lull creators, simply producing imitation works can produce results. As a result, Indonesia will have a deficit in new creations and innovations, and a climate conducive to the growth of domestic intellectual property, which should be a source of a new sustainable economy, will not develop.

 

So, what about the procedures for reporting pirated goods in Indonesian e-commerce? Our previous article could be a reference for you.

If you need further information about Intellectual Property related to e-commerce, please do not hesitate to contact us via [email protected].

Source:

• DataIndonesia
• Databoks Katadata
• Directorate General of Intellectual Property