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The dangerous dominion of counterfeit technology products

Posted by Laura Urquizu on Monday, Apr 3, 2017

A new OECD report provides some disconcerting information on counterfeit technology products, which are worth a third of all counterfeit trade.

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A new report by the OECD values counterfeit ICT goods as worth $143 billion in 2013, equal to a third of the total worth of the counterfeit trade that year, which the OECD valued at $461 billion. The report details the extent of the problem of counterfeit information and communication technology (ICT) products, which is experiencing a rapid growth alongside that of the genuine market. ICT goods today represent an enormous sector of trade, driving employment and development worldwide, so the estimate that as much as 6.5% of traded ICT products are counterfeit illustrates how damaging counterfeits could be to the global economy.

The counterfeit industry is harmful in a multiplicity of ways. Known to support organised crime activity, counterfeit products also have a damaging impact on industry innovation, luxury brand appeal and consumer buying attitudes. Counterfeit products are also frequently found to be harmful, and this is even more true within electronics products that pose a risk of fire and electric shock, such as in the counterfeit lamp industry. Counterfeit goods do not undergo safety checks, and precise design in electronic items is of crucial importance to ensure of user safety. A study conducted last year by safety organisation UL found that out of 400 counterfeit iPhone chargers tested, three, just over 1% of the chargers passed basic safety tests. 12 of the chargers tested even posed a risk of lethal electrocution from poor design.

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So which products should consumers watch out for? The report explains that ICT products most targeted by counterfeiters include memory cards, sticks and solid state drives, video games consoles and controllers and sound products. Of the latter, excluding MP3 and MP4 players a staggering 14% of traded sound apparatus products are fake. Improperly manufactured sound apparatus, too, can be highly dangerous, as a report of counterfeit JBL bluetooth speakers exploding showed just last week.

And like JBL, within counterfeit ICT goods US companies are being hit the hardest; almost half of all seized counterfeit ICT goods are infringing US brands. The report shows that the second-most impacted country is Finland, but it is interesting to note here that the total number of seized ICT products in Finland is relatively low at just 5% of the total number of products, but the value of Finnish ICT products is equal to almost 25% of all fake ICT products seized between 2011 and 2013. This shows that brands are being affected in different ways; whilst Finland’s luxury brands are most commonly counterfeited, Japan sees a very high number of low-end products counterfeited. This market knowledge can be applied in devising brand protection strategies, which should be tailored to address the specific counterfeit problem experienced by the brand, in level and commerce type.

The OECD report provides some information on the likely countries of origin and transit countries of seized counterfeit ICT products, but warns that the information is based on varying data, and thus should be regarded as estimative. The most likely producer is, unsurprisingly, China, but swiftly behind follows Germany, Korea and Sweden. The identified most likely points of transit for counterfeit ICT trading include Greece, Hong Kong, Chile and Morocco.

Understanding the where, why and how of counterfeit goods is of interest here, as the growing e-commerce market is providing a changing landscape for counterfeit goods: the report details that almost two-thirds of counterfeit ICT goods are shipped by postal or express services after being purchased by retailers and end users online. Changing consumer habits is likely to cause a particular impact for small businesses, as e-commerce platforms facilitate awareness of popular selling products that can be imitated whilst the risk of legal contention is reduced compared to infringement of an international brand.

With this in mind, the importance of a specialised brand protection solution is crucial. Awareness of the changing market highlights the necessity of a digital solution, particularly, and one that is targeted to a brand’s specific level of counterfeit that can be assessed through an online audit. The counterfeit industry continues to rise correlating with demand in genuine markets, and continues to challenge economies around the globe. All brands should take steps to monitor their own level of counterfeit, and work towards protecting their brand and curbing the damaging industry.

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About the author

Laura Urquizu

Post Written by Laura Urquizu

Red Points' CEO Laura Urquizu has over 20 years experience as an executive and board director in banking, venture capital and startups. She has worked with companies like Arthur Andersen, Caja Navarra, Corporación CAN and Inspirit. Laura is a respected expert in the startup field and innovation-based businesses.