The Chemistry of Counterfeits

Counterfeiting has always been a well-known and troublesome problem to address on for government’s, brands and companies all over the world. To fight against something of this savage propositions we should know the genesis of counterfeits, to find a better solution. Counterfeiting is not a new business. Trademarks track back to ancient times and so does counterfeiting. The counterfeiting of coinage was part of the normal exchanges involving smuggling, minting privileges, alchemy, and foreign trade in Genoa in the sixteenth and seventeenth centuries. But product counterfeiting may be much older. The advent of trademarks used to identify manufacturers or uniqueness of particular products certainly created the opportunity for counterfeiting. Marked pottery was introduced in China four to five thousand years ago where merchant’s marks were started in about the tenth century. This technique was used to prove the ownership of goods. Similarly in Japan wood was marked by the maker. By the thirteenth century, trademarks were imprinted on most of the products in England. In fact, a compulsory marking law was introduced that every maker/owner has to place marks/symbols on their work. During this time period trademark infringement became a crime and was a severely punishable act to abusers. In the seventeenth century Domingo Navarette, a Spanish priest, noted the Chinese ability to copy products later complained that the Chinese had “imitated to perfection whatsoever they have seen brought out of Europe” which is why no wonder China has world’s 76% counterfeits manufacturing hub. The Patent Act introduced in 1793 did not provide protection for foreign inventors which trickily meant that an American could copy any product patented in a foreign country and then apply for a US patent.

In 2013, the estimated size of the worldwide counterfeit goods market seems to have coalesced more than $600 billion annually. It’s a problem that has evolved over 10,000% in the past decades, partly fueled by consumer demand.

Effects of Counterfeiting ;
In the recent decade, news from China emphasized that the problem of counterfeit goods can be a matter of life and death. In less than a week, an unknown brand of cough syrup containing ethylene glycol was identified as responsible for the deaths of hundreds of people in Panama and the Dominican Republic and a cell phone exploded killing a 22-year-old man in China. Phone manufacturers blamed counterfeit batteries, USA Today claimed that even the US military is not immune to counterfeit goods and reports that “investigators found that counterfeit or suspect electronic parts were installed or delivered to the military for several weapons systems, including military aircraft and the Marine Corps’, as well as the Army’s missile defense system”. The Organised Crime Threat Assessment identifies Chinese organized crime groups as particularly active in the manufacture and distribution of counterfeit goods. Individual groups were identified as the beneficiaries of counterfeit products such as Al Qaeda and other terrorist based groups. It’s clearly understood that the counterfeit market is growing but the real magnitude is still unknown.

The amount of counterfeit product seized by Customs services around the world is a tiny percentage of the overall counterfeit goods market.
Researching the size of the counterfeit market reveals that the same numbers from few different sources are repeated over and over. But despite the uncertainty, it appears that product counterfeiting is significant and growing. With the basic understanding of history of counterfeiting let’s get to other subtopics of counterfeiting; Products that are most vulnerable to product counterfeiting fall into four categories ;

  • Highly visible, high volume, low tech products with a well-known brand name such as FMCG goods.
  • High-priced, high-tech products such auto parts and high-end technology.
  • Exclusive prestige products such as apparels and cosmetics.
  • Intensive R&D, high-tech biobased products such as drugs and other pharmaceutical products.

Reasons for the Growth of Counterfeit Goods
There are numerous reasons for the growth in the counterfeit goods market. Let’s take seven major driving influencers behind the worldwide growth of counterfeit goods.

High-end Technology = Low Investment & High Profits
With the current advancement of few countries in terms of technology has made a huge plus point for their GDP, with this the counterfeiters are also utilizing the market opportunity/demand created by these high-end technologies that are priced at insane prices. Counterfeiters using their network reverse engineer these high-end technologies and after a bulk production with cheap quality materials sell it for extremely low prices filling in the demand.

Low trade barrier and Globalization
The rapid growth of world trade through the opening of markets, coupled with the reduction of barriers to financial and merchandise flows, has certainly opened opportunities for product pirates. Between 1990 and 2008 total container throughput grew at an average annual rate of 10%. In 2011, Maersk, a leading shipper with an estimated 14.4% of a container- fleet capacity, predicted more than an 8% growth in the global container market. During the same period, the average tariff applied to imports by developing countries reduced from 16.5% in 1996 to less than 10%.

Consumer Connivance
There is a great deal of evidence to conclude that consumers are too willing to purchase counterfeit products even when they know the products are fake. Consumers are purchasing counterfeit goods for a variety of reasons, including a perception of the counterfeit to be as good as the genuine version; support of the counterfeit market as a means of expressing anti-big-business sentiment; few consumer opt for counterfeits with an end result of temporary usage and societal acceptance.

Development of Channels and Markets
Counterfeiters have three major distribution outlets to customers: retail shops, informal channels such as “ flea markets,” and the Internet. The OECD gives four major reasons for pirates’ attraction to the Internet: 1) Anonymity 2) Flexibility 3) Market opportunity 4) Market potential.

Worldwide publicity of Brands
Globalization has made it possible to develop truly global brands. Brands such as Apple and Gucci are recognized all over the world and have become hugely valuable assets. One 2009 study looking at the impact of counterfeiting on consumers’ brand relationships in India and Thailand stated that “consumers are drawn to premium brands in part because of the exclusivity and connotation of prestige associated with them. These characteristics are also the reason such brands are attractive targets of counterfeiting”. As these consumers want these brands but many cannot afford to purchase the legitimate items. This has given rise to suppliers who fill the demand for products with famous brands at much lower prices.

Weak Enforcement Actions
The fear of starting a counterfeit products business is rather low in many countries including developed once for one reason: weak enforcement of IPR. Investors generally get turned off by large government deficits, these governments have had to cut funding to law enforcement. In addition, these governments cannot fulfill their public servant needs adequately leaving them no other option but to accept bribes from counterfeiters and to limit their anti-counterfeiting activities.

Tariffs and Taxes
Branded luxury goods have extensive advertising and highly visible retail outlets creating demand but high prices deter most consumers from purchasing the products. This tree is one counterfeiter will most happily step where investment and potential penalties are limited and rewards are considerably high.

Types of counterfeiting;
Counterfeiting of money
The counterfeiting of money is one of the oldest crimes in history which was also used as a strategy in wars to make the opponent’s currency weaker. At some periods in early history, it was considered treasonous and was punishable by death.

Counterfeiting of documents’
Forgery is the process of making documents with the intention to deceive.

Counterfeiting of consumer products
Certain consumer goods, especially very expensive or desirable brands, have become most opted by the counterfeiters, who attempt to deceive the consumer into thinking they are purchasing a genuine item, or convince the consumer that they could deceive others with the counterfeit.

Media products
Movies and computer software may be easily copied or “pirated” are often sold through local vendors at flea markets and numerous Internet sources making counterfeit content easy to distribute.

Drugs
A counterfeit drug or a counterfeit medicine is a medication which is produced and sold to deceive the consumer for its functionality. It may not contain active ingredients which are typically sold with fake packaging.

Anti-counterfeiting measures
Although product counterfeiting is certainly not a new phenomenon, much more attention is being paid to it in recent years. As we have seen counterfeit products may go back more than 2,000 years and punishment for infringement at least 700 years. Though few countries have adopted necessary amendments and action towards counterfeiters realizing the threat they pose to the country and its people, there are other significant numbers of countries who have not yet taken the stance against counterfeiters. It’s high time that every country has a common standpoint before it gets unstoppable, as they say, “Proactive is better than Reactive”.

One Comment

  1. January 19, 2018 at 12:33 pm

    Thanks for this post. It was very helpful.

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