The Impact of Product Counterfeiting

The overall costs of product counterfeiting are estimated to be between 5-7% of total global trade - a staggering US$500 billion each year. But who pays these costs? Who really suffers from this crime? The answer is that we all do - consumers that believe they are buying authentic products, legitimate manufacturers that invest in safety and quality manufacturing processes, and retailers that want to provide safe, reliable products to their customers. So how does this $500 billion dollars translate - how do these costs impact us?

Consumers

• Exposure to serious health and safety risks associated with counterfeit electrical products, pharmaceuticals, car parts, airplane parts, baby formula and OTC medicines, etc.
• People that unknowingly purchase counterfeit products, anticipating a bargain, are actually paying an inflated price for an inferior product
• In the United States alone, it is estimated that the crime of counterfeiting has caused the loss of over 750,000 jobs

Retailers

• The sale and distribution of counterfeit products has clear legal risks - whether sold with intent or without any knowledge whatsoever
• Retailers pay the costs of merchandise returns of inferior quality products and suffer loss of goodwill and direct sales as a result
• Cost of recalls
• Counterfeiters are very hard to trace - in the case of an injury associated with a defective counterfeit product - the retailer may be the only traceable company associated with its distribution

Manufacturers

Legitimate manufacturers invest in research and development, they invest in quality materials and manufacturing processes, and they work to meet the conformity assessment schemes of their markets. They work to build brand recognition and to foster goodwill with their end users. The counterfeiters that are their direct competition rely on stealing their brand names and profiting from their goodwill and reputations.

• Direct loss of sales
• Loss of goodwill
• Irreparable damage to corporate brand/reputation
• Trademark dilution
• Costs of protecting and enforcing their intellectual property rights

Get More Facts and Figures

The U.S. Chamber through its National Chamber Foundation has launched a broad initiative to effectively thwart the growing global threat of counterfeiting and piracy to the U.S. economy, the global business community, and consumers. Learn more about the scope of counterfeiting and piracy in their publication, "What are Counterfeiting and Piracy Costing the American Economy?"

In response to the threat posed by counterfeiting, the International Chamber of Commerce (ICC) has launched BASCAP - Business Action to Stop Counterfeiting and Piracy - to connect all business sectors and cut across all national borders in the fight against counterfeiting and piracy. This global approach is designed to support individual company and organizational efforts and amplify business messages with national governments and intergovernmental organizations. Visit ICC Facts & Figures to see their snapshot of counterfeiting and piracy activity by country or by type of item.

The International AntiCounterfeiting Coalition, Inc., (IACC) is a Washington, D.C.-based non-profit organization devoted solely to combating product counterfeiting and piracy. Facts on Fakes is their report on the impact of counterfeiting.

The Organisation for Economic Co-operation and Development (OECD) is a unique forum where the governments of 30 market democracies work together to address the economic, social and governance challenges of globalization as well as to exploit its opportunities. In 1998, they published one of the most comprehensive works aimed at identifying the true costs of counterfeiting: The Economic Impact of Counterfeiting.