This article is brought to you by CSC's Digital Brand Services. Visit their website HERE.

“The internet has just completely changed the face of the problem, made it more complicated and more pervasive… whole industries now have been attacked, not from the street, but from the internet.”

– John Morton, assistant secretary in charge of U.S. Immigration and Customs Enforcement

Imagine your brand is facing a new competitor. But this competitor doesn’t need to abide by industry regulations, slashes production costs with unethical and illegal practices, and cashes in on your reputation to sell its goods. Worse still, unlike you, it is completely unaccountable to customers, shareholders, and governments.

Unfortunately, that’s the reality for many in the fast-moving consumer goods (FMCG) industry – the sector most impacted by the rise in global counterfeiting. With so many consumers now unwittingly buying fake products online, brand reputations are being tarnished by counterfeiters monetizing a brand’s global prestige, or by product recalls and liability claims when counterfeits infiltrate supply chains.

By definition, tracking the size of an illicit industry like counterfeiting is a challenge. That said:

• In 1982, the global counterfeit market was estimated at $5.5 billion, grew to $1.1 trillion in 2013, and is expected to exceed $2.8 trillion by 2020.
• On average, one in six products bought online today is a fake.
• Online, mobile, and social channels offer fraudsters easy, low-cost, and immediate access to a global customer base, as well as almost unbreakable anonymity. 

Today’s brands are in direct competition with online counterfeiters. The sheer size, diversity and unregulated nature of the Internet exposes brands to numerous threats. It takes just seconds to register a domain name, with few mechanisms to prevent someone from immediately infringing on a trademark or other intellectual property. Copycat websites or mobile apps can be built in a few hours – although social media, auction sites, and online marketplaces are all viable alternatives for fraudsters in a hurry.

A COMPLEX CHALLENGE

While counterfeit products can be simply understood as fakes or unauthorised replicas of a real product, the illegal market is a complex web that makes it difficult for brand owners to combat counterfeiting, and for consumers to identify legitimate products. Criminals concerned with making a profit have many avenues available, and goods can be passed off across a wide spectrum:

• Substitute goods: These are goods repackaged with counterfeit trademarks that appear to be brand names. Substitute goods are cheap to manufacture and can net criminals huge profits by posing as more expensive brands. In 2016, 9,000 bottles of generic sparkling wine rebranded as Moët & Chandon champagne were seized – which was worth €1.8m to the criminals.
• Placebo goods: These fakes don’t cause direct harm, but lack the crucial element expected by consumers. Perhaps the most insidious example is counterfeit pharmaceuticals that contain no active ingredient, causing treatment failure, or even death, when given to those with life-threatening conditions.
• Dangerous goods: Sadly, some counterfeiters will stop at nothing to turn a profit, even if it means selling deadly substances or substandard parts. For instance, in 2013 a Chinese air stewardess was fatally electrocuted when charging her iPhone, prompting Apple to start a global programme to replace third-party and counterfeit USB chargers. Such risks mean it’s even more critical for brands to take action and protect customers from fakes.

FAKE ITEMS, REAL RISKS

The economic damage from online counterfeiting is jaw-dropping. Counterfeit sales slash business revenues and harm employment while increasing the need for welfare payments. The earnings the fake products generate are diverted to organized crime, necessitating more spending on policing. 

Each year, the G20 governments lose around €62 billion in tax revenues and increased welfare spending, as well as €20 billion from increased crime and €15.5 billion due to counterfeit-related deaths and healthcare costs.

For consumers, the dangers can be even more terrifying – from financial losses through malware and fraud, to physical injury and even death. Anti-freeze, cleaning products, and nail polish remover have been found in counterfeit alcohol; sky-high levels of arsenic, lead, and mercury have been found in fake make-up. Such items face none of the rigorous safety checks that legitimate products must undergo. 

FIGHTING THE FAKES

The state of play in online counterfeiting means that no brand can afford to underestimate the sophistication of the fraudsters now exploiting the digital world. They have already proven their skill at adapting their tactics to exploit the online environment, even migrating to cyber crime and information theft when it proves more lucrative. They will even use the same intelligent channels as the genuine brands to market their goods.

In the European Union, a third of all counterfeit seizures are already linked to Internet distribution channels, with fraudsters cashing in on rogue e-commerce sites, peer-to-peer auctions, and online marketplaces. 

Mobile, in particular, is a channel to watch. More than half of all web browsing now happens via phones, and they’re increasingly used to make purchases – but smaller screens and on-the-go engagement may leave consumers more prone to being duped.

It’s more crucial than ever for brand owners to manage their online presence carefully. Domain names are a brand’s visibility on the Internet, making them one of the most valuable assets a business can own. Amongst other benefits, having a clear domain name policy and proactively defending their digital assets allows brand owners to safeguard their IP. 

While the digital revolution has armed modern counterfeiters, it can also dramatically assist brands in finding and removing fraudulent sites, listings, and apps. Cutting-edge methods to detect, analyse, and enforce against key infringers give brands an arsenal of techniques against counterfeiters, which is only possible through digital technology. The counterfeiters use the Internet to advertise their wares and this is their Achilles heel – this activity can be detected, prioritised for takedown, and effective enforcement measure can be taken. 

Now is the time to develop a proactive and effective anti-counterfeiting strategy to safeguard customer confidence, brand equity, sales, and revenue.

Corporation Service Company® (CSC®) is a worldwide leader for business, legal, and financial services. We are the preferred solutions provider for 90% of the Fortune 500®, half of the Best Global Brands (Interbrand®), nearly 10,000 law firms, and more than 3,000 financial organizations. Headquartered in Wilmington, Delaware, we have offices throughout the U.S., Canada, Europe, and the Asia-Pacific region.

CSC Digital Brand Services manages and protects more than half the 100 Best Global Brands (Interbrand®), and a growing share of Global 2000® corporations – and because of that, we recognize that each brand has unique digital asset and intellectual property security requirements. Our truly global footprint and in-house experts allow us to continually adapt our advice and offerings to your evolving needs. CSC is also the world’s largest corporate domain name registrar.

Our service offerings include:

• Online brand protection. Anti-counterfeit and marketplace monitoring, brand monitoring, social media monitoring, and trademark and enforcement services.
• Cybersecurity. Domain name system security, distributed denial of service protection, anti-phishing and email fraud protection, secure sockets layer certificates, and domain security.
• Digital asset management. Domain management and strategy, new gTLD registration, social media username registration and services.

Our clients trust us to consolidate and secure their entire digital portfolio, optimize and promote their online presence, monitor their brands online, and enforce their rights against infringements. Our brand protection and security expertise give our clients peace of mind that no matter how fast the digital world changes, their intellectual property and digital assets will be secure.