How Counterfeit Products Affect Brands and Consumers

The omnipresence of digital platforms and ecommerce have ensured ease in transactions, without the hassles of red tape. Trade of products has never been easier as it has been in a digital economy.

India liberalised its economy in 1991, and ever since, has seen a growth in consumer goods production. The e-commerce sector is expected to touch US $ 200 billion in 2026, according to the Indian Brand Equity Foundation. This unprecedented boom has also led to a huge counterfeit market not just across the world but also India.

China and Hong Kong top the list of countries which trade counterfeit and pirated goods, followed by India with 3.4%, according to a report released in March 2019 by the OECD and the EU's Intellectual Property Office. The volume of counterfeit products traded across the world is 3.3 per cent of all trade in 2016, according to the report.

Counterfeit Products Across Industries

Counterfeit goods can be replicas or first-copies, making it difficult for the layperson to differentiate. Replicas can be as expensive as the originals. Counterfeit products can also be knock-offs, wherein the quality is lower. Many times, consumers are aware of these knock-offs but may buy them because they are not as expensive.

The construction industry, much like others like luxury goods and Pharma sectors, has also had to battle counterfeit products and materials. While many counterfeit products may be sold at lower rates, it helps to understand the harm that fake products can cause. Take the use of counterfeit construction material, for instance. They can lead to poor construction quality, which in turn, could affect the longevity of the building. We have all heard of umpteen building collapses, structures caving in et al, owing to the use of imitation construction material.

Brands that have spent years in R&D, trying to evolve products or goods for the benefit of consumers are also at risk. Cheap imitators may use their brand name or product so the original brand may lose out. There is an infringement of copyright or trademark but there is also a serious fallout in terms of the fake seller gaining financially at the cost of the original. Then, there is a much bigger issue of loss of brand equity, reputation and trust earned over the years by the original brand, in case the counterfeit product malfunctions or causes harm to the consumer.

Measures to Fight Counterfeiting

What can a brand do then, to curb counterfeiting? There is legal recourse, of course. There are several Acts such as the Trademarks Act 1999, Copyright Act 1957, IT Act 2000 and Designs Act 2000 among others to help with infringement of copyright and trademarks.

Technology is also now playing a crucial role in curbing the problem of counterfeit goods. Brands use technologies such as Radio Frequency Identification (RFID), security holograms, barcodes or QR codes. Artificial intelligence and blockchain technology are also being deployed to counter fakes in the market.

Brands would also need to closely monitor online and offline tracking to spot counterfeiters. Market surveys and routine modification of design and packaging to make it difficult for counterfeiters to catch up will all help. Brands will do well to create consumer awareness. They can leverage digital and social media platforms as well as mass media to help consumers stay watchful. They can provide information about their products, policies, trademarks and pricing. They can also educate consumers about why their products are better than counterfeit ones — in cases such as pharma, construction material or electrical equipment, imitation goods can cause real harm, and consumers need to know. Counterfeit machinery, construction material or drugs can cause loss of life, and not just property.

On their part, consumers need to keep a close eye on refunds or returns policies, online reviews, pricing and do their research about the brand, their after-sales policies and support.