Introduction

Over the last decades, the threat of counterfeiting has escalated to unprecedented levels, posing significant challenges for brand owners globally. Now, more than ever, the use of technology to combat counterfeiting online and offline is mandatory. This necessity arises not only from the need to protect intellectual property but also from the imperative to safeguard brand reputation, consumer safety, and economic stability. Brand owners, intermediaries and law enforcement authorities must prioritize anti-counterfeiting measures, exploring the critical role of technology in this endeavor and its broader implications for social development.

Protecting brand image, reputation, and revenue

Counterfeiting is not just an economic crime; it is an attack on a brand’s identity and integrity. The proliferation of counterfeit goods can severely damage a brand’s image and reputation, leading to a loss of consumer trust and loyalty. This, in turn, directly impacts revenue and market share. For world-leading brands, this fight is paramount to protect not only the brand itself but also the jobs of the bright minds that drive innovation and growth.

Counterfeit goods are not merely inferior substitutes; they are dangerous. Fake pharmaceutical products, automotive spare parts, spirits, and consumer electronics can severely harm the health and safety of the consumers. Below is a list of risks associated with counterfeit goods as determined by TRACIT (Transnational Alliance to Combat Illicit Trade) during the public debates on the US SHOP SAFE Act, highlighting the potential danger of counterfeit goods.

Small and midsize enterprises (SMEs) and counterfeiting threats

The consequences of counterfeiting to large corporations could be quite severe, especially when counterfeiters are able to make replicas that, at least externally, look very similar to the genuine products (this is the case of many products, such as toys, consumer electronics, fast-moving consumer goods (FMCGs), spirits and more). For small yet successful businesses, the consequences of counterfeit goods could be even worse as counterfeiting poses an existential threat to them. Counterfeiters can quickly replicate successful products, leading to a significant loss of revenue and market presence. In severe cases, this can drive small companies out of business as the sale of counterfeit goods can be even higher than the genuine ones (see the chart below: nabcore.com/how-fake-products-destroy-a-brand-and-the-company/). Therefore, robust anti-counterfeiting strategies are crucial for the survival and growth of these businesses.

Take, for example, a small cosmetics company that has developed a niche product gaining popularity for its unique formulation. If counterfeiters successfully replicate this product, and their version looks externally almost the same as the genuine item, they could flood the market with cheaper, inferior versions. In this case, as the counterfeit product is likely to be inferior, the small business marketing the genuine product could face customer dissatisfaction and reputational damage, potentially leading to its downfall. Hence, investing in anti-counterfeiting measures is not just an option but a necessity for small businesses aiming to protect their market position and future growth. 

It is very important to mention that, for SMEs, protecting the brand while investing heavily in research, development and growth, could be a challenge. Therefore, support from governments (such as the European Union Intellectual Property Office (EUIPO) initiative for SMEs) is crucial to help these vulnerable companies to survive while fighting counterfeiting.

Technology-driven anti-counterfeiting measures

Technological advancements have revolutionized the fight against counterfeiting. From online monitoring tools to advanced offline detection systems, technology enables brands to stay ahead of counterfeiters.

Online brand protection technologies

AI-powered monitoring systems

These systems use artificial intelligence to scan thousands of marketplaces, standalone e-commerce and social media for counterfeit listings. By identifying and taking down counterfeit products swiftly, brands can prevent these items from reaching consumers.

As an example, a major electronics brand implemented AI-powered monitoring across various e-commerce platforms. This system not only identified counterfeit listings but also provided insights into the sources and patterns of counterfeit activity, enabling more targeted enforcement actions. As a result, the brand saw a significant reduction in counterfeit listings and an increase in the sale of genuine products.

Proactive measures

Technologies that prevent counterfeit listings from going live in the first place are game changers. By engaging with online platforms to implement preemptive measures, brands can significantly reduce the presence of counterfeit goods. This could also be considered the ultimate technology for online brand protection.

Proactivity is essential in combating counterfeiting. Brands, along with marketplaces and social media platforms, must adopt innovative approaches to detect and prevent counterfeiting activities before they occur. For example, online platforms should implement technologies that prevent counterfeit listings from going live at the moment any bad actors try to upload the content. Similarly, law enforcement authorities should use advanced technologies to intercept counterfeit goods on a large scale to tackle the problem of small parcels (up to 50kg) and increase the current success rate of only 1%.

An example of this is the implementation of machine learning algorithms that analyze seller behavior and product listings in real-time to flag potentially counterfeit items before they are made available to consumers. This proactive approach ensures that counterfeit goods are stopped at the source, reducing the risk to consumers and preserving brand integrity. The critical advantage of this kind of technology is a sensible reduction of human work in the moderation of the content, allowing the brand to increase the takedowns while reducing the budget and fighting a ‘fairer’ battle against bad actors.

