Who Cares About a $600 Billion Problem That Can Kill People?
By Al McClain
According to the International Anti Counterfeiting Coalition,
counterfeit goods are a $600 billion global problem on an annual basis, cost
U.S. businesses $200 to $250 billion yearly, and represent five to seven percent
of all global trade.
The counterfeit product problem goes much deeper
than product “knockoffs” (see RetailWire – Fashion
Knockoffs: Good or Bad?) and can have deadly consequences.
Approximately two percent of all airplane parts are said to be counterfeit,
for example. In the past week, Sony warned that phony PlayStation 3 wireless
controllers could explode or ignite and the U.S. Food and Drug Administration
warned consumers about the danger of buying discounted pet medicine online
because the drugs may be unapproved or counterfeit.
Travis Johnson, VP and director of legislative
affairs and policy for the Coalition, said in a presentation to the Florida
Luxury Marketing Council this week that, while counterfeiting is a huge problem,
it is hard to get marketers, retailers, law enforcement or consumers to pay
enough attention to it. He said that it’s
not just phony handbags and sunglasses that one sees sold on city streets.
Everything from pharmaceuticals to software, auto parts, and luxury goods are
being counterfeited. While U.S. seizures are increasing year to year, mainly
via customs enforcement, goods seized represent only a tiny fraction of those
produced and sold. There is an ever increasing variety of counterfeits being
made available, primarily
over the internet on sites such as eBay.
Consequences include the loss of business
revenue, jobs, innovation and tax revenue. China is by far the largest source
of phony products (81 percent) with other developing countries such as Vietnam
part of the problem as well.
And then there are the deadly consequences.
Defective auto and airline parts have the capacity to cause fatal accidents
and counterfeit Colgate toothpaste from South Africa was found to contain
substandard ingredients such as components of brake fluid and antifreeze,
according to Mr. Johnson. The conterfeits became obvious to Colgate because
they don’t have a manufacturing facility in South Africa.
Johnson says the profits from counterfeit products go to organized
crime, drug traffickers, terrorists, and those in the slave and child labor “businesses.” Penalties
tend to be lower than those for other crimes, so it is a “low risk – high
reward” proposition for criminals.
Regarding solutions, there is the Special
301, a report that
the U.S. Trade Representative is required to present to the U.S. Congress every
year that helps define problem countries. The World Trade Organization is supposed
to handle sanctions and resolve disputes, but both the report and sanctions
are subject to all kinds of political considerations. And, there is the idea
of consumer education to decrease demand.
A recent Huffington Post column
by an IBM food and drug safety expert suggested that one solution may be RFID
and bar-coding to track products in the supply chain. Another
may be dot-matrix codes that can be laser-etched or printed on items as small
as individual medicine tablets or capsules.
Discussion Questions: How concerned should U.S. retailers be about the
counterfeit product issue? What steps can manufacturers and retailers take
to help fix the problem?
- The Truth About Counterfeiting – International Anti Counterfeiting
- How to Watch Out for Counterfeit Pharmaceutical Drugs – Huffington Post
- Warnings About Discounted Pet Drugs – The New York Times
- Sony: Beware of exploding counterfeit PlayStation 3 controllers – Examiner.com
- 2010 Special 301 Report – Office of the United States Trade Representative