Counterfeiting is often thought of as a monetary crime, but there are many counterfeit goods and even services that are offered for sale every day. It’s not even on the black market any more. It is possible to find counterfeit goods at your local store these days too.
The total amount of the counterfeit goods market is valued at over $653 billion and accounts for up to 7% of the global world trade annually.
What is remarkable about this above figure is that this includes just 26 different known counterfeit products that are tracked over 88 countries. The real cost of counterfeiting, when the small-time single person setup is included, is easily above $1 trillion. It is big business, especially when intellectual property thefts are included, and only a fraction of it is ever caught. In 2013, the US seized just $1.7 billion worth of goods.
- 84% of the counterfeit goods that the United States seized in 2013 came from China or Hong Kong.
- Approximately 3.7 million doses of potentially counterfeit drugs valued at $10.5 million in 2012 were seized at US borders.
- 16% of counterfeit drugs contain wrong ingredients.
- The percentage of counterfeit drugs that contain the incorrect amount of proper ingredients: 17%.
- 60% of the counterfeit drugs that are sold every year have no active ingredients in them whatsoever.
- The amount seized by the US from China and Hong Kong accounts for just 2% of the total counterfeit trade.
- American companies lost $200 billion to foreign piracy of intellectual property.
Although something seems like it might be a good deal, it really isn’t. Things that are too good to be true almost always are. If you’re purchasing a book that doesn’t have the cover on it, then you’re participating in counterfeit goods. If you get a movie that is copied and there isn’t a distribution license, then you’re also participating in counterfeit goods. These sales affect more than just the intellectual property profits of an artist or business. It also reduces the amount of taxes that are collected, which reduces annual budgets, and that means jobs can be affected as well. Will one pirated movie destroy civilization? Maybe not. Multiply that one movie by 20 million sales and that’s a massive amount of revenue that should have gone to others, but went to criminals instead.
Are Counterfeiters Losing The Battle?
- In Europe, there were almost 87,000 detention cases that were directly attributed to counterfeiting products.
- The most commonly counterfeited product is clothing, accounting for 12% of all the product cases that are discovered.
- Daily use items, such as toys, medicine, or even body care products make up more than 25% all counterfeit goods.
- For counterfeit foods, the leading export of the fake products is Egypt.
- The total value of IPR seizures has increased by more than 25% each year since 2005.
- There was a 25% decline of all importations in FY 2009 compared to FY 2008.
The decline of importations is a good sign that efforts to stop counterfeiting are working, but the value of what is being seized is going up. It’s going way up, in fact, more than $150 per average item that is seized. This means that counterfeiters aren’t focusing on the small things any more. They’re going for high value items to counterfeit because of the massive profit margins that are involved. This means that the total number of counterfeited items might be going down, but that counterfeiting is actually increasing because they’re taking more of an overall market share.
Should We Be Concerned About Counterfeiting?
- India was in third place in terms of total counterfeiting behind Hong Kong and China with $3 million and 1% of the total domestic value.
- Xiushui Market in China is visited by as many as 20,000 customers on a busy day and sells an estimated $12 million worth of merchandise annually – all counterfeit.
- China is estimated to account for 78.5% of the total counterfeit market, both known and unknown.
- The only European country to make the Top 10 list of top counterfeiting nations is Switzerland, which was ranked #8 in the last year.
- In a 2004 survey on eBay, 186 random items were purchased and only 5% of them were found to be authentic.
- Out of 300,000 Dior products and 150,000 Louis Vuitton items offered on eBay during the first six months of 2006, 90% were found to be counterfeits.
- Microsoft found that 39% of the media sold on eBay was counterfeit and another 12% was tampered with in some way.
- Internet auction fraud is the most commonly reported internet crime, comprising nearly two-thirds of all complaints.
This is why counterfeiting is such a big issue. There are goods that are counterfeited so well that people don’t always realize that the item is a fraud. Then they need some cash fast, so they sell the product on eBay. In doing so, they’ve just unknowingly helped the counterfeiting market even more. Then there are the sellers that are blatantly using their home as a front for counterfeit goods, contributing to the problem even more. That’s why saying that counterfeiting is a victimless crime just isn’t ok to do. Anyone who purchases an item with an expectation of authenticity and receives something else instead becomes the victim of a crime. Just because it isn’t always reported doesn’t mean that it isn’t happening.
Is Online Streaming Thee New Form of Counterfeiting?
- Over half of people in a UK survey admitted to purchasing knock-off versions products, including movies.
- 18% of consumers admit to buying fake alcohol, despite the presence of toxic solvents that can cause blindness and even death.
- 13% have bought imitation branded cigarettes.
- There is a direct link to income levels and counterfeit goods purchasing – lower incomes purchase more counterfeit items.
There needs to be a balance between cost and revenue. Apps like Spotify are nice for free, legal music, but the revenues to the musicians are very low – just $0.001 per stream. If intellectual property is valued so low, then it is no wonder that artists are looking elsewhere for income or participating in the counterfeit market themselves. Until counterfeiting pays less than legal purchases or streaming options, then it is going to always exist.