Counterfeiting is the practice of manufacturing products, often of inferior quality, and selling them under a brand name without the brand owner’s authorisation. It is an extremely profitable, illegal business because while fakes are sold at a lower price, counterfeiters do not have to invest in research and development, design, marketing and after-sales service.
An October 2013 report by accountants PwC revealed that British adults now regularly buy fake designer clothes, perfumes, alcohol, cigarettes and even medicine.
China is seen as the centre for churning out fake goods. US customs revealed that 93% of the value of counterfeit goods seized at US borders in 2013 originated from China and Hong Kong.
For businesses, becoming embroiled in a counterfeit incident can cause loss of revenue, damage to reputation, trademark dilution and also loss of consumer goodwill and trust.
“Legitimate providers in supply chains have taken positive steps to prevent infiltration of fake goods, but the scale and nature of the challenges mean that services have to continually improve their defences to prevent their capabilities from being hijacked to support illegal activity,” says Jeffrey Hardy, Director of the ICC’s Business Action to Stop Counterfeiting and Piracy initiative.
Criminals are also taking advantage of advanced manufacturing and packaging technologies, which make counterfeit products very difficult to detect. The increasing sophistication of counterfeiters means that their products are no longer limited to cheap imitations sold on the black market; counterfeits now infiltrate distribution chains, masquerading as authentic products to wholesalers and retailers.
The difficulty for distributors and manufacturers lies in identifying the fakes. If they don’t, they could be exposed to liability claims where the offending products cause harm to consumers, as well as costly product recalls and expensive lawsuits. And if counterfeit goods are being sold on a business’s premises, directors can be charged with money laundering offences, which can carry jail terms.
To prevent counterfeiting, businesses must now view it as a boardroom issue, as well as increasing internal resilience around intellectual property and supply chain management. New technology – ranging from unique markings on products, to smartphone apps and even mobile surveillance – is also increasingly being used by businesses in the fight against fakes.