The legislation that means brands must adopt secure product authentication
New legislation in both the U.S. and E.U focused on extended producer responsibility is demanding brands find solutions to better trace, authenticate and regenerate their products, as well as fighting counterfeit products made in their name.
Connected products with secure digital product IDs are becoming an indispensable solution for brands to ensure they are compliant with the objectives of the legislation.
How and why to implement connected products with secure authentication
A great solution to be compliant with regulations and easily introduce authentication is turning to connected products.
Connected products make consumers' lives easier by giving them immediate access to all the information they need about product origin, production methods, supply chain, any certifications, as well as additional brand-related content. Plus, of course, they allow immediate authentication and thus, real-time recognition of a possible clone or fake product.
All of this is useful in many ways. For example:
- It satisfies the principle of extended producer responsibility;
- It protects consumers from fraud;
- It limits the introduction of counterfeit products into the circular economy ecosystem (especially when it comes to second-hand);
- It increases brand credibility, consumer trust, and thus encourages repeat purchases and long-term relationship.
But let's take a closer look at the most interesting legislations, some of which are already operational while others are still pending.
Main legislations in the field of product authentication
1) EU - Unfair Commercial Practices Directive
The EU Unfair Commercial Practices Directive (2005) aims to strengthen consumer confidence and facilitate cross-border trade. It regulates unfair trade practices that may occur before, during and after a business-to-consumer transaction.
By following the legislation, national enforcement authorities are able to curb various unfair trade practices. For example, sharing untruthful information to consumers or aggressive marketing to influence their choices.
The directive was amended by Directive (EU) 2019/2161.
On December 17, 2021, the European Commission adopted a new Commission Notice on the interpretation and application of the Unfair Commercial Practices Directive ("UCPD Guidance”), which provides additional legal interpretation on topics like:.
- Interplay with other EU legislation;
- Environmental claims and planned obsolescence;
- ‘Dual quality’ marketing of goods;
- Obligations of online platforms and marketplaces;
- Transparency of search results;
- Consumer reviews and endorsements;
- Influencer marketing;
- Data-driven personalisation and dark patterns;
- Gaming practices;
- Consumer lock-in;
- Obligations in the travel and transport sector;
- Enforcement and penalties.
2) Fashion Act
In 2022, New York State enacted the so-called Fashion Act, a legislation aimed at holding fashion brands accountable. Specifically, it requires large players - companies with $100 million in sales, globally - to track at least 50 percent of their supply chains, analyse the use of materials used in production, and even monitor employee pay. The goal is to make the fashion industry more transparent and push companies that to date do not follow principles of environmental protection and social responsibility to do so. Those who do not comply with what the act states could face penalties of 2 percent of earnings.
The Fashion Sustainability and Social Accountability Act was not drafted by a national body, but by the New Standard Institute, a nonprofit organisation that advocates sustainability in the fashion industry. Then, it found favour with Alessandra Biaggi, a New York state senator, and Anna R. Kelles, an assembly member, as well as from designer Stella McCartney.
3) The INFORM Consumers Act
The growth of online marketplaces has expanded the business of many small companies; however, it also has facilitated fraudulent activities, such as selling stolen and counterfeit goods.
Therefore, the US Congress wanted to modernise consumer protection laws by requiring online marketplaces to collect and verify basic seller information (government ID, tax ID, bank account information, and contact information), and sellers to share this information with consumers. This should create a more transparent and secure environment for consumers, plus it should give law enforcement an extra tool to track and prevent illicit sales.
The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (INFORM) is expected to make it much more difficult to sell goods anonymously, thereby limiting the spread of counterfeit and stolen goods.
4) The SHOP Safe Act
The SHOP Safe Act, also known as the “Stopping Harmful Offers on Platforms Act”, is a bill that was introduced in the United States Congress in June 2021. It purpose is to enhance consumer protections and hold online marketplaces accountable for the sale of counterfeit or unsafe products. It focuses on platforms that facilitate third-party transactions, where individual sellers offer products to consumers.
Key provisions of the SHOP Safe Act include:
Verification of Third-Party Sellers: The act seeks to impose requirements on online marketplaces to verify the identity and contact information of third-party sellers using their platform. Marketplaces would need to collect and display this information to consumers.
Transparency of Fulfilment Methods: The bill also aims to ensure transparency regarding the fulfilment methods used for products sold on online platforms. Marketplaces would be required to disclose whether the product is shipped by the seller or by the platform itself.
Counterfeit Goods Removal: The act would establish guidelines for removing counterfeit products from online platforms. It would require marketplaces to promptly remove listings of products that are known or suspected to be counterfeit.
Consumer Education: The SHOP Safe Act proposes the creation of an online database that compiles information about sellers who have been banned from selling counterfeit or unsafe products. This database would help inform consumers and enhance their ability to make informed purchasing decisions.