Counterfeit consumer good
Counterfeit consumer goods are goods illegally made or sold without the brand owner's authorization, often violating trademarks. Counterfeit goods can be found in nearly every industry, from luxury products like designer handbags and watches to everyday goods like electronics and medications. Typically of lower quality, counterfeit goods may pose health and safety risks.
Various organizations have attempted to estimate the size of the global counterfeit market. According to the OECD, counterfeit goods made up approximately 2.5% of global trade in 2019, with an estimated value of $464 billion. Sales of counterfeit and pirated goods are projected to reach €1.67 trillion by 2030.
Despite the illegality of counterfeit goods, many, especially fashion items such as handbags, watches, shoes and sports jerseys, are widely sold worldwide and purchased by both locals and tourists, typically at street markets or through online retailers.
Description
A counterfeit consumer good is a product, often of lower quality, that is manufactured or sold without the authorization of the brand owner, using the brand's name, logo, or trademark. These products closely resemble the authentic products, misleading consumers into thinking they are genuine. Pirated goods are reproductions of copyrighted products used without permission, such as music, movies or software. Exact definitions depend on the laws of various countries.The colloquial terms dupe or knockoff are often used interchangeably with counterfeit, although their legal meanings are not identical. Dupe products are those that copy or imitate the physical appearance of other products but do not copy the brand name or logo of a trademark.
Economic impact
Sellers of counterfeit goods may infringe on either the trademark, patent or copyright of the brand owner by passing off their goods as made by the brand owner. Counterfeit products made up an estimated 2.5% of world trade in 2019. Up to 5.8% of goods imported into the European Union in 2019 were counterfeit, according to the OECD. In 2018, Forbes reported that counterfeiting had become the largest criminal enterprise in the world. Sales of counterfeit and pirated goods are estimated to reach €1.67 trillion by 2030.Although counterfeit and pirated goods originate from many economies worldwide, China remains the main source of origin. According to The Counterfeit Report, "China produces 80% of the world's counterfeits and we're supporting China. Whether or not it's their intention to completely undermine and destroy the U.S. economy, we buy about 60% to 80% of the products." It states:
The OECD states that counterfeit products encompass all products made to closely imitate the appearance of the product of another as to mislead consumers. Those can include the unauthorized production and distribution of products that are protected by intellectual property rights, such as copyright, trademarks, 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. Any product that is protected by intellectual property rights is a target for counterfeiters. Piotr Stryszowski, a senior economist at OECD, notes that it is not only the scale of counterfeiting that is alarming, but its rapidly growing scope, which means that now any product with a logo can become a target.
In many cases, different types of infringements overlap: unauthorized music copying mostly infringes copyright as well as trademarks; fake toys infringe design protection. Counterfeiting therefore involves the related issues of copying packaging, labeling, or any other significant features of the goods.
Among the leading industries that have been seriously affected by counterfeiting are software, music recordings, motion pictures, luxury goods and fashion clothes, sportswear, perfumes, toys, aircraft components, spare parts and car accessories, and pharmaceuticals. Counterfeit pharmaceuticals are the most profitable sector of illegally copied goods, with lost revenues up to $217 billion per year. Fraudulent drugs are known to harm or kill millions around the world, thereby damaging the brand names and sales of major pharmaceutical manufacturers.
Since counterfeits are produced illegally, they are not manufactured to comply with relevant safety standards. They will often use cheap, hazardous and unapproved materials or cut costs in some other manner. These unapproved materials can be hazardous to consumers, or the environment.
Growing problem
The OECD estimated that counterfeit goods accounted for around $464 billion, or approximately 2.5% of global trade in 2019. That estimate did not include either domestically produced and consumed products or digital products sold on the internet. That estimate rose from 1.8% of world trade in 2007. The OECD concluded that despite their improved interception technologies, "the problem of counterfeit and pirated trade has not diminished, but has become a major threat for modern knowledge-based economies."In the U.S., despite coordinated efforts by Immigration and Customs Enforcement and Customs and Border Protection to stem the influx of counterfeit goods into the U.S., there was a 38% increase in counterfeits seized between 2012 and 2016. In a test survey by the GAO of various items purchased online of major brands, all of which stated they were certified by Underwriters Laboratories, the GAO found that 43% were nonetheless fakes.
