Fake Goods Epidemic During The COVID-19 Global Pandemic

03 July 2020

With the recent Covid-19 global pandemic, there has been a surge in the demand for, and a resultant shortage of, medical and protective gear like face masks and hand sanitisers. The lockdowns in many countries forcing the public to stay indoors have also led many to resort to purchasing these supplies from online retail platforms.

Unfortunately, there has been an alarming proliferation of unscrupulous traders taking advantage of the situation. In particular, many counterfeiters, who typically target big names in luxury goods, have begun selling fake face masks and hand sanitisers or passing off lower grade products as being high quality ones at inflated prices.

In April 2020, Malaysia participated in Operation Pangea XIII, an international operation coordinated by Interpol against the sale of illegal drugs and medical products. Within a week, fake or substandard face masks and hand sanitisers as well as illegal drugs worth more than US$14 million were seized worldwide.

Thus, here are some issues concerning counterfeits that businesses should be aware of before purchasing hand sanitisers, face masks and gloves online.

As most medical items are regulated products, the quickest and easiest way is to confirm whether it is properly registered or approved by the relevant regulatory body.

Hand sanitisers generally fall into two categories. Household hand sanitisers for general hand hygiene are classified as “cosmetics”; whereas medical-grade hand sanitisers for use by health practitioners in medical facilities are classified as a “drug”, specifically a “generic product (non-scheduled poison/over-the-counter)”.

The former must be notified, and the latter must be registered, with the National Pharmaceutical Regulatory Agency (“NPRA”), before it can be imported, manufactured or sold in Malaysia.

Businesses and consumers can verify whether a product is notified or registered via NPRA's website or the official NPRA mobile app “NPRA Product Status”

Note, however, that disinfectants for the purpose of disinfecting surfaces of objects and workspaces are neither cosmetics nor drugs but are considered general consumer products.

Face masks and gloves which are marketed to the general public for household use are not considered medical devices.

However, surgical masks, face masks and gloves which are intended for medical purpose must be registered with the Medical Device Authority (“MDA”) in order to be imported, exported or placed in the market. Businesses must hold an establishment licence in order to import, export or sell any registered medical device.

MDA's website also provides a public search function for registered medical devices.

If the product is registered with the relevant authority, it is a generally safer bet that the product meets the required safety and efficacy standards and requirements (e.g. notified hand sanitisers must contain at least 60% alcohol and non-alcohol-based sanitisers must be supported by sufficient scientific documentation).

If purchasing online, businesses are advised to ask the vendor for the manufacturer's details and applicable certificates or permits. Businesses should also be wary of purchasing from unknown vendors directly via social media apps like Facebook, WeChat and WhatsApp.

Businesses are encouraged to purchase from trusted online platforms and to always check reviews before purchasing. Reviews which contain photographs of the actual product taken by the customer are useful for comparison against the vendor's advertised pictures.

Various governmental ministries have issued their own Standard Operating Procedure (“SOP”) for their relevant sector during the Recovery Movement Control Order (“RMCO”). Most SOPs, e.g. by the Ministry of International Trade and Industry and the Ministry of Human Resources, mandate that companies must prepare hand sanitisers at entrances and common areas in the factory/premise.

As for face masks, most SOPs state that the wearing of face masks by employees is mandatory. However, these SOPs do not go as far as to require the employer/company to supply face masks for employees' use. Most governmental SOPs are also silent on the provision of gloves.

Be that as it may, under Section 15 of the Occupational Safety and Health Act 1994 (“OSHA”), employers are required to ensure, so far as practicable, the safety, health and welfare at work of all employees. Under Section 3 of OSHA, what is “practicable” depends on:

• the severity of the hazard or risk in question;

• the state of knowledge about the hazard or risk and any way of removing or mitigating the hazard or risk;

• the availability of ways to remove or mitigate the hazard or risk; and

• the cost of removing or mitigating the hazard or risk.

Whether what is “reasonably practicable” under OSHA extends to providing face masks and gloves for preventing Covid-19 will likely depend on the circumstances including the line of work and risk of infection. Service personnel which frequently come into contact with customers on a daily basis, or workers who are crowded in confined spaces on a manufacturing line, may be at a higher risk of infection and may require face masks and gloves to be supplied by their employer.

