The dangers of counterfeit goods regularly make headlines: bad brakes, knock-off tires, lead-laden children’s toys and fraudulent medicines are just a few of the ways that counterfeit goods have harmed consumers. In addition to the direct dangers counterfeits pose, they undermine legitimate enterprise and fund further illicit criminal activity. Now, new numbers reveal the sheer size of global counterfeiting operations as a growing problem that cannot be ignored.
The Organisation for Economic Co-operation and Development (OECD) released new data this spring showing that global counterfeiting amounts to $461 Billion –more than doubling prior estimates released in 2005. That’s also more than double the 2014 profits of the top ten companies in the world combined. The OECD’s study also suggests enforcement efforts should be focused in Asian markets: China and Hong Kong were found to represent 86 percent of the world’s market share of counterfeits.
To give a clearer picture of where the problem lies, U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) also just released “Measuring the Magnitude of Global Counterfeiting,” a report providing a deeper-dive analysis on the part individual economies play in the bigger picture. Looking at 38 economies representing 85 percent of the world’s economy, GIPC’s findings reveal that the next largest share of counterfeiting economies after China and Hong Kong only make up less than half a percent. But the report also suggests that customs authorities are only seizing an extremely small fraction of the value of total estimated counterfeits- as little as 2.5 percent.
What does all this mean for consumers and countries attempting to crack down on counterfeits? The U.S. Chamber’s International Intellectual Property Index, measuring IP strength in key global markets, reveals that few economies have adequate laws on the books to deter counterfeiters. And at the most basic level, customs authorities often lack the authority to seize counterfeit goods at the border, even if officials have the specialized training needed to identify the fakes. Finally, customs officials need more boots on the ground to be able to effectively identify and seize dangerous fakes.
The explosion of the counterfeiting market has obvious ties to the growth in e-commerce. For every counterfeit website that is shut down, dozens seem to pop up in its place. And even for the most discerning consumers, counterfeit sites have evolved into ever more sophisticated-looking copies of legitimate brands.
In addition, many operations have evolved from shipping in large containers to international small package shipping, with an approach that is less wholesale and more retail. Just recently, a Northern Virginia woman was caught in a scheme returning hundreds of fake handbags purchased from online counterfeiters. Over the course of a few years, she returned the fakes to major department stores, stealing as much as $1 million from one retailer alone. The good news is that the U.S. Department of Homeland Security and local law enforcement were able to catch and charge this offender. The bad news is that so many criminals continue to abuse e-commerce marketplaces to hawk fake goods.
In the case of pharmaceuticals, purchasing authentic drugs can be a matter of life or death. Earlier this year, the Los Angeles Times reported that 10 people had died in the Sacramento area, in less than a month’s time, after taking a counterfeit version of the painkiller fentanyl. More than thirty others were treated for overdose. There are believed to be between 35,000-50,000 active online drug sellers in operation, and as much as 96 percent of these online sellers do not comply with laws and standards created to protect patients.
While the challenges grow in volume and complexity, the counterfeiting numbers don’t lie. These are just a few of the examples of the negative impacts of counterfeit goods.
No one wins in a world where the global counterfeiting problem continues to grow at such an alarming rate. The solution starts with increased consumer awareness of counterfeiting as a problem and increased government resources to rein it in.
Mark Elliot is executive vice president of the U.S. Chamber of Commerce’s Global Intellectual Property Center.