It happens countless times every day: Someone buys a $2,000 Louis Vuitton bag, or $2,500 Nike Air Yeezy shoes, or a $7,000 Rolex, only to find out later that the item is a fake.
Beyond the potential hit to brand revenue and reputation, should the legitimate IP owner be concerned?
On all counts, yes. Too often a consumer who complains about being deceived by counterfeiters is told by the real brand owner: “There’s nothing we can do.” The brand might hate that counterfeiters are infringing on its trademark and disappointing consumers, but it relies on customs authorities, online brand protection algorithms, governments, and social media platforms to clear the field of fakes. Taking on criminals more directly— even criminals hiding behind the brand's good name — is written off as an impossible task.
Here are the four top reasons that needs to change:
1. Stealing money from the public good
The production, distribution, and consumption of counterfeit goods denies billions of tax dollars that would go into schools, roads, public health, environmental protection, safety, policing, and economic growth for countries all over the world.
According to Europol, counterfeit goods earn their sellers $461 billion USD per year, and the OECD/EUIPO forecast that the value of trade in counterfeit and pirated goods could reach $991 Billion by 2022. Because all of that revenue is earned by illegal activity, none of it is taxed. For the European Union alone, the OECD reports a loss of 14.3 billion EUR in annual tax revenues, including VAT and excise duties.
What might those countries accomplish for citizens with 14.3 billion EUR in additional tax money?
The manufacture and sale of counterfeits also inflicts higher costs on the public who are paying taxes, because it takes away money that would otherwise pay for social benefits. Additional law enforcement, litigation, security, and policing expenses are one category of extra expense. Another is funding for public health systems managing the fallout from the abuse of workers and their exposure to unregulated toxic materials.2. Undermining environmental regulation
With global warming causing record temperatures, rises in sea levels, greenhouse gases, and deadly floods, now is the most critical time in our history to be actively preventing new damage to the planet. And while governments struggle to do this with the legal and known industries, they have no power to prevent the damage that the hidden counterfeit industry is doing to our environment.
Counterfeit manufacturers produce fake goods in the cheapest ways possible, in the dark, with no official oversight over the toxins they add to our air, water, and soil.
Because these criminals are operating under the radar, the unregulated air pollution from their manufacturing is causing an unknown and possibly devastating effect on greenhouse gases -- gases that are already at an all-time high. Substandard counterfeit agrochemicals such as pesticides, used by these illegal operations, can also cause environmental damage, which could spread to food chains and harm wider ecosystems..
The damage is not just being done in the manufacturing of these fake goods. The fact that we have yet to identify and target these illegal producers means that there is no one to blame, and subsequently force to clean up this environmental damage.
And then there’s the “garbage” side of it all. Not only do consumers throw out these cheap, low-quality products to live forever in a landfill, but legal authorities overwhelmed by the flood of sequestered goods tend to destroy them by burning – causing still more air pollution. In 2011, customs authorities in the European Union alone, seized some 115 million items ranging from sunglasses, bags, and shoes, to medicines, electronic devices, batteries, refrigerants and pesticides. Over 75 percent of these goods literally went up in smoke.3. Exploiting vulnerable workers
The most heart-breaking and human cost to this counterfeiting problem is the loss of jobs to legal workers, and the horrendous abuse of the workers that end up doing the counterfeiters’ dirty work.
Researchers estimated a net job loss of 2 to 2.6 million globally in 2013; they expect those numbers to rise to 4.2 to 5.4 million by 2022. The OECD estimates that the 85 billion EUR of imported counterfeit goods counterfeit causes the loss of roughly 800,000 jobs annually in the European Union alone. The increasing unemployment rates devastate personal financial situations for families, as well as burden state and federal welfare programs.
And then there is the truly cruel side of this already dark enterprise. Unregulated manufacturing encourages worker exploitation, child labor, and dangerous working environments. Workers are paid extremely low wages and safety and security concerns are ignored, while benefits are non-existent.
Counterfeiting sweatshops involve the excessively cruel and criminal treatment of children as young as 6 years old in various countries where workers are forced to assemble counterfeit goods. In her book Deluxe: How Luxury Lost Its Luster, Dana Thomas writes:
“The owners had broken the children's legs and tied the lower leg to the thigh so the bones wouldn't mend. [They] did it because the children said they wanted to go outside and play.”
If that doesn’t make you want to stop the trade in counterfeit goods, nothing will.
This modern-day slavery doesn’t stop with children. It has been documented that migrants who have been smuggled into a country are frequently coerced into selling counterfeit goods. “Retail workers” in the counterfeit industry are often nothing more than indentured servants working long hours in tough conditions to pay off a smuggler’s debt that will never be paid.4. Nurturing organized crime
In addition to all of the previous facts about how the counterfeit trade negatively affects people around the world, you should know that turning a blind eye to counterfeits allows money and power to sustain illegal mafias, organized crime, and terrorist organizations.
The International Anti Counterfeiting Coalition and Interpol state that there is “strong evidence suggesting, if not proving, that organized criminal groups and terrorist organizations are increasingly turning to intellectual property theft as a means to raise funds.”
Organized crime groups, specifically groups such as the Mafia and Camorra in Europe and the Americas, and the Triads and Yakuza in Asia, have diversified into the illicit trafficking of counterfeit goods in order to fund their other criminal enterprises, such as money laundering, excise fraud, sex trafficking, and drug trafficking.
In the U.K. alone, a survey conducted by the IP Crime Group showed that 40 percent of respondents had worked on cases where counterfeiting was linked to drug crime, while 29 percent stated that they had found a connection between counterfeiting and overall organized crime.
With all of these horrors, consumers and ethical brands are realizing that stopping the production, distribution, and consumption of counterfeit goods is a imperative that no one can afford to ignore.