Why is the problem so big?
Counterfeiting is now a big business and it’s easy to see why. Companies or individuals that produce fake goods don’t have to cover research and development, marketing or advertising costs – the biggest cost is making the products look as convincing as possible.
There are also global factors driving the growth in counterfeit goods. Products are increasingly traded internationally, which makes it much more difficult for law enforcement agencies to scrutinise the goods flowing in and out of countries. Many of the goods that we consume in the UK are manufactured in emerging economies such as India and China where the cost of manufacturing is much lower and where the authorities have had less success in addressing the issue.
How does the issue affect organisations and their customers or patients?
In the last decade, brand owners have seen their businesses increasingly damaged by the problem. Lower operating costs mean that counterfeit producers and sellers can undercut their legitimate rivals, steal sales and therefore profits. Counterfeits are almost exclusively of a much lower quality than their legitimate equivalents. Consumers, who unwittingly buy fake goods, will invariably get a substandard product which reflects badly on the companies that produce the real goods and can substantially damage their brand.
Disappointing customers with poor products is regrettable, but there’s a much wider concern about the risks of counterfeits to consumer and patient safety. Legitimate products that are sold in UK stores have to go through rigorous testing and conform to strict standards. On the whole, producers of fake goods do not follow such thorough procedures to check their products are safe to use. Children’s toys are a particular concern. The dangers of fake pharmaceuticals are even more alarming. Patients may be misled into thinking they are treating an illness, when in fact the fake drugs are actually doing nothing or even further damaging their health. There have been cases where fake pharmaceuticals have proved fatal.
How can the problem be addressed?
Concerned about the damage to their brands, their profits and the threats to consumer health and safety, many businesses are ploughing significant resources into combating the counterfeiters. For instance, a well-known luxury goods company, spent more than $16 million last year on investigations, busts and legal fees. However, there is still much more companies can do to prevent counterfeit goods from entering markets in the first place - it’s difficult to reverse the potential damage of counterfeit drugs.
If companies can monitor the identity (and therefore authenticity) of goods at key stages along the supply chain then it enables them to prevent counterfeits from being distributed to consumers or patients. Our standards mean that companies can identify products with unique numbers represented as bar codes or RFID (Radio Frequency Identification) tags and develop systems around them to help trace products throughout the supply chain.
Counterfeit drugs, for example, can be kept away from patients by identifying each pack of medicine with a unique serialised number. This enables manufacturers and other trading partners in the supply chain to use them in their traceability and authentication systems. For example, the manufacturer of a well known drug could hold a database of the unique numbers they’ve used to identify their products. When a pack of medicine is passed from one trading partner to another it can be verified against the central database to confirm if it’s authentic or not.
According to a survey by PTE, 27% of pharmaceutical industry executives admitted that their companies had yet to instate an anti-counterfeiting solution. In other sectors, there are also a significant number of companies who have yet to take steps to address the problem. The implementation of GS1 standards could help all these organisations to develop effective systems so that patients or consumers are kept safe from potentially harmful counterfeit products.