Canada’s Anti-Counterfeiting Chargeback Project: Paying Back Deceived Consumers

A Canadian initiative to fight online counterfeiting and piracy that enables deceived consumers to get their money back is yielding results, a Canadian official said last week. Project Chargeback means to cut the profit margin of counterfeiters on the internet, and supplement legal recourse for right holders.

Nicholas Gordon, senior trade policy officer, Canadian Intellectual Property Trade Policy Division, Global Affairs gave a presentation on the project on 6 September, at the 11^th session of the World Intellectual Property Organization Advisory Committee on Enforcement (IPW, WIPO, 8 September 2016).

In 2012, Project Chargeback was created as an anti-counterfeiting, anti-piracy initiative. It is having significant success in disrupting the sale of counterfeit and pirated goods over the internet and preventing their entry into the channels of commerce in Canada, according to Gordon.

The project, which is administered by the Canadian Anti-Fraud Center (CAFC), was launched in response to complaints from Canadians receiving counterfeit or questionable goods from e-commerce websites, he said.

The goals of the project are essentially threefold, he said. They are: to increase refunds and reduce losses incurred by consumers that have been misled in buying counterfeit or pirated goods; to disrupt the supply chain and diminish the profit margins for organised crime, and to support and supplement protection and legal recourse available to right holders.

The initiative relies on the worldwide “zero tolerance” counterfeit policy that has been adopted by companies such as VISA, Gordon said. The policy requires that credit card-issuing banks refund victims that have unintentionally purchased counterfeited or pirated goods if they can confirm that those goods are not authentic, he explained. Once this confirmation has been provided, there is a 100 percent refund provided to the consumer by the credit card-issuing bank and there is a chargeback towards the seller, he said.

The initiative itself relies on close collaboration between the consumers, law enforcement, credit card companies, right holders, and banks, Gordon added.

How it Works

The consumers file a complaint with their bank or the CAFC and provide information which include details of the goods, where they purchased them from, the transaction date, the merchant’s name on their credit card statements, as well as the amount of the purchase, he detailed.

The CAFC will then work with rights holders to confirm that the goods that were sold are not authentic and relay this information to the cardholder’s bank for assessment, which then initiates a charge back against the seller’s merchant account, he said. That will result in the termination of the merchant’s account used on the website, and the victims are instructed not to return the counterfeit goods to the seller, he added.

The Impact

The effect of the Chargeback initiative is a “quasi-extraterritorial” enforcement as the merchants’ accounts are closed and they are no longer able to process transactions through their websites, he said.

Misled consumers receive 100 percent money back, while the sellers lose their products, production and shipping costs, along with a US$25 chargeback fee against their merchant account, and their account will be terminated, he said. Processors and merchant banks may also be fined for a high number of charge backs they receive/

According to Gordon, in a year, some 10,000 victims have fully recovered their losses, and close to 6,000 merchant accounts that have been identified as being used for selling counterfeit goods have been terminated. The average time it takes to have a merchant account closed once the chargeback has been initiated is about 2 to 3 months, he said.

He advised those wanting to start a similar programme to focus on building relationships between stakeholders. The programme received constant feedback from stakeholders, he said. Consumers are pleased to be refunded for counterfeit merchandise, mostly luxury goods and sport gear, that they purchased, and rights holders are very supportive, while banks are working closely with the CAFC.

The summary of Gordon’s presentation is here [pdf].

According to the CAFC, Canada is the first country to have such a programme “that works to shut down counterfeiters and protect IP in this way.”

 

Image Credits: WIPO