Buying counterfeit products may seem like a victimless crime, but in reality, the consequences are far-ranging and widespread. You may not know that counterfeiting enables illicit activity worldwide, so what happens if you buy counterfeit goods online?
At a minimum, purchasing fake items infringes upon brands’ trademarks and puts consumers at risk. Whether it’s phony medication or counterfeit luxury goods, counterfeited products pose a genuine threat to public health and safety aside from criminality. Intelligence on the scope and scale of the activity is difficult to assess due to the dynamics of black markets, which are inherently outside of legitimate sales channels.
Nevertheless, a recent report by the U.S. Department of Commerce estimated that counterfeiters earn between $1.7 trillion and $4.7 trillion in sales yearly. Counterfeiters make more illegal sales than drug cartels and human trafficking syndicates combined. Still, you have options if you want to end fake products and build a robust ecosystem of anti-counterfeit protection.
Direct and indirect problems with counterfeits
The magnitude of the problem should give anyone pause, especially those who erroneously think that counterfeiting is harmless. The truth is precisely the opposite because counterfeiting funds organized crime, thus magnifying the impact at a scale few consumers understand. Financial losses in the U.S. range into the billions, and law enforcement authorities continue to seize counterfeit items in large quantities despite increased diligence.
Indeed, the sheer scale of the fraud is hard for consumers to comprehend. Counterfeiting entails a massive organized effort to manufacture fake goods and ship them worldwide, but it doesn’t stop there. These items are often smuggled alongside dangerous controlled substances – or human beings. The financial damage to brands and consumers is noteworthy, yet there are indirect effects that are no less detrimental.
Legal aspects – Civil or penal penalties
Some counterfeiting victims are the most vulnerable of all: innocent children. In the West, child labor laws ended this type of exploitation, but in other parts of the globe, it’s still an issue. The wages paid are significantly lower, and the work environment can be hazardous or life-threatening. From the fraudster’s perspective, there is no moral revulsion against exploiting children as young as six-years-old, as recounted in a report by the United Nations Office on Drugs and Crime.
But the crime doesn’t stop at illegal labor because manufacturing fake goods can supply income for organized criminal activities. Drug manufacturing and human trafficking are horrific offenses, yet there’s also extortion, racketeering, money laundering, and illegal firearms sales in countries with tight regulations. After all, profits from counterfeiting can range into the millions, so there’s always a financial element to the con as well.
The result is an extensive global network of thieves, fraudsters, hackers, counterfeiters, and white-collar criminals who launder illegal profits and take a percentage. Yet, the damages don’t stop there because fake goods can also lead to bodily harm or death.
Health and safety aspects – Many counterfeits are dangerous
Consuming counterfeit products can lead to serious adverse health outcomes, if not permanent damage or worse. An automobile can malfunction at high speeds and cause an accident if it’s repaired with counterfeit parts, or fake fuel can damage the motor. Counterfeit perfumes may contain toxic substances due to no quality controls, and counterfeit beauty products may trigger adverse reactions in people with no history of allergies.
Along those lines, fake medication is the most dangerous. Counterfeit Viagra and Cialis are rampant online, where men purchase erectile dysfunction (ED) drugs online without a prescription. The problem is that many fraudulent Viagra pills may contain potentially dangerous chemical analogs of the active ingredients in ED medicine. Counterfeiters will even manufacture fake cancer medication, which shows that they’ll stoop to any level to turn a profit.
Economic impact – Companies producing genuine items lose money and market share
Ironically, criminals like counterfeiters usually exploit well-known brands to fool consumers into believing the product is genuine. Not only is the consumer receiving a fake item, but the company is also losing the sale. Statistics on how much businesses lose to counterfeiting are hard to come by because many organizations appear reluctant to inform the public about the risk of counterfeiting.
The electronics industry is a noteworthy exception, and major brands like Canon regularly publish warnings about the risk of buying fake accessories. Similarly, pharmaceutical companies like Pfizer also inform consumers of the dangers of purchasing illicit medicines online; however, these companies still lose billions in market share despite these efforts. Government oversight strengthens anti-counterfeiting protections, but they do not suffice to solve the problem since criminals keep finding creative ways to circumvent countermeasures. Thus, the task falls onto the companies to protect consumers or potentially face legal penalties.
Responsibility to rise to the challenge
Law enforcement leaves no stone unturned when stopping counterfeiting, but brands are responsible – or legally liable in some parts of the world – for producing safe goods. Part of that challenge is securing an extended supply chain with multiple international partners because counterfeiters can exploit the system during a change of custody.
Tracking and tracing systems work well, yet some fake goods still reach consumers. One example occurs when the product comes partially assembled. The primary item may be authentic, but the parts required to complete production may be fake. Criminals will stop at nothing to find ways to smuggle counterfeits or sell them through illegitimate channels. The good news is that brands can strengthen their security posture to make counterfeiting extremely difficult, if not impossible.
How can brand owners protect against counterfeiting
The easiest low-hanging fruit to pluck involves encouraging consumers to buy only through legitimate sources. The brand can openly inform consumers of the risk of counterfeiting and provide portals for secure sales. A good example is how HP keeps the public up to date on the latest counterfeit ink cartridges and how to spot them.
Another strategy is to add overt security features like QR codes or holograms to products to prove authenticity. Ideally, a consumer would visually inspect the item for inconsistencies and use the overt markings to confirm their assessment. The problem is that countermeasures that rely on human verification are inherently less secure since fraudsters can remove, alter, or forge them.
How to choose a security feature – AlpVision anti-counterfeit solutions
AlpVision’s anti-counterfeit solutions can build a robust ecosystem of safeguards to thwart counterfeiting before products enter the supply chain. Whereas overt markings aren’t secure, covert protections invisible to the naked eye are preferable. Products are significantly more secure, with counterfeiters unable to mimic the technology. That’s the benefit of AlpVision’s capabilities. It’s extremely difficult to copy the protections when you deploy state-of-the-art tech to hide them.
Still, you can’t rely on human verification, so what’s the alternative? You could use a smartphone instead to verify protections, and our solutions – Cryptoglyph and Fingerprint – excel at stopping counterfeiting. Your brand may not eliminate all counterfeiting, but you can achieve incredible results with AlpVision to safeguard your brand and consumers too.
If you’d like to learn more about which solutions would work best for your business, download our latest white paper for professional guidance on bolstering anti-counterfeiting systems.I download the white paper