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Counteract Counterfeits

By: Rick Van Arnam, Esq.
Posted: October 2, 2007
Back to the October issue.

The fact that counterfeiting is a global problem comes as no surprise to anyone involved in worldwide production or distribution. As an “industry,” counterfeiting has graduated from the regional distribution of designer goods to a global behemoth knocking off just about any type of consumer product for sale anywhere in the world—including cosmetics and personal care goods.

To illustrate, in April 2006, Australian customs intercepted 30,000 bottles of fake perfume with a street value of US$2 million. In April 2007, police in Moscow seized 1.2 million bottles of bogus perfume and eau de toilette worth $5.7 million. A May 2007 report stated that Doho, Qatar was flooded with counterfeit perfume. And closer to home, a joint enforcement initiative by U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement resulted in the June 2007 seizure of over 950 shipments of a variety of counterfeit goods, worth approximately $700 million dollars, if the goods were authentic.

The Scope of the Problem
Just how big is this problem worldwide? In a June 2007 report issued by the Organization for Economic Cooperation and Development entitled “The Economic Impact of Counterfeiting and Piracy,” illicit cross border trade in “hard goods” is estimated to reach $200 billion. This number is believed to grow to several hundred billion dollars when domestically produced and consumed hard goods and non-tangible goods, such as film and music, are included.

Many factors exist in the ongoing value growth of counterfeit goods. For personal care and cosmetics companies, a key issue is the ongoing consumer desire to have luxury name goods regardless of their authenticity. Organized crime and terror groups have also become active players in this lucrative field, and the traditional methods of interdiction, such as seizing counterfeit products, may be ineffective in the age of the Internet, where products and ideas may be moved or reproduced digitally.