1- More than a simple App and enormously popular in China

Wechat (Wēixìn in Chinese) is a social network created by Tencent in 2011, that quiclky developped into an ecosystem in which you can chat with friends, shop, pay your utilities etc. Having evolved so much since its launch, when it was very similar to Whatsapp, some considers that it now shows the way to social media’s future.

According to Tencent, Monthly Active Users (MAU) were 806 million at the end of June 2016, an increase of 34% YoY. In addition to the individual (or private) accounts, there are about 10 millions of « official accounts » (aka « public accounts »), about 70 % of which are used by companies and institutions, the rest being individuals (including many « celebrities »).

 

2 – Brands have noticed, but also discover the pitfalls that come with it

Many brands have already opened an official account providing information about themselves and their products, or even selling products.

Like all channels in China, being real or virtual, it is not without challenges on the intellectual property front. Indeed, sellers of counterfeited products were early adopters of Wechat, despite it not being a shopping platform per se. But its ease of use, its anonymity (you register with a SIM card that can still be bought anonymously) made (and still does) it very attractive.

Sellers of infringing products use 2 main ways:

- « circle of friends »: The seller opens an individual account, and adds as many «contacts » as possible, using different means to do so ("friend radar" function for instance). It then posts « Moments » (akin to Facebook’s news-feed) promoting its fare and how to order it.

- « public account »: The seller opens an account with a usually fake ID card or other documents (the « verification » process appears to be cursory, and in any case, Tencent clearly states that it takes no responsibility for this verification).

It explains therefore the sometimes important number of « official accounts » that have not much to do, if at all, with the brand. Indeed, some companies discover to their dismay that accounts using their brand already exist!

LV is an often mentioned example, as it illustrates the numerous challenges a brand may face. Here is what a search for « LV » in the « official accounts » section of Wechat produces:

 

WECHAT LV search Screenshot 2016-10-05-12-44-08

 

The LV official account appears only in second position. First is seemingly a trading company, and the 3rd is a company located in Guangdong province. This account uses a Hermes logo as a profile picture (which by the way does not belong to the Louis Vuitton Group, even though it is a minority shareholder), and in its introduction offers Gucci and Prada products, both competitors of LV. If you follow it, you get some information about bags and at the end of the pages, a link (QR code) to another Wechat account, private this one, offering bags and accessories, and with a profile picture of a « DIOR » logo. When accepted as a « friend », you can browse the « Moments » and see a large offer of counterfeited bags and accessories of famous brands, such as a Yves Saint Laurent bag offered at 550 CNY! For those not familiar with the brand, their cheapest women handbag is priced at 9250 CNY on the official YSL website.

Granted, these accounts are not necessarily all selling counterfeits, they might sell second-hand products or sometimes genuine products imported outside of the regular distribution channels, also known as « parallel imports ». Chine law does not specifically forbids it, but Chinese courts hold different views on parallel imports of trademarked goods.

In any case, being in a situation where there is a large number of « official accounts » using your brand is not ideal, as it might create a confusion in the mind of some (potential) customers and/or facilitate the spread of fakes.

Fake brand accounts are not something new. One has to remember that even if Wechat is not a shopping platform, almost from the day of its launch it was used as such. Two years ago, fakebrand accounts were already considered a big problem. The prohibited activities listed in the « Wechat – Acceptable use policy » include « name squat via your account name in a way that infringes any third party's intellectual property rights or other rights », so it seems strange that there are still so many fake accounts of famous brands.

As our example shows, even a huge group like LVMH struggles with this issue. Does it mean that nothing can be done? Far for it. But one has to keep in mind that, in addition to the specific challenges of online counterfeits, social acceptance of fake brands in China is high.

 

3- Fighting counterfeiting on Wechat presents its own set of challenges

Tencent gets mixed reviews regarding its willingness and efforts to deal with intellectual property rights infringements. For instance, Mr. Claudio Bergonzi, General Director of Indicam, an Italian association gathering nearly 180 companies, industry associations, law and IP firms, security consultants and other organisations daily engaged against counterfeiting activities said during a recent Expert Roundtable in Beijing that « WeChat is more and more used to promote fake items. The platform is not according a high interest to tackle the online infringements. Also during meetings they didn’t show real interest to implement policies really effective and able to support brand’s actions. »

Wechat Terms of Use clearly states that the user shall not « publish, transmit, disseminate and store the content of infringement of the legal rights such as the right of reputation, portrait, intellectual property and trade secret of others » (art.8.1.2.2 ). And it is possible to report an infringement directly through the App (when you see an infringement, select « Report » and then choose « copyright »). However, it is also said that « We may review (but make no commitment to review) content or third party services made available through WeChat to determine whether or not they comply with our policies, applicable laws and regulations or are otherwise objectionable. »

Not exactly the strongest or most forceful statement but it actually reflects quite well Tencent’s policy: to make them close an account is not easy (it may take as many as 5 warnings before closure).

It is true that it is a tremendous task, as thousandsof accounts are created everyday. According to a Tencent report published in January 2016, it received 13,000 IP-related complaints about public accounts between October 2014 and September 2015, and 55.2% of these were based on a trademark right. More than 7,000 WeChat accounts selling fake goods were shut down during thesecond half of 2015. If it sounds like a big number, one has to remember the cleaning-up done just 2 years ago following governmental pressure against prostitution and other illegal activities: More than 20 millions accounts were closed (then representing 5% of the total number of accounts).

As withother platforms, companies and business associations lobby and develop cooperation programs with Tencent, pushing for the adoption of a more proactive and efficient policy. For instance, the China Britain Business Council (CBBC) has signed last August a Memorandum of Understanding with Tencent that aims to facilitate communication between intellectual property rights owners and the platform. It is supposed to be a win-win situation: members of the CBBC may get a more reactive answer (i.e. get fake ads deleted more rapidly), and Tencent can use it as a nice public relations tool, demonstrating its commitment to deal with the issue.

Tencent is also under pressure from the Chinese authorities: A report published before the 2016 edition of the China Central Television (CCTV) show called "3.15" (March 15 is Consumer rights day) accused WeChat “of being fraught with pitfalls and lacking supervision”.

 

 

Wechat has to be on the radar of most foreign firms, not only as a marketing and sales channel, but also as a part of their anti-counterfeiting strategy. It presents some specific challenges (for instance on collecting information about sellers as well as evidence, even if new tools are created) but with a sound strategy and persistence, excellent results can be obtained, that is of course if the IP rights have been properly registered in China.