Understanding Counterfeiting and Its Threat to Genuine Products

Counterfeiting is a global problem that is infiltrating various industries, compromising authentic products, and harming the reputation of genuine brands. According to the OECD, the availability of counterfeit goods has increased significantly, from luxury goods to pharmaceuticals, which acts a threat to consumers, businesses, and the overall economy.

In this article, we'll look at various counterfeiting methods, analyze their impact, and discuss the consequences for genuine products.

What are Counterfeit Products?

A counterfeit product is an illegal replica of a genuine product, and it is often designed to mimic the physical characteristics and functionality of the original. Counterfeit goods can be electronics, clothes, footwear, jewels, pharmaceuticals, and even automobile parts. Counterfeiters seek to capitalize on the confidence consumers have in established brands by producing goods that appear like genuine products but do not meet quality, and safety standards.

The Rise of Counterfeit Goods

The increase in the number of counterfeit goods can be linked to a variety of factors, including technological advancements, globalization, digitization, and the increasingly complex supply chains. Today's digital world has made it easier to create highly precise counterfeit goods, with the Internet serving as a platform for illegal trade.

According to the OECD, E-commerce has become a hotbed for the distribution, and sale of counterfeit goods, which provides counterfeiters with an unrestricted access to a large consumer base. During 2017-19, the EU customs seized 56% counterfeit goods from online sales.

Different Methods of Counterfeiting

Counterfeiters try out a variety of methods to replicate genuine products, from simple imitation to more advanced techniques. Some common methods include:

• Reverse Engineering
  Counterfeiters dismantle genuine products to analyze, and understand their design, structure, and functionality. This involves breaking down the product into individual parts and examining their assembly. By reverse engineering, counterfeiters aim to duplicate the exact specifications and features of the genuine product. This method requires an in-depth understanding of engineering and manufacturing processes
• Trademark Infringement
  Counterfeiters copy the logos, product design, brand names, and packaging of genuine products to create replicated copies that are identical to the authentic products. This is often done with high accuracy to mislead the consumers, and make them fall prey to buying these counterfeit products. By mimicking the branding elements, counterfeiters capitalize on the trust associated with reputed brands, and this is one of the main reasons why consumers might lose their confidence in authentic brands, and they hesitate before making any purchases in future.
• Material substitution
  Counterfeiters use low quality, or inferior quality materials in the production of fake goods. This might involve using cheaper raw materials which do not meet the quality standards of the authentic products. The use of low-grade materials allows counterfeiters to reduce production costs and maximize their profits. However, this directly hampers the quality, durability, and safety of the products.
• Hybrid Methods
  Some counterfeiters try out different combinations of methods which are mentioned above, this results into creating advanced level replicas that incorporate reverse engineering, trademark infringement, and the use of low-quality production materials and so on. Hybrid methods of counterfeiting aim towards producing counterfeit products which closely resemble the original products in terms of design, branding, and functionality. This makes it more challenging for consumers, and authorities to identify the fake products.

The Impact on Genuine Products

Counterfeiting may lead to a wide variety of consequences for brands, and consumers. They are as follows:

• Economic Damage
  According to data provided by the customs in 2013, the total world trade of counterfeit, and pirated products accounted for approximately $461 billion which is as much as 2.5% of the total world trade in 2013.
  
  In 2019, jewelry, and electronics were the product categories with highest value of imported fake products; followed by clothing, leather goods and footwear.
  
  Genuine manufacturers encounter major financial losses due to the rising number of counterfeit products. These losses directly impact the manufacturers in generating revenue, and employment, and it affects the company's long-term growth and competitiveness in the market.
• Brand Erosion
  Counterfeit products can damage the reputation of authentic brands. When consumers unknowingly purchase counterfeit products that are of low quality and performance, they associate these negative experiences with the authentic brand.
  
  Over time, this erosion of trust in brands can lead to a consistent decline in brand loyalty of consumers, and influence their purchasing decisions, which directly affects the market position of the authentic brands.
• Consumer Health and Safety Risks
  
  • Substandard Quality
    Counterfeit goods of inferior quality can often be encountered in the pharmaceutical, automotive as well as the consumer electronics industry. These counterfeit products do not adhere to quality, and safety standards set by genuine manufacturers. As a result, consumers health, and safety are at risk while using these products, as they are made up of harmful substances, they tend to malfunction and fail to meet the intended benefits which the authentic products offer.
    
    For example, according to the OECD Health and Safety report, a survey conducted in the UK in 2020 found that 32% of individuals who bought, and ingested one, or more counterfeit medicines reported experiencing health issues.
  • Regulatory Concerns
    Counterfeit pharmaceuticals impart a serious risk to public health and safety. They may lack the essential components, incorrect dosages, or might also be contaminated with harmful substances. This not only endangers life of individual consumers, but also challenges the regulatory bodies that monitor, and control the distribution of counterfeit goods.
    
    According to the OECD, in 2013, fatalities were reported due to the consumption of a counterfeit diet pill purchased from an online drug seller. Marketed as a weight loss aid on various illicit online pharmacies, the pill contained BNP, a substance also found in pesticides. This resulted in acute poisoning for consumers, and overconsumption potentially led to fatal outcomes.
  • Legal Consequences
    Manufacturers of authentic products may face legal liabilities if consumers are affected by counterfeit versions of their products. This may result in costly legal battles, damage the company's reputation, and additional financial burdens.

Combating Counterfeit Products

Governments, businesses, and consumers should collaborate to combat counterfeiting effectively. Some effective strategies include:

• Law Enforcement
  Strengthening intellectual property laws and enforcing them rigorously can serve as a deterrent to counterfeiters.
• Technological Solutions
  Incorporating technologies such as holograms, RFID tags, and serialization into product packaging can help verify the authenticity of goods. At Origify, we offer Fingerprinting, and optical recognition technology which can help to trace your products and acts as an added layer of security to protect your brand against counterfeiting.
• International Cooperation
  Given the global nature of counterfeiting, international collaboration is very crucial. Government, and organizations must work together to share information, intelligence, and implement best practices.

Protecting your business

For businesses and consumers seeking protection against counterfeiting, proactive measures are necessary.

• Educate Staff and Consumers
  Training employees, and educating consumers about the risks of counterfeiting can help to create awareness.
• Secure Supply Chains
  Implementing robust supply chain management practices, secure sourcing, and distribution methods, can help to minimize exposure to penetration of counterfeit products.
• Anti-Counterfeiting Technologies
  Innovative technologies such as blockchain, and digital authentication, can enhance the traceability, and authenticity of products.

The battle against counterfeiting requires a different approach that involves legal measures, technological innovations, and heightened consumer awareness. By understanding the different methods of counterfeiting, its impact on the genuine products, and implementing effective strategies for identification and prevention of counterfeits, businesses, and consumers can contribute towards the eradication of this extensive threat. By collective efforts, we can tackle the relatively easy access to counterfeit products and safeguard the integrity of the global marketplace.

At Origify, we aim towards detecting authentic products and providing you with end-to-end tracking data to secure your brand from counterfeit products.