Scope of Global Counterfeiting
• Organisation for Economic Cooperation and
Development (OECD) concluded in a 2007 study
that about 2% of world trade, with a value of
about 176 billion (USD), is counterfeit
• This number exceeds the Gross National Product
(GNP) of entire economies such as Argentina (173
billion USD), Ireland (167 billion USD), Israel (129
billion USD) and Venezuela (128 billion USD)
• Some authorities argue that counterfeits make up
much more than 2% of world trade.
Counterfeit Goods
The spread of counterfeit goods (commonly
called "knockoffs") has become global in recent
years and the range of goods subject to
infringement has increased significantly.
Apparel and accessories accounted for over 50
percent of the counterfeit goods seized by U.S
Customs and Border Control.
Counterfeit Goods
• According to the study of Counterfeiting Intelligence
Bureau (CIB) of the International Chamber of
Commerce (ICC), counterfeit goods make up 5 to 7% of
World Trade, however these figures cannot be
substantiated due to the secretive nature of the
industry.
• In November 2009, the OECD concluded that the share
of counterfeit and pirated goods in world trade had
increased from 1.85% in 2000 to 1.95% in 2007.
• That represents an increase to US$250 billion
worldwide.
Counterfeit Seizures
Scope of Global Counterfeiting
• A very high percentage of counterfeit goods
originate in China
• Counterfeit products infiltrate legitimate supply
chains
• New technologies, including the internet, have
given counterfeiters access to new channels of
distribution
• Counterfeit products are bought and sold in
virtually all economies
Scope of Global Counterfeiting
• Counterfeiters constantly alter their trafficking
routes
• Customs authorities are overwhelmed with
the scale and scope of counterfeiting
• Free trade zones are used to ‘sanitize’
manifests as to the origin of counterfeit goods
• Free ports are transit points that enable
counterfeiters to conceal distribution
Factors Behind Counterfeiting
1. Freer trade – relaxed border controls
2. Long distribution chains; parallel trade; trading
of pharmaceuticals by brokers as commodities
3. Economic motive – poverty, and looking for
“bargain” products
4. Lax enforcement – low prioritization to
counterfeits
5. Loose distribution systems outside pharmacies
6. New element -- the Internet
7. Weak intellectual property protection
8. Not recognized as an international threat
Effects on Supply Chain
• Intellectual Property (IP)
rights owners require
more protection to
safeguard their brands.
• Counterfeiting affects
distributors, retailers and
other suppliers
throughout the
distribution chain.
• The cost of combating
counterfeiting is growing.
Effects on Consumers
• Consumers are cheated out of quality products and are exposed to health
and safety risks
• Safety issues are prevalent in many sectors, including:
 Food and beverages
 Pharmaceuticals
 Automotive and machinery
 Electrical components, including:
• Relays and contacts
• Timers, circuit breakers and fuses and
• Wiring accessories and batteries
• Substandard items can cause property damage, illness, injury and death
Intellectual Property
Intangible creative work—not necessarily the physical form on
which it is stored or delivered.
Given legal protection in the form of copyright, patent,
trademark, and trade secret laws.
Copyrights are granted for a limited, but long, time. Fair-Use
Doctrine
– Permission to use the work is not required.
– Allows uses of copyrighted material that contribute to the
creation of new work and do not significantly affect sales
of the material, thus depriving copyright holders of their
income.
– Allows some research and educational uses as well as
news reporting and critiquing.
– Guidelines for determining Fair Use are found in law.
Ordinary Items Now Counterfeited
With the market in fake goods expanding, shoppers need to
know the warning signs -- not only to avoid wasting money
but because such products can carry health and safety risks.
Shoppers in the market for designer handbags know to be
wary of the too-cheap-to-be-real "fauxch" -- that is, faux
Coach bags -- just as those looking to cut their prescription
bills can assume that the emails in their spam box for discount
Viagra are, at best, offering sugar pills. But experts say even
scam-savvy consumers may unwittingly buy some of the
newest counterfeits popping up in unexpected categories.
Perfume
In December 2011, police in Monroe, Ohio, seized
more than 500 bottles of fake perfume from local
flea markets, with mimicked scents ranging from
$85 Chanel bottles down to $40 Beyoncé scents.
What's inside a replicated perfume bottle is
anybody's guess. At best it is a perfume, but one
that smells nothing like a designer scent and may
have been watered down.
Fakes more often contain chemicals like antifreeze,
cleaning solutions or human urine, any of which
may cause a rash or other skin problems.