Companies are encouraged to consult their Health and Safety Officers and legal counsel to conduct a risk assessment as to whether the current health and safety policies in place are adequate for meeting their OSHA responsibilities.

At least one branch of the Department of Occupational Safety and Health (“DOSH”) (Sarawak) was reported as stating, during the height of the Covid-19 pandemic in February, that it was compulsory for employers to take measures to ensure employees are protected from the coronavirus while at work, such as providing face masks.

Whether employees can take action against their employer under OSHA for supplying hand sanitisers, face masks and gloves of poor quality will likely depend on whether the duty to provide a safe work environment includes such an obligation to supply in the first place, which, as discussed above, will vary on a case-by-case basis.

If a duty does arise, and a complaint is made to DOSH, the employer may be at risk of being fined. Take note that, while yet to be definitively decided in case law, it has often been suggested that the liability for failure to provide a safe working environment under OSHA is “strict liability”, i.e. the employer may be liable even though it was not aware that the goods were unsafe or it was not negligent in acquiring the goods.

Otherwise, companies may be at risk of being found liable in a civil suit for negligence and thus having to pay compensation to employees who have contracted Covid-19, provided the employees are capable of proving causatively that they would not have contracted the disease but for the employer failing to provide proper equipment. That said, this may be mitigated if the company can show it had exercised caution and taken reasonable steps to ensure the quality and authenticity of the goods.

Hence, it is advisable for companies to obtain the necessary warranties and, particularly indemnities for claims by employees and other third parties arising from use of the face masks, gloves and hand sanitisers, from the supplier/manufacturer of such products.

The Consumer Protection Act 1999 imposes implied guarantees that goods supplied are of acceptable quality and fit for purpose. The Consumer Protection Act 1998 also applies to goods supplied in trade transactions conducted through electronic means.

Where there has been a failure to comply with such implied guarantees, the Consumer Protection Act 1998 provides statutory rights of redress against the supplier and/or manufacturer, including a right to reject the goods and to opt for a refund of money paid or replacement of the goods.

Contrary to popular belief, businesses and companies can also be considered as a “consumer”. A “consumer” is defined in the Act as a person (which can be a natural person or body corporate) who acquires or uses goods of a kind ordinarily acquired for personal, domestic or household purpose, use or consumption and does not acquire or use such goods for the purpose of resupplying them in trade or consuming them in the course of a manufacturing process.

The Sales of Goods Act 1957 similarly provides implied conditions that goods supplied in a contract for sale are of merchantable quality. Hence, companies who are victims of subpar or defective hand sanitisers, face masks or gloves may institute a claim in Court for breach of the Consumer Protection Act 1999 and/or the Sale of Goods Act 1957.

There is also the Tribunal for Consumer Claims Malaysia which serves as an inexpensive alternative for consumers to seek redress against suppliers/manufacturers. The Tribunal typically only accepts complaints lodged by individuals, but to be prudent, companies and businesses may nevertheless inquire as to whether companies as consumers may avail themselves of the Tribunal before resorting to court action.

Where the goods were purchased online, most e-commerce platforms have returns policies which allow purchasers to demand refunds for defective items from the seller/vendor. Even if the seller rejects your refund request, most platforms have an avenue for the purchaser to dispute this and independently assess the purchaser's request.

Further, consumers can file complaints to the relevant regulatory body if the product is meant to be registered/approved. Purchasers of unnotified/unregistered hand sanitisers or notified/registered hand sanitisers which cause adverse effects, can complain to the NPRA. Likewise, purchasers of surgical masks or face masks and gloves for medical purposes which are supposed to be registered as medical devices, but are not, or where the medical masks or gloves are of poor quality, may complain to the MDA. The NPRA and MDA may order for a recall of the relevant product from the market.

Lastly, there is also the option of lodging a police report under Section 420 of the Penal Code for cheating and dishonestly inducing delivery of property.

Thus, businesses should exercise caution before purchasing protective gear like hand sanitisers, face masks and gloves online. The risk of such items being fake/defective could not only translate to losses suffered from receiving goods which are not commensurate to the value paid for, but may also expose the company to potential liability from its employees. Businesses are again reminded to seek legal advice as to whether their current SOPs and policies are adequate for mitigating these risks.

This article is prepared by partners, Charmayne Ong and Kuek Pei Yee, and associate, Gooi Yang Shuh.