How consumers are put at risk by counterfeit cosmetics online

Strong growth in the cosmetics market is attracting counterfeiters, with consumers being put at risk by fakes containing harmful materials such as arsenic, lead and rat excrement[1].

Cosmetics sales are on the rise, with the industry recording growth of 5% in 2018 (its highest in two decades)[2]. By 2024, the market is expected to be worth US$863 billion[3]. Cosmetics are therefore seen as an enticing opportunity for counterfeiters looking to exploit consumer demand. Skincare is the leading category accounting for 36% of the global market[4] and is seen as one of the most profitable avenues to bad actors.

Cosmetics and pharmaceutical products made up 6.5% of all counterfeit good seizures in the U.S. in 2017, estimated to be worth $69 million[5].

The hidden dangers of counterfeit cosmetics

Counterfeit cosmetics are often manufactured in unsanitary conditions where bacteria thrive. Seized goods have been found to contain toxic materials such as cyanide, arsenic, lead, mercury and, in some cases, even rat excrement. These harmful ingredients will cause skin irritation, rash or infection, and many are linked to a higher risk of cancer.
Seized goods have been found to contain toxic materials such as cyanide, arsenic, lead, mercury and, in some cases, even rat excrement. These harmful ingredients will cause skin irritation, rash or infection, and many are linked to a higher risk of cancer.
Each cosmetic good must detail its ingredients within the International Nomenclature of Cosmetic Ingredients (INCI) to ensure regulatory compliance. To avoid detection by more savvy consumers, counterfeiters display the INCI list of the official product. This, in turn, masks the true ingredients from the consumer, putting them at risk of coming into contact with these dangerous ingredients.

The rise of social media selling and the risks posed

The skincare market accelerated dramatically in 2018, with the industry crediting this to the expansion of the ‘upper middle classes’ globally and, most specifically, in Asia.

Many high-end brands are engaged in a fierce battle for online popularity with this upper middle class. MAC Cosmetics leads the charge with their social media following on Twitter and Instagram. Whereas Eisenberg Paris has the largest social real estate on Facebook[4].

Social media has given rise to fast-moving influencer brands such as Jeffree Star and Zoella. It is also integral to start-up brands, who rely heavily on influencers and sponsorships to quickly build brand recognition in a market that is fast reaching saturation.

Each of these cosmetics brands communicate with their customers through social media and official websites. Unfortunately for brands, counterfeiters are also highly active on social media; infringers have moved to where consumers now make purchasing decisions, advertising their fake goods within paid ads and sponsored posts on platforms such as Facebook and Instagram. These ads offer fakes a level of credibility, fooling many consumers into thinking they are genuine goods.

Bad actors place text within images and use obscured product photos and brand imagery to avoid detection by brands. They increasingly avoid using trademarks to further throw legal teams off the scent.

The dark side of grey market marketplaces and third-party resellers

The global popularity of online third-party retailers who regularly discount cosmetic goods, such as Sephora and Ulta and individual marketplaces such as Wish, has caused headaches for brands. Whilst legitimate products are available on these marketplaces, they also play host to a wide range of counterfeit or grey market products that are not fit for use.

FragranceNet is a platform operating in the grey market space that offers ‘vintage’, out of stock, discontinued and discounted luxury perfumes. The platform has been accused of selling used or opened perfumes by customer reviews, and in some cases, is believed to have sold counterfeits.

FragranceNet has been accused of selling used or opened perfumes by customer reviews, and in some cases, is believed to have sold counterfeits.

Recent customer review of FragranceNet on Consumeraffairs.com

Wish is another marketplace that has hit headlines by selling counterfeit makeup. The platform has a mostly young, middle-class customer base with a gross merchandise value estimated at US$5.5 billion. The marketplace has come under great scrutiny after it emerged last year that a 41-year-old woman purchased counterfeit Urban Decay and MAC products. The fake eyeshadow powder received reportedly smelt sulfuric and when it was applied to the customer’s right eye, the surrounding skin reacted and eventually became infected[6].

Targeted enforcement and social media monitoring essential

Brands must act to ensure that consumers are protected online. Case law exists for brands operating in the pharmaceutical and medical device markets who have been deemed to be aware of black or grey market goods but have taken insufficient action. This legal reasoning could be applied to a cosmetics brand if it was found to have not put sufficient anti-counterfeiting and authentication steps in place or not warned consumers of the dangers of buying fakes. They may also be found liable for injuries to consumers as a result of purchasing counterfeits.

So, what can brands do about this growing threat?

It is key to regain control of the social media environment to affect a lasting reduction in infringement. Social media advertising monitoring technology, targeted enforcement and robust platform relationships are essential components of a comprehensive Online Brand Protection strategy that can achieve this.

At Incopro, we work with our clients to ensure they protect their consumers and brand reputation online by leveraging our expertise in intellectual property, criminal intelligence, and technical design. We allow our customers to meaningfully reduce online infringement and increase their online sales by targeting the largest infringers. If you believe your brand is under threat and are interested to see how our technology can offer a long-term solution to issues such as social media infringement, request a free demo from one of our experts below.

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References:

[1] Rat droppings and arsenic: The stuff you put on your face by using counterfeit makeup (The Washington Post, 2015): https://www.washingtonpost.com/news/morning-mix/wp/2015/05/18/rat-droppings-human-urine-and-arsenic-the-stuff-found-in-counterfeit-makeup/

[2] Annual growth of the global cosmetics market from 2004 to 2018 (Statista, 2019): https://www.statista.com/statistics/297070/growth-rate-of-the-global-cosmetics-market/

[3] Global Cosmetic Products Market Will Reach USD 863 Billion by 2024 (Zion Market Research, 2018): www.globenewswire.com/news-release/2018/06/22/1528369/0/en/Global-Cosmetic-Products-Market-Will-Reach-USD-863-Billion-by-2024-Zion-Market-Research.html

[4] Cosmetics Industry – Statistics & Facts (Statista, 2018): www.statista.com/topics/3137/cosmetics-industry/

[5] Clothing, jewelry, prescription drugs among America’s most counterfeited items (USA Today, 2019): https://eu.usatoday.com/story/money/2018/07/26/clothing-jewelry-prescription-drugs-among-americas-most-counterfeited-items/37022305/

[6] Wish faces criticism over suspected counterfeits (Digital Commerce 360, 2019): https://www.digitalcommerce360.com/2018/07/17/wish-faces-criticism-over-suspected-counterfeits/

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