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A slice of the porky pie[1] – TM and counterfeit in the food industry

February 24, 2022

By Arpit Kalra and Pranit Biswas

The taste of deceit in the food industry may come in various flavors including trademark/ brand dilution, substitution, concealment, unapproved enhancements, counterfeiting, mis-labelling and forgery. Of all these, the trade of counterfeit products in the food and beverage industry is massive, and booming, and likely the one which is most damaging from a health and safety perspective. While there may indeed be some overlap with respect to other kinds of food related frauds, it is worth noting that packaged foods are one of the most vulnerable to being counterfeited in the FMCG industry, given that packaging is a prominent part thereof.

To begin with, the packaging of a product is essentially recognized as a ‘trade dress’ in the world of Intellectual Property, and the same is granted due protection under Trade Marks law in India. Primarily, the overall image of the product including its shape, the colour combination, graphics or even its texture and other features of the like, falls under the ambit of a trade dress. On that premise, counterfeiting refers to the production of inferior quality goods, sold in the trade-dress of the original product.

For instance, in July 2021, a factory manufacturing counterfeits of the well-known TATA Salt was taken down by the Delhi police.[2] The manufacturing unit set up in Barwala was primarily involved in the bulk production of inferior quality salt, packed in duplicate TATA Salt packaging.

Moreover, counterfeit goods of the staple Nandini Desi Ghee manufactured and distributed by the Karnataka Milk Federation (KMF) were seized in Bengaluru on a surprise raid in shops as warehouses. The investigation led to the discovery of another manufacturing unit that was dedicated towards the production of fake Nandini Ghee.[3]

Impacts of Counterfeit Food

Public Health

There is a high risk of food adulteration in cases of counterfeited food/beverages as in most cases, the ingredients that go into the product are either unclear or misinterpreted. This is because the objective of introducing counterfeited products into the marketplace is to deceive consumers by adopting similar/identical packaging and selling products of inferior quality at cheaper costs. Thus, the risk of such products containing unidentified allergens or hazardous/toxic substances is quite high.

Food- supplements packed with fake steroids worth INR 20 million had recently been seized from the possession of three individuals in Greater Noida, Uttar Pradesh who were engaged in the manufacturing and distribution of the same. The accused were ex-employees of pharmaceutical companies, who directed their experience towards producing fake supplements and selling them to gym-enthusiasts with duplicate packaging of foreign companies.[4] According to sources, consumption of such unregulated supplements in unsupervised amounts can lead to serious side effects linked to the heart, kidneys as well as the liver.

Other scandalous food frauds in the industry includes the incident in Spain where a highly toxic chemical substance known as Aniline was contaminated into rapeseed oil and was sold as olive oil in local markets. This incident in 1981, saw the demise of over 1000 people who had consumed the same, and had succumbed to ‘Toxic Oil Syndrome’.

Business

It is only natural that once a consumer encounters fake products of a certain brand, it is only natural that such a consumer would quit placing their trust on those brands. And the process of regaining the trust of the public may get quite cumbersome, and sometimes may even be impossible. Even otherwise, the sale of counterfeit products also lead to heavy losses incurred by the bona fide owner of the product, including but not limited to the loss of opportunity costs and goodwill.

In sum, companies face the brunt of the misdoings of others by literally paying the price for regaining their reputation and combating the removal of fake products across the market. This also forfeits the company’s survival in the market as it also leads to the tarnishing of long-term trust built with business partners.

Prevention

According to a recent report, India has seen a spike by 24% in counterfeit cases, wherein incidents in FMCG sector has seen a spike by 63%. The food and beverage sector saw close to 250 incidents of counterfeit cases in the year 2019.[5]

According to sources, manufacturers of counterfeit products in India often resort to supplying their goods in suburban and rural areas, owing to the lack of stringent quality checks in such areas, making the population belonging to such localities susceptible to health and safety hazards.[6]

Trademarks as a weapon

By now it is established that food fraud is on the rise at the cost of the economy and public safety, however this is where trademarks may be used as one of the tools to combat the menace. While the objective of adopting trademarks by business entities is usually to make a mark in the industry (more on this: https://ssrana.in/articles/making-a-mark-with-your-mark/), the same may also be used to kill two birds with one stone. In the sense, companies must be encouraged to initiate prompt and appropriate legal action against such counterfeit goods as it would not only ensure the protection of their brand, but would also aid in eliminating food fraud to a certain extent.

