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Cost of Counterfeits: Why Brands Matter and How Counterfeits Undermine Them

Cost of Counterfeits

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Cost of Counterfeit: Why Brands Matter and How Counterfeits Undermine Them

In 2018, counterfeit goods caused an estimated $323 billion in damages to the global economy 一 and, for consumers, even led to deaths


What Counts as Counterfeit?

Fake products pretend to be genuine, including design and packaging, but are inferior in quality ㅡ and unregulated

Pirated: Copyrighted works that have been reproduced without permission
Knockoff: Close imitations of copyrighted material and designer products

More than 1 in 4 consumers reported unknowingly purchasing non-genuine goods online:

Makeup 32%
Skincare 25%
Supplements 22%
Medication 16%

Fake goods are found through many seemingly innocuous platforms:

Online marketplaces 39%
Search engines 34%
Mobile apps 22%
Advertisements 20%

In a 2018 test, the US Government Accountability Office found that over 2 out of every 5 of supposedly brand name products it purchased online* were counterfeit

Brands Matter: The Importance of Avoiding Fakes

Unlike genuine branded goods, fakes are often poorly made and do not comply with safety standards, raising potential health and safety risks 一 among other downsides

Negative Economic Impact

Chinese manufacturers are accused of stealing and reproducing the intellectual property of US companies, cheapening their work
The US pushed back with tariffs, and Chinese producers are paying the price
Consequently, prices increase 一 and consumers pay more for the same product
Soaring prices for real products could increase demand for cheaper counterfeits

Unsecure Information

Counterfeit merchants present high risks for identity theft and credit card fraud
Illegal downloading sites often have malware which steals personal information
Thieves can use pilfered information to create a fake copy of credit cards
Even cryptocurrency is at riskー trusted crypto wallets like Trezor have warned of nearly indistinguishable fake versions of their hardware stealing users’ protected currency

Criminal Activity

Organized human and drug traffickers monopolize the trade of counterfeit goods
Many of these groups are involved in extortion, prostitution, and terrorism
Counterfeit items are often produced in sweatshops or factories using child labor

Unsafe Products

10% of medical products in developing countries are counterfeit, including critical medicines 一 leaving consumers susceptible to illness and even death
3 in 10 didn’t realize they had bought a fake product until it caused a bad reaction
A 2016 study found that 99% of fake iPhone chargers failed critical safety tests ─ faulty chargers have caused electrical shocks and even fires

Be Alert: Stop Fake Goods

Technology has an impact: “Manufacturing and 3D printing has made it very hard to tell the difference between a super fake and a legitimate product” – Unit Chief of the FBI Intellectual Property Rights, Steve Shapiro

Consumers are split on who is responsible for protection from counterfeits:

Brands only 34%
Buyers themselves 23%

What Can Brands Do?

Determine which areas are most at risk for counterfeit and address accordingly
Monitor sites and channels known as hot markets for counterfeits
Diligently enforce takedowns of fake goods traders, manufacturers, and sellers

Consumer Tips for Spotting Counterfeits

Use Verified Websites
Research using the manufacturer’s website before you buy. Familiarize yourself with logos, labels, and photos of the genuine item
Especially when buying cryptocurrency, buy straight from the manufacturer ーdon’t trust your funds to unverified third parties
Look for a Realistic Price
Any item being sold at a very low price (50% or less of market value) is most likely to be counterfeit
Examine the Quality
Misspellings and poor quality products are an easily recognizable trait of all kinds of fake goods
Read the Reviews
Check the feedback and reviews from previous buyers 一 if there are none, that is a red flag
Ask Questions
Sellers of fake goods may be vague about the origins or differences in price or appearance

Are you the victim of a fake or unsafe product? Report the problem to the National Intellectual Property Rights Coordination Center at https://www.iprcenter.gov

Counterfeit goods are bad for consumers and businesses alike 一 know what to look for to avoid harmful fakes

Cost of Counterfeits

Sources:
https://www.apnews.com/ef15478fa38649b5ba29b434c8e87c94
https://www.who.int/en/news-room/detail/28-11-2017-1-in-10-medical-products-in-developing-countries-is-substandard-or-falsified
https://www.europol.europa.eu/publications-documents/counterfeit-products-why-buying-fakes-can-be-bad-for-your-health-and-more
https://share.america.gov/whats-wrong-with-buying-counterfeit-goods/
https://www.markmonitor.com/brand-protection-domain-management-resources/press-releases/release/counterfeit-consumer-goods-online-pose-risk-to-shoppers-health
https://www.gao.gov/assets/690/689713.pdf
https://www.worldtrademarkreview.com/anti-counterfeiting/trump-administration-tariffs-could-help-legitimise-fake-goods-trade
https://www.cnbc.com/2019/03/13/heres-how-the-trade-war-could-lead-to-a-boom-in-counterfeit-goods.html
https://www.iacc.org/resources/about/what-is-counterfeiting
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3139240
https://wtop.com/news/2019/01/what-are-cloned-credit-cards/
https://www.who.int/en/news-room/detail/28-11-2017-1-in-10-medical-products-in-developing-countries-is-substandard-or-falsified
https://www.markmonitor.com/brand-protection-domain-management-resources/anticounterfeiting-whitepapers-datasheets/g/consumer-goods-global-online-survey-barometer-2017?cid=pr
https://s208914684.t.eloqua.com/e/f2
https://library.ul.com/wp-content/uploads/sites/40/2016/09/10314-CounterfeitiPhone-WP-HighRes_FINAL.pdf
https://www.cscdigitalbrand.services/images/CSC_Best_Practice_Guide-10_Steps_to_Tackling_Online_Counterfeiting%E2%80%93EN.pdf
https://www.iprcenter.gov/
https://cointelegraph.com/news/trezor-one-wallets-forgery-reveals-new-techniques-used-to-steal-crypto