Counting the costs of counterfeit goods


From the man on the beach with designer sunglasses, to the market trader selling branded jackets, we’ve all been offered items carrying a luxury brand logo at a bargain basement price.

Despite being aware that these fake products are in circulation, the true extent of the counterfeit produce industry is underestimated by many of us. In fact, trade in counterfeit items is a huge issue. A report by the OECD (Organisation for Economic Co-operation and Development) and the EU’s Intellectual Property Office revealed that counterfeit items represent 2.5% of all global trade value, amounting to a staggering half a trillion dollars a year.

Not limited to any one industry, unscrupulous manufacturers are producing a wide range of counterfeit goods to sell onto unsuspecting consumers and buyers for resale. Whilst you may think that you are getting a bargain when purchasing these products, they could actually end up costing you money, or sometimes more….

In the UK alone, over the past 5 years Border Force have seized goods of a value of around £100 million just at Heathrow, whilst a recent 3-day operation by Border Force at East Midlands airport resulted in over 8,000 counterfeit items being seized, worth £1 million, including Beats headphones, Louis Vuitton handbags and Urban Decay makeup.

Unsurprisingly, the largest market for counterfeit produce is the fashion industry, with handbags, watches and other accessories being the most replicated items, clothing being the next largest market for counterfeit goods.

Whilst it may seem harmless to purchase counterfeit fashion products, there are many aspects to doing so. Aside from the moral implications of buying fakes, counterfeit goods equate to loss of sales for a company, whilst poor quality copies can damage a brand reputation. As many of the goods are sold at much lower prices, as cash sales or by foreign vendors who make no VAT payments, there is also less money going into the economy. It is estimated that as much as 10% of total sales in the EU fashion industry is lost to counterfeit sales, representing an annual loss for the industry of 26 billion Euros.

It’s not just a negative impact economically that needs to be taken into consideration. Counterfeit goods are often produced in factories where workers face poor conditions, low pay and exploitation, whilst profits from the sale of these goods are said to often fund drug dealing or other types of organised crime.

There can also be significant safety implications in purchasing counterfeit products as these copies are not subjected to the rigorous safety testing processes that genuine products undergo.

Potentially lethal chemicals added to fake cosmetics, candles, toys and pharmaceuticals may cause harm to the users, and in the case of medicines, may fail to treat the diseases for which they were intended. It’s thought that about 10% of pesticides in use throughout Europe are counterfeit, posing risks to human health and environmental damage, and resulting in an estimated £65 million of lost revenue in the UK per year.

Fire risks from clothing, electronics, candles and toys can be catastrophic. It is estimated by National Trading Standards that, in just one year, from 2015 – 2016, the work of the Safety and Ports & Borders Team resulted in 1,035 serious injuries being avoided, 887 fires being prevented and three lives being saved.  Whilst work is being done to prevent these incidents, it has been well documented that unsafe products are still making it to the end consumer.

So, given the associated dangers, why is there still such a demand for counterfeit items in the UK? Whilst there will always be some people who will always be willing to buy fake goods, the ever increasing quality of the copies means that, for some people, they cannot detect the difference between fake and genuine goods and they are genuinely being duped in to believing that they have received a real product for an unbelievable price. With online sales on the increase, the inability to see the quality of the product ahead of purchase means that it is becoming harder for consumers to ascertain what is genuine produce and what is not.

More than 80% of these fake goods originate in China and Hong Kong. The rise in e-commerce means it is becoming easier for illicitsellers to get their product to market via online selling. The fact that much of the produce is supplied to the end consumer direct from the manufacturer in small parcels, means it is becoming harder for border force agencies to detect counterfeit goods.

Preventative measures are being taken to lessen the flow of illegal produce to the UK however, with court orders being granted to block websites selling fake goods. The UK anti-counterfeiting police unit, PIPCU (Police Intellectual Property Crime Unit), established just over 3 years ago has successfully shut down 19,000 fake websites.

Brands are also taking steps to ensure consumer safety. GHD, Bose and UGG are amongst a number of brands that have added functionality to their websites to enable consumers to check the authenticity of the goods that they are looking to purchase.

Asides from concerns regarding counterfeit produce, there is the growing market for ‘Grey Goods’ sales, where genuine goods are sold without the owner’s permission, and not for the purpose intended.  Electronics are particularly exploited within this market, through parallel imports; purchases being made from Far East markets by Western consumers. Although not strictly illegal, you could find yourself facing a number of issues if you undertake such purchases. With varying levels of legislation country to country, it is highly possible that the manufacturing specifications of the produce may not to comply with the regulatory requirements for the country the purchase is made in. Often the product warranty won’t be applicable to your home market and it’s not uncommon to face difficulties in securing refunds on purchases if goods turn out to be faulty.

The sale of overruns and products not approved at QC also poses an issue for brand owners. Deemed as a breach of contract by the manufacturers, and not a legal issue, the sale of such items can have a negative impact on brand positioning due to the low costs being charged.  When purchasing these items, it is not possible to be certain that they are even genuine brand products, as some manufacturers and wholesalers disguise counterfeit produce as overruns.

To avoid getting involved in the trade of counterfeit and grey market goods, then it’s wise to follow the principle that, if the price you’re being quoted for the purchase of goods seems too good to be true, then it probably is. And remember, if you’re a retailer looking to sell branded items, you will require a licence from chosen brand partners in order to trade in produce that incorporates their brands.


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