However, other tools to tackle the same may include drastic and stringent measures such as –

  • Cancellation of licenses of any manufacturer identified to be engaged in the production of counterfeit goods
  • Strengthening quality check authorities and placing accountability on authorizations issued by them
  • Establishing benchmarks for product packaging and encouraging the use of distinct elements such as holographic stickers, disclaimers on packaging, etc. to aid consumers identify genuine goods from fake ones.
  • Sensitizing the general public on the topic and creating general awareness, including steps such as mass mobilization on the issues involved.

Moreover, companies like Nestle and Nova have taken active steps like frequently changing their labelling and aggressively marketing the same to aid the consumer in identifying the right products.[7]

Another valuable tool to tackle the problem is to register ones registered trademarks with the Customs Authorities in India, which would protect the brand from import of counterfeit goods carrying the mark in question, into India (for more information, please see https://ssrana.in/articles/custom-recordal-india/).

Nevertheless, while it may be common to find small scale businesses engaging in copying products of pre-established giants, it is also not uncommon to find big companies copying products of small scale local businesses and selling counterfeits, as their own. Such was the case in the United Kingdom, where recently, Marks & Spencers, a well-established company, took a slice of the porky pie. The product in question: The Perfect Match by Choc on Choc, a small-scale local business. The original product (introduced by Choc on Choc) was essentially two pieces of chocolates shaped like matchsticks with the tag ‘The Perfect Match’ engraved on it and it was introduced in light of Valentine’s Day approaching. M&S on the other hand, went ahead and introduced a blatant copy of the said product, passing it off as their own, least expecting that Choc on Choc had in fact duly registered the tagline ‘The Perfect Match’ along with their product. When Choc on Choc addressed the issue and publically called out the copycat products by M&S, being sold without their permission, it attracted much traction in the public. However, M&S was quick in covering up their tracks and in turn struck a deal in collaboration with Choc on Choc, claiming that they believe in giving credits where it was due and firmly trusted in promoting small-scale businesses. Such a recovery by M&S at the outset looks brilliant for their PR, but let that be a discussion for another time.

Conclusion

The menace of counterfeited goods has been rampant in recent times. However, it may be worth laying down certain guidelines for the restoration of all the elements of the economy, impacted by the circulation of counterfeit goods. Encouraging steps such as verification of goods and their licenses at the micro-level, i.e. by the local distributors before accepting stock, incorporation of Blockchain technology and other tools such as tamper/copy-proof holograms, may aid in combating the problem. Additionally, placing a certain level of accountability on such distributors for failing to do so may act as a catalyst in the success of such a system. Nevertheless, power also lies in the hands of the consumers, who must empower themselves and be extremely wary of such products while shopping.

Girishma Sai Chintalacheruvu, Associate at S.S. Rana & Co. has assisted in the research of this article.

[1] British Slang for ‘a lie’

[2] https://www.indiatoday.in/cities/delhi/story/delhi-police-busts-fake-tata-salt-factory-one-arrested-1829458-2021-07-18

[3] https://www.deccanherald.com/city/fake-nandini-ghee-seized-in-bengaluru-1063394.html

[4] https://theprint.in/features/bodybuilding-in-ncr-goes-high-on-fake-steroids-in-search-of-quick-abs/770257/

[5] https://www.foodnavigator-asia.com/Article/2020/08/24/India-food-fraud-alarm-Much-more-needs-to-be-done-if-Make-in-India-campaign-is-to-succeed

[6] Source: Indian Express, 08th January 2021 https://www.newindianexpress.com/states/odisha/2021/jan/08/poison-on-the-plate-markets-see-rise-in-fake-food-products-2247212.html

[7] https://www.tribuneindia.com/news/archive/business/news-detail-682584

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