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Counterfeiting comes home to roost
Counterfeiting used to be a third world problem. Tourists were happy to bring back their fake watches and clothing from holidays in the Far East. Shoddy copies, with their amusing misspellings and unfortunate habit of falling apart, hardly posed a threat to sales back home. In the main, the chosen strategy of most major brand owners was to tactfully ignore what was happening and avoid giving the issue any publicity.
Today, all that has changed. The global trade in counterfeits is now worth $500 billion a year ? around 7% of all the world's trading. The World Health Organisation has stated that more than 1 in 10 pharmaceutical products sold worldwide is counterfeit, while the problem is even more severe for the music, entertainment and software industries.
A problem that could be blithely overlooked 25 years ago, when the International Trade Commission estimated total losses from counterfeiting and piracy at $5.5 billion a year, has literally been multiplied by a factor of 100.
Counterfeiting hits every industry and every product type, wherever there's a brand that's worth exploiting. Electronics, car parts, fashion and cosmetics are just some of the victims. UK consumers are regularly buying fake vodka, condoms, video cameras and washing powder, too, firmly believing that the trusted brands they see on the packaging ? Smirnoff and Durex, JVC and Bold, and dozens of other household names ? reflect and guarantee the quality of the goods inside.
For brand owners, today's truth is distinctly uncomfortable. Counterfeiting is everywhere. If you think your products aren't being copied, you probably aren't looking hard enough.
Killer fakes cost lives, as well as profits
Counterfeits don't just cost manufacturers and brand owners money. They kill people.
Fake pharmaceutical products may be bulked out with sugar, chalk and various abrasive or even poisonous materials. Counterfeit drugs with inactive ingredients leave patients at the mercy of their diseases. Ineffective vaccinations let infections spread, endangering whole populations. Worse still, a near-miss formulation or a dilute, watered-down version of the real drug can allow the evolution of new strains of a disease, immune to any existing treatment.
It's not just pharmaceuticals. All cigarettes may be bad for you, but smuggled counterfeits ? often adulterated with anything from wood shavings to faecal material ? can add a whole new level of extra toxins. Fake, substandard components, including valves, seals and jet engine mounting bolts, have been identified as the root cause of more than 170 plane crashes.
Counterfeits have even been discovered in the control systems of nuclear reactors, thankfully before meltdown.
It's a first world problem now
Counterfeiting in the world's developing markets may not have been a big issue when local consumers simply couldn't afford to buy the genuine products. But dynamic economic progress in countries like China and India means that these vast markets now offer brand owners some of their brightest growth prospects, as long as counterfeiting can be kept under control.
Meanwhile, counterfeit goods are also having a serious impact on established consumer brands in many major European and North American markets.
The problem for prestige brand owners can be particularly acute, as mass-produced counterfeits can devalue a brand's reputation and cut a swathe through legitimate sales of the authentic product. Exclusive fashion brands tend to lose something of their cachet when half the local population is already parading around in cheap counterfeit knock-offs.
Good quality, bad quality
Today's increasingly sophisticated counterfeiters are producing increasingly sophisticated copies. The quality of their work can be so good that people often genuinely believe that they are buying your original products.
In some cases, of course, they are. Defective goods you think you have disposed of are repaired and resold, or factory run-ons are smuggled out of the back gate. And, though again it is not strictly a counterfeiting issue, there may be a similar set of problems caused by unscrupulous affiliates selling into the grey market, in order to profit from international price differentials.
In each of these instances, the product that is being sold, however illegally, is not actually a fake. But the counterfeits themselves are changing. There is now a gold standard of fakery, pitched at a level that is a far cry from the $5 Rolex watches and Gucci handbags of 20 years ago.
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