The internet is awash with ersatz products: leather goods stamped with a luxury brand’s label, knock-off clothing aping the styles seen on the runways in Paris and Milan but coming from Chinese factories, reproduction footwear and bogus electronics.
In fact, two in five branded products purchased online are counterfeits, according to the U.S. Government Accountability Office. And a recent study by the Organisation for Economic Cooperation and Development (OECD) and the European Union’s Intellectual Property Office estimated that counterfeit goods now account for 3.3% of global trade—more than $500 billion.
As consumers witting or unwittingly purchase counterfeits, brands are losing money. According to the Global Brand Counterfeiting Report 2018, losses due to online counterfeiting amounted to $323 million in 2017, with high-end consumer good sellers hit the hardest.
Counterfeiters not only siphon sales from established brands, taking a free ride on their investment in branding, quality and advertising, but they also compromise their reputations and dilute their high-end brands, particularly when they deliver shoddy products. And some counterfeit goods are downright dangerous. Fake electronics are responsible for fires and electric shocks while fake drugs, like knock-off Viagra, can cause serious health problems.
Meanwhile, the money consumers spend on counterfeits, either knowingly, in search of a deal, or because they’re duped, has become an important source of income for terrorists and other criminals. The terrorist cell responsible for the attack on the offices of French magazine Charlie Hebdo in 2015 funded their purchase of weapons by selling fraudulent Nike sneakers.
It’s little wonder then that preventing intellectual property infringement and stopping the sale of counterfeit goods has become a priority for targeted brand owners, law enforcement and payment processing firms. Brands looking to tackle online counterfeiting and protects their brands should employ a holistic approach, taking in monitoring, mitigate and enforcement.
The first line of monitoring is usually web crawling—employed by many brand owners, banks and payment companies to scan the thousands of online marketplaces, merchant sites and a mushrooming number of apps where counterfeit items are flogged.
However, traditional web-crawling technologies are limited to searching text, leaving a loophole for unscrupulous sellers. Increasingly, vendors of fakes are using vague text descriptors like “luxury” and “top end,” paired with images that show potential buyers exactly what product the item is pretending to be. Artificial intelligence can thwart these sellers. AI image analysis can detect brand logos and other signature graphics from photos of products and rumbling even the sliest fraudsters.
However, some counterfeit items will still slip the net. That’s where a mitigation strategy can help. Brands are encouraged to incorporate into their goods features that are difficult or costly to replicate. These could be holograms or distinctive packaging. Anti-counterfeit packaging has become so widespread, across industries from clothing and accessories to pharmaceutics to car parts, that the market for it is projected to reach $200 billion by 2024. Customers should be educated to recognise these distinctive markers, which tip them off is a product is genuine or a forgery. Brands should also direct these customers approved e-commerce vendors and suppliers, so they avoid unregulated marketplaces and social media platforms.
Customer education can also help with monitoring: well-informed consumers, particularly brand loyalists and fans, can also be marshalled to detect and report counterfeits online.
Once identified, counterfeit goods and their sellers can be removed from online marketplaces, have their websites deactivated and face legal action.
Some brands undertake these actions in-house but many are now relying on dedicated providers which specialise in online brand protection. These providers do everything from web crawling to purchasing suspected counterfeits items to gathering evidence about vendors that can form the basis of a raid or legal action.