When a new FMCG brand enters a market, there’s an expectation that sales will spike. However, the more successful a brand becomes, the more counterfeiting and infringement take place.
Compliance with various regulations pertaining to product labeling, advertising and data privacy is crucial for FMCG companies. Failure to do so can lead to legal disputes.
Trademark Infringement
FMCG brands are among the most widely recognized brands in the world, making them a prime target for counterfeiting and trademark infringement. These unauthorized activities dilute the distinctiveness of a brand, which can diminish its value and impact customer recognition and loyalty. In addition, it can also lead to confusion about the source and quality of a product.
As a result, trademark infringement is an important legal issue for FMCG companies to consider when developing their branding and marketing strategies. The first step in protecting a trademark is to register it. Many countries use a “first-to-file” system, so it is crucial for brands to register their marks as soon as possible. Failure to do so can allow other companies to exploit consumer demand for a particular product, which can be incredibly difficult to overcome once a competitor has established a strong market presence.
Another common legal issue faced by FMCG companies is regulatory compliance. They must adhere to a complex web of laws regarding product labeling, safety and environmental standards. This can be challenging for a sector that is constantly changing and evolving, especially as a result of new consumer demands.
Other regulatory issues include compliance with antitrust and competition laws. This can be particularly difficult for a fast-moving industry, as it may be difficult to prevent cartels and other anti-competitive behavior. Additionally, FMCG companies must comply with privacy laws when collecting and sharing consumer data throughout their supply chains. A breach of these laws can have significant consequences for a company’s reputation and bottom line.
Lastly, the price volatility of raw materials can be a significant challenge for FMCG companies, and something FMCG consulting services frequently take into account.. This can be due to natural disasters, geopolitical events or transportation problems. This can have a negative impact on production costs and profit margins. In addition, some products may require a certification to meet halal standards for Muslim consumers, which can increase production costs and limit the availability of the product.
Counterfeiting
The more popular an FMCG brand becomes, the higher the risk of counterfeiting. These duplicate products damage the reputation of established brands and steal market share, causing financial losses for manufacturers. They can also be of poor quality and put consumer health at risk. The best way to avoid this threat is by implementing robust compliance programs and working closely with legal experts to stay up-to-date on changing laws and regulations.
Moreover, counterfeiting is a global issue for FMCG companies because the manufacturing and distribution of their products take place in various jurisdictions. Therefore, even if an FMCG company manages to eliminate counterfeiting in one particular location or country, the problem can resurface in another jurisdiction and affect the entire supply chain. This is why it is important for FMCG companies to consider the overall impact of counterfeiting when developing their product and marketing strategies.
FMCG companies are regulated environments, and complying with the applicable laws is crucial to avoid legal issues and reputational damage. They must invest in robust compliance programs, stay up-to-date on changing regulations, and conduct regular audits. Moreover, they must focus on talent acquisition and retention to ensure that they have the right skills sets to support their business growth goals.
As a high-volume, low-margin industry, FMCG companies must rely on contracts with suppliers and distributors to maintain their supply chain operations. The terms of these agreements must be clear and well-defined to prevent legal disputes and ensure that the FMCG company meets its contractual obligations. This requires a comprehensive review of all the company’s contracts with third parties, including suppliers and distributors, to understand the scope and meaning of each agreement.
FMCG companies must balance their competitive advantage with the need to protect their intellectual property rights in a highly crowded market. The best way to achieve this goal is by investing in real-time analytics and tracking technologies, which can help them keep track of their products from production to retailing. These tools can detect suspicious activities and mitigate the risks of counterfeiting, ensuring that only genuine products reach consumers.
Grey Market Imports
When a new product hits the market in a particular jurisdiction, brand owners hope sales will spike. While this often happens, there is a darker underbelly to every success story — counterfeiters are all too common, and no brand is immune. In fact, some companies struggle with this problem more than others.
The more popular a company’s brand, the more likely it is to be subject to counterfeiting activities. This is especially true when a company’s products are available in multiple countries at once. This creates a mammoth task for legal, risk and compliance professionals who are charged with monitoring global marketplaces to ensure the company’s trademarks and other intellectual property rights are protected.
During peak seasons, it is not uncommon for demand to exceed supply, forcing retailers to buy products from other sources and sell them at higher prices. This practice is known as scalping and it can have serious consequences for FMCG brands. The company could lose market share, be subject to regulatory scrutiny or even face litigation. Moreover, the company may have contractual obligations with distributors and retailers that require them to only sell genuine products. In these situations, brand owners can send cease-and-desist letters to gray market importers to protect their brands and reputations.
Grey market goods are legitimate, but they have been imported into a country without the authorization of the brand owner. This practice is prevalent in a number of jurisdictions around the world and poses significant problems for FMCG brands. Authenticating these products and determining their origin can be time-consuming and costly, which can lead to unanticipated expenses. Furthermore, brand owners may be required to provide warranty service on these unauthorized goods, which can increase their management and operating costs.
The most important step that FMCG companies can take to combat grey market goods is to monitor and enforce their intellectual property rights across all of their distribution channels and online marketplaces. They should also consider collaborating with outside counsel to understand their legal options for taking action against unauthorized sellers and distributors.
Another issue that arises is that, when a counterfeiting or infringement problem occurs in an FMCG brand, the production and distribution is often spread out over an entire country. As a result, taking action against one small producer or seller may curb illicit activities in that single location, but does little to address the problem overall.
Intellectual Property Disputes
FMCG businesses are typically very fast-moving and rely on brand loyalty and consumer recognition to achieve success. This makes it important for them to protect their intellectual property and ensure that they have adequate policies in place for the protection of their IP Rights, as well as to identify potential risks to those IP Rights.
Trademarks are one of the most important IP Rights for companies in the FMCG industry, as they serve to distinguish the source of goods and services from those of competitors. In the FMCG industry, trademarks often represent a significant investment of time and resources for the company, as well as embody the accumulated goodwill that the company has built up. Moreover, unlike other IP Rights, trademarks are generally valid in perpetuity, so long as they are used and renewed as required.
Unfortunately, the fast-moving nature of the FMCG industry also makes it prone to counterfeiting and intellectual property disputes. For example, it is not uncommon for companies to produce their own version of a popular product with the intention of driving up sales and gaining market share. In some cases, this may lead to infringement of the trademark of a well-known brand or even cause consumer confusion.
Another common intellectual property issue in the FMCG industry is grey market imports. These are imported goods that were not manufactured or sold in a country with its owner’s authorization. This is a problem for FMCG companies because it can be difficult to control distribution channels or verify the quality of the products being sold. Additionally, there are concerns that these gray market imports could lead to health and safety issues, especially if the products were not produced or approved by the FDA or similar authority.
Regardless of the type of product, it is important for companies in the FMCG industry to have clear policies in place regarding IP protection and enforcement. This includes filing for patent protection, as this provides the right to prevent others from making, using, selling or importing the invention for a limited period of time.
In a fast-moving industry, it is crucial that FMCG companies have a legal team in their corner to help them reduce the risk of intellectual property disputes and to respond quickly to any allegations of infringement or counterfeiting. After all, it is a well-known saying that “it takes 20 years to build your reputation and five minutes to ruin it”.