Shampoo
• It's not just pricey salon brands that are at risk for
counterfeiting. Labels found at the drugstore have caught
fakers' attention, too. Some are little more than water,
fragrance and a thickening agent, but anything that suds -notably, cheap cleaning solutions -- can be substituted for
the actual shampoo.
• Late last year, Beijing police seized more than 2,000 boxes
of faux shampoo bottles that were contaminated with
sulfur, as well as mercury and other heavy metals. That's
too harsh for a product that's going on your scalp and
possibly dripping near your eyes. (And shoppers can forget
about any label-promised moisturizing, volumizing, colorprotecting or anti-dandruff effects.)
Honey
Recent tests by Food Safety News found that 75% of store
honey isn't really honey. It still comes from bees, but the
pollen has been screened out, ostensibly to keep the
honey from crystallizing.
Food safety experts say this may also be done to hide the
honey's origin, says Andrew Schneider of Food Safety
News.
Many regulators don't consider the food honey if there's
no pollen, but there could be more serious problems, too
While shoppers might not notice a taste difference, tests
found that a third of the faux-honey imports from Asia
were tainted with lead and antibiotics.
Toothpaste
The Food and Drug Administration warned consumers
about Chinese-made toothpaste in 2007, saying it
contained a poison used in antifreeze.
That's still a common adulterant, and one that you don't
want to put near your mouth, let alone ingest, Halloran
says.
Other unsafe-for-consumption chemicals may be used,
too, either as a way to make the paste white or to create
the right consistency, she says. Pastes may also lack
fluoride or can be contaminated with bacteria.
Maple Syrup
Vermont's U.S. senators recently announced
they would co-sponsor a bill to make it a felony
to sell fake maple syrup as the real thing.
Violators could face up to five years in prison.
Fakes may be made in part, or entirely, from
cane sugar rather than the more expensive
maple sugar.
The big risk here is financial -- a gallon of real
maple syrup can run $30 or more.
Baby Formula
That chalky taste may in fact be chalk, which is commonly
used as a filler to give the fake product the right
consistency.
Of course, fake baby formula isn't likely to have the
recommended levels of protein and other nutrients,
either.
Both factors can be problematic: In 2004, more than 60
Chinese infants died after ingesting fake formula.
The Food and Drug Administration warns that infants may
be intolerant of such ingredients and could "experience
serious adverse health consequences."
Sunscreen
• Fake sunscreen can burn people twice -- first at
the cash register, then at the beach. Counterfeits
often contain chemical additives, but they can
also simply be cheap, all-purpose skin lotion,
which provides zero UV protection.
• It's easy for a counterfeiter to make something
look like cream without containing the expensive
ingredients someone is buying it for. (The same
warning holds for anti-aging creams and lotions,
which are another common counterfeit category.)
Counterfeit Medicines: A Special Case
• For most counterfeit products, the costs to consumers are
indirect – I.e., product development
• Not so for medicines – costs are direct and serious – death,
disability, resistance to legitimate drugs
• There is a need for far greater awareness of the hazards to
health and a far greater political commitment to
international cooperation
• Pharmaceutical companies: not only concerned about loss
of revenue but also about the damage to patients’ and
physicians’ confidence in legitimate products if ineffective
or dangerous copies are in circulation
Counterfeit Medicines: A Special Case
World Health Organization
A counterfeit medicine is one which is
deliberately and fraudulently mislabeled with
respect to identity and/ or source.
Counterfeiting of medicines can apply to both
branded and generic products. Generally,
counterfeit products may include products with
the correct ingredients or with the wrong
ingredients, without active ingredients, with in
correct quantities of activities ingredients or with
fake packaging
Counterfeit Medicines: A Special Case
“Counterfeit” does not include legal generic
versions* of patented medicines: local laws
dictate this, consistent within international
rules.
*There are issues about generics in connection with the
problem of substandard medicines
Why are Medicines a Target?
Medicines represent one of the most regulated sectors
of industrial activity. Why do they attract
counterfeiters?
– They are a relation to their bulk and a fake can be made
relatively cheaply
– Many countries, especially in the developing world are
without adequate regulation and enforcement
– Even in the industrialized countries, the risk of prosecution
and penalties for counterfeiting are inadequate
– The way in which medicines reach the consumer is also
different from other goods: the end-user has little
knowledge of the product
Pharmaceutical Counterfeiting
• There is no such thing as a “good quality”
counterfeit drug
• Developing countries are the worst affected
because regulatory structure is weaker; useful
generics counterfeited
• Prices vary widely globally, thus counterfeit
medical products are often widely (parallel)
traded
• Counterfeiting is not just a “brand” issue: i.e.,
generics are more extensively counterfeited –
especially in poor regions