The consequences of counterfeiting: not only monetary losses

01 Oct, 2020

Selling one thing for another, tampering goods in order to increase their commercial value and copying others’ ideas and inventions to make profits are all old and repeatedly pursued actions since the dawn of times. This of course does not mean that they are legitimate and lawful practices. In fact, besides being morally questionable, they are also considered a fraud in most of the cases, especially when patents and intellectual property rights are involved.

The market of fakes has reached impressive dimensions in the last years. The Global Brand Counterfeiting Report, 2018 estimates that the amount of total counterfeiting globally has reached to 1.2 Trillion USD in 2017. The report highlights that factors such as globalization of trade and communication have offered unparalleled opportunities to engage in illicit trade and counterfeiting, dramatically increasing their economic influence.

To make matters worse, the situation does not seem under control right now. On the contrary, illicit markets are growing instead of disappearing. The International Chamber of Commerce estimates that the global economic value of counterfeiting and piracy could reach 4.2 trillion USD by 2022, putting 5.4 million legitimate jobs at risk over that time period.

Because of this situation, recently brands, retailers and online stores have engaged in a stiff battle against fakes. These in fact, cause them damages both in terms of economic losses and reputation. It goes without saying that fakes compete in the market with originals, lowering their sales and compromising their reputation. However, the loss of money and the damage in name are not the only consequences of counterfeiting. In fact, the widespread presence of illicit products in the market, summed with the luck of reliable elements of protection, discourages also new investments in research and development and therefore the flourishing of innovations in that same market. Who would invest in a new product, service or technology, knowing that as soon as it will be launched, it will be easily copied and exploited by third parties?

The illegitimate acts we are addressing, not only have a bad impact on the overall growth of the businesses. They also have large social impacts. Beside discouraging innovation and the high risk of job loss that we already pointed out, there is also a matter of taxes. Illegitimately produced goods are often sold in black markets, implying a substantial reduction in government tax collection. Additionally, it is important to consider the fact that counterfeited products are mostly crafted regardless of safety measures and with lower quality materials, resulting non-compliant with the health laws of most countries.

Finally, after the economic, the social and the health factor, there is an additional risk entailed in the process of counterfeiting: the environmental one. In fact, because of their nature, fakes are always realized under non-regulated circumstances, and, to increase their profit margin, its producers often use cheaper, pollution-creating and sometimes dangerous raw materials.

It is therefore obvious that counterfeiting constitutes a risk for the entire chain, starting from the production site, passing through the producers, till the end user. To address this problem, beside state policies, intellectual property rights and the consumers’ common sense to buy authentic products, a part could be played also by single companies. Frequently in fact, customers really want to avoid fakes, but they don’t have assurances of any kind. The role of each business here is to set a new way of communication and to reestablish a relationship of trust with its customers, providing them with advanced and reliable guarantees of authenticity.

The technology provided by Authena in this case matches exactly the needs of companies and of the whole involved sectors. Combining a physical seal with an advanced digital technology based on IoT and Blockchain in fact, Authena is the only solution available on the market that integrates efficiently:

– Fraudulent re-filling protection
Traceability and grey market prevention
Product opening identification
Effective end user direct engagement
Instantaneous authentication of genuine product

Companies partnering with Authena apply a patented NFC tag to their products via common labeling machines. The tag will then capture data, such as when and where the item is opened, to help prevent fraudulent refilling or content substitution. With the help of an app, the final consumers can also read the tags to ensure that their products have not been tampered after production and access details regarding the supply chain and sustainability certifications.

Alessandro Tacconelli