Technologies and system integrations for data sharing

The importance of data sharing between online and offline stakeholders cannot be overstated. Intensive data sharing allows rights holders to increase the success rate of their enforcement activities. For instance, offline providers can share data with online platforms to facilitate more takedowns, while online platforms can share data with customs to intercept more parcels.

The synergy between online and offline data sharing enhances the ability to track and intercept counterfeit goods. For example, customs authorities can benefit from data provided by e-commerce platforms or from providers whose technology is directly deployed into the supply chain, enabling them to identify suspicious shipments more effectively. Conversely, data from offline seizures can help online platforms refine their detection algorithms, creating a robust defense network against counterfeiting. Notably, more than 80% of counterfeit goods originate from China, therefore we are very well aware of where counterfeits originate and despite its frequent mention, it is crucial to reiterate that a collaborative effort between the public and private sectors is essential for success in combating counterfeiting.

Offline brand protection technologies

Logistics and supply chain monitoring

Advanced tracking systems and secure supply chains are critical in preventing counterfeit goods from entering the market. Logistics firms can use technologies such as Optical Character Recognition (OCR) and image recognition to be able to intercept suspicious parcels moving along the supply chain before their delivery to the end consumers. Today, more than 25 million parcels containing counterfeit goods enter the European Union alone, which is impossible to block with the current random checks and no advanced technologies in place at the border.

Using anti-counterfeiting Know Your Customer (KYC) technologies can finally enable intermediaries (parcel and postal firms) and customs to monitor the parcel flow more effectively and increase the number of counterfeit products stopped before the delivery to the end consumers. It is worth mentioning that, often, counterfeit operations are run by criminal organizations so the use of logistics and supply chain monitoring technologies can also allow intermediaries and law enforcement authorities to intercept other illicit goods such as drugs, weapons or explosives.

Collaborative data sharing

Offline providers sharing data with online providers and law enforcement authorities, and vice versa, is essential. For example, customs authorities often struggle to share data due to a lack of resources. Implementing technologies that enable seamless data sharing can significantly improve enforcement efforts, creating a win-win situation for all parties involved.

Data sharing is paramount in the fight against counterfeiting. Brands, online/offline providers, online platforms, and law enforcement agencies must collaborate and share intelligence to effectively combat counterfeit activities. For instance, a luxury brand can provide data on counterfeit hotspots to customs authorities, enabling more targeted inspections and seizures of their products and, most of the time, counterfeit products of other brands as well. Similarly, customs data can help brands and online platforms identify new trends and support new proactive strategies in the detection of the listings and parcels.

Measuring the success of brand protection measures using return on investment (ROI) calculators

Investing in anti-counterfeiting measures can be evaluated using ROI calculators, which assess the financial returns of these investments. These tools help brands quantify the benefits of protecting their products against counterfeiting. For instance, an ROI calculator can compare the costs of implementing anti-counterfeiting technologies with the revenue saved from intercepted counterfeit goods and the sales increase in that geographical area or on that specific marketplace. This measurable approach highlights the direct correlation between effective brand protection and financial performance.

An example of this can be seen in the FMCG goods sector. A toothbrush manufacturer, for instance, had been heavily investing in anti-counterfeiting technologies, such as proactive removal of suspicious listings before going live and supply chain monitoring. These investments, though initially costly, have shown a substantial return in terms of revenue generated on the marketplace monitored and region protected. 

It is important to say that a more accurate figure on the monetary brand value in the company’s balance sheet is crucial. If brand owners are aware of the brand value, then brand protection measures can finally be seen as revenue generating centers instead of pure cost centers.

Achieving social development goals through anti-counterfeiting

Anti-counterfeiting efforts contribute significantly to achieving the United Nations Sustainable Development Goals (SDGs). Illicit trade in counterfeit goods undermines economic growth, public health, and environmental sustainability. Even though many of them are in the early-stage phase, there are available technologies already in the market that allow brands to directly correlate the impact of their anti-counterfeiting activities with the company sustainability goals. In all the measures below, it is evident that it is vital that governments support the private sector (and therefore the GDP of the country) in the fight against counterfeiting.

Mapping the impact on SDGs

Economic growth

Counterfeiting deprives governments of revenues that could be invested in public services and infrastructure. By combating counterfeiting, brands support legitimate economic activities, ensuring that taxes are paid and reinvested into the economy.

A robust anti-counterfeiting framework promotes fair trade and economic development. For instance, reducing counterfeit trade in the fashion industry can lead to increased sales for legitimate brands, resulting in higher tax revenues and more funds available for public investment in healthcare, education, and infrastructure.

