How big is the business of Counterfeiting?

business-of-counterfeiting - Holostik

Counterfeiting is an epidemic to the 21st century world economy and has transformed itself from a small cottage industry to a full-fledged large scale industry. It poses a massive threat to the world as it adversely affects businesses and also the health and safety of the masses. So much so that it’s presence is felt everywhere and is slowly crippling many businesses.

It is a widespread phenomenon. So widespread that the industry is estimated to have imported counterfeited products that are valued at $461 billion till date. These products account for a whopping 2.5% of total imports. Counterfeiting in a broader sense encompasses any manufacturing of a product which so closely imitates the appearance of a genuine brand to mislead the consumers. Hence, it may include trademark infringing goods, as well as copyright infringements. The concept also includes copying of packaging, labelling and any other significant features of the product.

The counterfeiting business is spread across the globe. Every country is affected by counterfeiting directly or indirectly, but some countries have become infamous over the past couple of decades for producing and exporting a large number of knock offs. The countries where majority of the fake goods originate are China, Hong Kong, Turkey, Singapore and Thailand to name a few but more than half of the counterfeited goods originate from China which is massive. Reports suggest that China is the hub of the counterfeiting industry with 86% of world imports of physical counterfeited goods originating there. This is largely due to the availability of cheap labour in the country with lax labour laws.

Almost all countries are adversely affected by this. Substandard fakes and copies demotivate and pull down businesses not only on the economic front but psychologically too. The nations whose businesses have suffered the most at the hand of counterfeiting in the form of trade of fake goods are the United States with 20%, Italy at 15% and France and Switzerland both landing at 12%. While footwear is the most counterfeited type of good in the United States, infringed trademarks exist even on natural food items like strawberries and apples. Cases of counterfeited money/currency is also prevalent in US since the 80’s, with one breed of counterfeited notes called the “Superdollar,” a $100 counterfeited bill made of high quality that looks extremely similar to a real bill. The total value of counterfeited currency stood at $4.5 million from 2002-2005 in US.

The deluge of fakes includes everything from software and medicine to detergent and car parts. On July 26th 2015, for example, Chinese authorities said police had raided a factory turning out huge quantities of iPhone copies. Nevertheless, watches, bags, clothing, jewellery and perfume make-up most of the goods seized at borders. On July 21st 2015, the European Commission reported that loss of sales due to fake clothes and accessories amounted to 10% of the industry’s revenue in Europe. This makes luxury firms shudder. They cherish their reputations for quality and exclusivity, explains Antonio Achille of the Boston Consulting Group; Ubiquitous, flimsy copies undermine them.
Few more things that take up a considerable amount of space in this vicious circle are currency, machinery, pharmaceuticals and chemicals. These are the ones that pose numerous other threats than the economic ones. Imagine someone who needs a lifesaving drug and gets a fake one, it can be life threatening. Or, counterfeited spare parts in an aircraft which might result in technical failure.

According to the OECD, counterfeit products encompass all products made to closely imitate the appearance of the product of another as to mislead consumers. This can include unauthorised production and distribution of products that are protected by intellectual property rights, such as copyright, trade-marks and trade names. Counterfeiters illegally copy trademarks, which manufacturers have built up based on marketing investments and the recognized quality of their products, in order to fool consumers.

Counterfeit clothes, shoes, jewellery and handbags from designer brands are made in varying quality; sometimes the intent is only to fool the buyer who looks at the label only and does not know what the real thing looks like, while others put some serious effort into mimicking fashion details. Others realize that most consumers do not care if the goods they buy are counterfeit and just wish to purchase inexpensive products. The popularity of designer jeans in 1970s, spurred a flood of knockoffs. Factories that manufacture counterfeit designer brand garments and watches are usually located in developing countries. Counterfeit devices have been reverse-engineered (also called a Chinese Blueprint due to its prevalence in China) to produce a product that looks identical and performs like the original, and able to pass physical and electrical tests. According to the U.S. FBI, the counterfeiting of pharmaceuticals accounts for an estimated $600 billion in global trade, and may be the “crime of the 21st century.”

There is a parallel counterfeiting industry to every industry in today’s times. It is geographically widespread and well-established. The need for the hour is to collectively educate the masses and unite them to fight against this menace. Businesses need to be equipped enough to counter counterfeiting and that would only happen when they have easy access to hi-tech anti-counterfeiting solutions. Such solutions include the use of anti-counterfeiting tools such as tax stamps, holographic boards, 3D holographs, paper labels, and track and trace devices. These will enable the producer and other entities of the supply chain to differentiate between the fakes and originals and will play a vital role in fighting the war against counterfeiting.