The repercussions of counterfeiting span much farther than the significant economic losses. In an interconnected global system, the hidden costs of counterfeiting pose serious implications that affect innovation, national security and the safety.
Consumer Health & Safety
Counterfeiting isn’t something confined to designer apparel. The newest commodities for counterfeiters are perhaps the most dangerous of all— ingestibles and personal care like medicine, food and cosmetics.
Unlike legitimate products that are regulated by government agencies, counterfeits have not inspected for safety. Unregulated and toxic ingredients found in such goods pose an enormous risk to consumers’ health- causing disfigurement, illness or even death.
Without safety standards, counterfeits become safety hazards to consumers. From exploding electronics to malfunctioning jet engines, counterfeits have the potential to threaten and take lives.
Generally, counterfeit products are not manufactured to the same environmental standards as legitimate goods. Examples of environmental damage have occurred in the chemical industry, whereby products like counterfeit fertilizers have caused serious environmental damage.
Diminished Rule of Law
Corruption directly undermines governance and the rule of law. Illicit trade is a criminal enterprise without regard for standards, regulations or the law.
Crime & Terrorism
Violent criminal and terrorist groups have been known to profit from illicit trade. The fake goods industry finances organizations linked to gambling, money laundering, drug trafficking, extortion, prostitution, and human trafficking.
Diversion of Funds
With the rise of criminal entities controlling illicit trade, the government is forced to divert increasing focus and resources to law enforcement efforts.
Border Security Threats
The distribution of counterfeit goods depends on the corruption of officials, unauthorized routes, and falsified documents– the same infrastructure used by criminal transport of illegal goods, weapons and terrorists.
The majority of counterfeiters operate overseas in China and third world countries. The International Anticounterfeiting Coalition estimates that counterfeiting costs U.S. businesses $200-$250 billion each year. That results in the loss of more than 750,000 American jobs.
Enterprises producing illicit products are much less likely to adhere to labor and safety standards. Workers assembling counterfeit goods are underpaid and overworked— and oftentimes are children who are forced to work in horrific slave-like conditions.
Tax Revenue Loss
According to the International Chamber of Commerce, the global trade in illegitimate goods has grown to approximately $600 billion annually, which accounts for 5 to 7 percent of all global trade.
Illicit goods deprive the government of tax revenue. Because counterfeits are made offshore and sold on the black market, there are no taxes paid to our government to improve the welfare of our country.
Counterfeiting undermines innovation. It dilutes centuries of skill and craftsmanship and redirects the equity from legitimate brands to illicit goods.
Fighting illicit goods becomes a direct cost for brands and contributes to a less conducive business environment.
Fraud and Identify Theft
Buying illicit items online can put customers at risk of identity theft and credit card fraud. Counterfeit merchants are conducting illegal operations and have been known to steal personal and/or credit card information.
Although law enforcement efforts in the U.S. tend to concentrate on manufacturers and retailers, consumers are still at risk of facing prosecution. Consumers caught importing or purchasing multiple fakes may be charged with trafficking that results in fines or even arrest.
So why does counterfeiting remain so rampant? Consumer demand. If fakes weren’t being purchased, criminals would have no incentive to make and sell them.
You can help solve the problem by not buying counterfeit goods. To ensure you’re buying authentic, always purchase from a brand’s authorized dealer.