Public health and safety

Counterfeit goods, particularly pharmaceuticals, automotive parts, and consumer electronics, pose severe risks to public health and safety. Eliminating counterfeit products from the market protects consumers from potentially dangerous and substandard items.

Consider the automotive industry: counterfeit parts such as brake pads and airbags can lead to catastrophic failures, endangering lives. Effective anti-counterfeiting measures ensure that only genuine, tested, and safe products are available in the market, safeguarding public health and safety.

Environmental sustainability

Counterfeit production often involves environmentally harmful practices. By eradicating counterfeit goods, brands help reduce environmental degradation and promote sustainable manufacturing practices.

Counterfeit manufacturing often bypasses environmental regulations, leading to significant pollution and resource depletion. By eliminating counterfeit goods, brands support sustainable practices and contribute to global environmental goals. For instance, legitimate manufacturers often adhere to strict environmental standards, reducing their ecological footprint and promoting sustainable resource use.

Creating quantitative metrics that allow brands to measure and achieve SDGs is also a key indicator of a company’s finances. Nowadays, one of the key metrics analyzed by investors when allocating their capital to a company is the ESG (Environment Social Governance) Score. A company with successful and measurable anti-counterfeiting measures will therefore have a higher ESG Score which will result in a more appetible company in front of investors, creating the necessary conditions for the company to grow solidly in the future.

Importance of new policies and proactivity

The dynamic nature of counterfeiting requires equally dynamic and proactive measures. New policies that enable stakeholders in the anti-counterfeiting industry to stay one step ahead of counterfeiters are crucial.

Zero-tolerance policy against counterfeiting

A zero-tolerance policy against counterfeiting is vital. Both brand owners and law enforcement authorities must adopt a stringent approach, ensuring that no counterfeit activity is tolerated. This involves taking down counterfeit listings online and removing counterfeit products from the market, regardless of quantity. The goal is to continuously disrupt and dismantle the operations of counterfeiters, making counterfeiting a non-viable business.

Implementing a zero-tolerance policy means that brands must work closely with online platforms, law enforcement, and regulatory bodies to ensure swift and decisive action against counterfeiters. This can involve legal actions, public awareness campaigns, and continuous monitoring to ensure that counterfeit activities are promptly addressed and eliminated.

Technology wise, a zero-policy approach against counterfeiting requires extremely innovative technologies (and a few are already available in the market) as high speed and high accuracy detection and removal of the content is necessary.

Investing in new technologies: challenges and solutions

Budget constraints and brand perception

Brands often struggle with budget constraints for anti-counterfeiting measures, as these are perceived as cost centers rather than revenue generators. However, effective brand protection protects image, reputation, and revenue, allowing companies to grow and flourish. A significant presence of counterfeits results in revenue loss, which can lead to reduced funds for research and development, talent acquisition, and innovation.

Leveraging on the quantitative metrics discussed before, such as sustainability metrics to share with the sustainability team or the ROI calculators to share with the finance team, can allow brand protection teams in starting cross-team collaboration and budget sharing in achieving a common goal. A brand protection team can therefore receive a portion of the budget from other internal teams, as they directly support:

• the marketing team, by protecting the image and reputation of the brand;
• the sales team, by protecting the revenue of the company online and offline; and
• the sustainability team, by sharing quantitative figures on the positive impact on SDGs goals.

Conclusion and final thoughts

The private sector is willing to invest billions in brand protection, recognizing that this is the only way to safeguard consumer health and safety and secure the future of the next generations. Counterfeiting, particularly prevalent in regions like China, poses global threats due to the low-quality materials and environmentally harmful manufacturing processes used by counterfeiters. These practices not only endanger consumers but also hinder global efforts to achieve the 2030 sustainability goals (see sdgs.un.org/goals).

Investment in brand protection is not just about preserving profits; it’s about ensuring the sustainability and ethical integrity of global trade. For example, technology firms are investing in advanced authentication technologies to protect their products and ensure that consumers receive genuine, high-quality items. These investments, in turn, support broader economic stability and consumer trust.

The fight against counterfeiting requires a multifaceted approach that includes advanced technological solutions, proactive policies, and robust data-sharing mechanisms. Brands must prioritize protecting their image, reputation, and revenue while ensuring consumer safety. By adopting innovative technologies and fostering collaboration with stakeholders, brands can effectively combat counterfeiting, contribute to broader social development goals and secure a sustainable and prosperous future. The commitment to a zero-tolerance policy against counterfeiting and continuous investment in anti-counterfeiting measures will be instrumental in winning this ongoing battle against counterfeiters.