The approximate cost to the U.S. from counterfeit sales was estimated to be as high $600 billion as of 2016. A 2017 report by the Commission on the Theft of American Intellectual Property, stated that China and Hong Kong accounted for 87 percent of counterfeit goods seized entering the United States, and claimed that the Chinese government encourages intellectual property theft. Utah Governor Jon Huntsman, who had served as U.S. ambassador to China, stated, "The vast, illicit transfer of American innovation is one of the most significant economic issues impacting U.S. competitiveness that the nation has not fully addressed. It looks to be, must be, a top priority of the new administration." In March 2017 U.S. President Donald Trump signed an executive order to, among other things, ensure the timely and efficient enforcement of laws protecting Intellectual Property Rights holders from imported counterfeit goods.
An Outside magazine article in 2016 discussed the psychology of sales, and the role of gullible consumers, perhaps blindly ignoring warning signs of a "killer deal", somehow justifying buying an item they know is a fake.
Types
Counterfeiters can include producers, distributors or retail sellers. Growing over 10,000% in the last two decades, counterfeit products exist in virtually every industry sector, including food, beverages, apparel, accessories, footwear, pharmaceuticals, cosmetics, electronics, auto parts, toys, and currency. The spread of counterfeit goods are worldwide, with the International Chamber of Commerce in 2008 having estimated the global value of all counterfeit goods at $650 billion annually, increasing to $1.77 trillion by 2015. Countries mainly the U.S., U.K., Germany, Austria, Italy, France, Spain, Netherlands, Belgium, Switzerland, Denmark, Sweden, Norway, Finland, South Korea and Japan are among the hardest hit, as their economies thrive on producing high-value products, protected by intellectual property rights, including trademarks. By 2017, the U.S. alone was estimated to be losing up to $600 billion each year to counterfeit goods, software piracy and the theft of copyrights and trade secrets.Alcoholic beverages
In 2022 an Europol-Interpol operation called OPSON XI was led by the European Anti-Fraud Office targeting counterfeit and illicit alcoholic beverages. Customs and police authorities seized nearly 14.8 million liters of illicit drinks, including wine and beer. The seized items also included counterfeit bottles, packaging, and equipment for making sparkling wine. OLAF emphasized the dangers of food fraud to consumer health, legitimate businesses, and public revenue.Wine
In China, counterfeit high-end wines are a growing beverage industry segment, where fakes are sold to Chinese consumers. Artists refill empty bottles from famous chateaux with inferior vintages. According to one source, "Upwardly mobile Chinese, eager to display their wealth and sophistication, have since developed a taste for imported wine along with other foreign luxuries." In China, wine consumption more than doubled since 2005, making China the seventh-largest market in the world.The methods used to dupe innocent consumers includes photocopying labels, creating different and phony chateaux names on the capsule and the label. Sometimes authentic bottles are used but another wine is added by using a syringe.
The problem is so widespread in China, the U.S. and Europe, that auction house Christie's has begun smashing empty bottles with a hammer to prevent them from entering the black market. During one sale in 2008, a French vintner was "shocked to discover that '106 bottles out of 107' were fakes." According to one source, counterfeit French wines sold locally and abroad "could take on a much more serious amplitude in Asia because the market is developing at a dazzling speed." Vintners are either unable or hesitant to fight such counterfeiters: "There are no funds. Each lawsuit costs 500,000 euros," states one French vintner. In addition, some vintners, like product and food manufacturers, prefer to avoid any publicity regarding fakes to avoid injuring their brand names.
Counterfeit wine is also found in the West, although primarily a problem for collectors of rare wine. Famous examples of counterfeiting include the case of Hardy Rodenstock, who was involved with the so-called "Jefferson bottles," and Rudy Kurniawan, who was indicted in March 2012 for attempting to sell faked bottles of La Tâche from Domaine de la Romanée-Conti and Clos St. Denis from Domaine Ponsot. In both cases, the victims of the fraud were high-end wine collectors, including Bill Koch, who sued both Rodenstock and Kurniawan over fake wines sold both at auction and privately.