How to counter pervasive counterfeits

Counterfeiting generally refers to the action of producing or packaging any product that is not distinguishable from a registered one produced by an authorized trademark owner. Almost none of the products we see has been left out from being counterfeited thanks to tax market administration. The list includes medicine, baby formula, electrical equipment, fuel, musical instrument, spare parts of vehicles, designer goods, software and what not.

Ultimately the vastness of the loss doesn't remain confined only to economic loss, although it consists of 7 per cent of total world trade (formally unaccounted). It also causes deaths, illnesses and injuries; motivates illegal black-market transaction; sponsors the absence of regulatory controls and flourishing of terrorist groups, crime syndicates etc.

The economic cost includes loss of business revenues, tax revenues for the government and funds related to the activities for tackling the problem.

The European Commission reported that, out of total counterfeit production and trade around the world, 17.9 per cent originates from Poland, 17.5 per cent from Thailand, 12 per cent from Turkey, 10.5 per cent from the USA and another 10.5 per cent from China. These are reported as the most renowned counterfeiting countries.

Now, why and how is the practice successfully prevailing in the market system? A recent research done by the Organization for Economic Cooperation and Development (OECD) finds anonymity, flexibility, size of market, market reach and ability to deceive successfully as the most prevalent factors working behind the scene of this immensely expanding problem. Furthermore, the risk of counterfeiting is generally very low as legal constraints are not clearly defined and addressed in most countries. Again, in counties like the USA, the UK, other EU countries etc. where Intellectual Property (IP) infringements and violations are known to be controlled strong handedly, the law enforcers don't find counterfeiting important enough when compared to other violent crimes and crimes regarding physical property.

A recent consumer research done in Bangladesh showed that level of income of the consumers, brand image of the real product, attributes of the counterfeit product compared to the real product and lack of ethical consumerism plays a vital role in the spread of counterfeit products. Surprisingly, the promise of low price of counterfeit goods has very little or no contribution to the ‘purchase decision’ of the consumers. Because, in most cases, counterfeiters deceitfully take the same price as branded goods from the consumers.

The counterfeit goods are presented as authentic, thanks to today's high-end, sophisticated but low-cost production technologies. Also, the internet provides a vast opportunity to a counterfeiter, as any Google search done by a consumer for an authentic product will so much likely display different websites offering counterfeits as well.

Accompanying the research participants is a universe where people are duped by retailers into purchasing counterfeit goods. There are consumers who have the capability, intention and necessity to purchase the authentic variant of products. But through various retailing tricks they are given the counterfeit one, often at the same markup. These happen through a combination of means adopted by shopkeepers, scrupulous suppliers and lack of distinguishable features in original products.

For many sensitive products which have a direct impact on adult or infant health, this is a dangerous situation. Medicines, baby food, cosmetics, electronic items are a few of many examples. An illicit compound on a product can force you to fork out way more than the actual price for restoration treatment. But that's only the risk to consumers. Companies, without having any control over these illegal acts, will automatically be maligned by the crowd.

Sometimes, retailers would cite the unavailability of original products to push sale of fake products. In many areas, where another shop is far away and product choices are limited, this becomes a dirty way of making consumers purchase fake products. Products which are largely found in a cluster of retailers can employ this tactic to pressure consumers into buying a fake product. Paper-product markets, electronic goods hubs are fertile breeding grounds for this tactic.

Products which are pricey and bought infrequently see a different kind of tactic being employed. Tyres, batteries suffer in instances such as those. Prices of original goods are marked up. As a result, when consumers try to make a bargain, they are given a way out, but only by purchasing a fake good at a lower price. Imagine the network effect of this tactic. The existence of whole businesses can be threatened by it.

The most obvious and the most ubiquitous among these tactics is simply swapping fake products for real ones, where consumers pay the same price and retailers pocket the larger profit margin. Products which are frequently used suffer the most from this.

The above can be done so rampantly since counterfeiters can make fake products look like real ones, sometimes by making from scratch look-alike labels and often reusing the product containers. Consumers can't rely on their human senses to differ between those two and end up being duped.

However, problems are not problems but situations which has solutions. Only planned action is needed to get there. Help is out there though, only if one wants to take it. We're talking about technology.

If one takes away counterfeiter's ability to copy labels at scale and give consumers a definitive way to understand authenticity of products, there will be a way out.

Leading manufacturing firms in Bangladesh have started adopting such means to safeguard themselves and their consumers. The basics of that idea are to give a unique identity to each of the products. When each of the products has a unique identity assigned to them, usually by unique codes being printed on them, they become different from one another and are no longer open to be mass copied by counterfeiters.

Consumers on the other hand can check those unique codes with their mobile phones, by sending an SMS or through websites and apps, to know definitively that those are authentic. Fake products can't have unique codes printed on them and won't return similar responses either. No longer will consumers have to rely on their human senses, electronic verification removes that dependency thus making the process closer to being foolproof.

Consumers prefer a worry-less purchase experience, similar to the experience brand stores give. Short of being able to provide physical store experiences everywhere, companies can use this verification technology to give the same worry-less experience to their consumers at any shop they buy their products from.

Companies need to step up here. Innovation has risk. Nonetheless with it comes the possibility of big rewards. Trying something new means breaking the barriers of inertia. They won't be alone. A leading pharmaceutical company in Bangladesh has generated great returns by properly leveraging such a verification service for their best-selling medicines. A number of local manufacturing firms have also taken the first steps towards adopting such services. They are the frontrunners and will reap the biggest rewards down the line.

Counterfeits are there in the market. But it doesn't have to be the status quo. Technology can aid companies to stay ahead of the curve and empower consumers to definitively identify counterfeits. That work has started in Bangladesh. It will only get bigger.

Souvik Aswad is the founder of Panacea Live, a technology company. Hossain Mohammad Omar Khayum is a post-graduate student & research associate at the Department of Development Studies, University of Dhaka. Souvik can be reached at [email protected] and Hossain at [email protected]