The Fake Economy is Big Business

How Can Companies Counter Counterfeit?

You might not know it, but there’s every chance that you’ve invested in a fake. Almost anything can be faked, from socks to electrical devices. The easier something is to make, the more attractive it becomes as a target, so the percentage of counterfeit apparel is higher than that of electronic goods. In 2016, 41 million fake items were detained by EU customs enforcement. The combined value of their genuine equivalents was over €672 million. The availability of small scale manufacturing materials and machines has only served to accelerate the creation of counterfeit products, but without doubt the most important enabler has been the Internet. The digital space is the perfect trap for unwitting customers looking for a bargain. So how has counterfeiting impacted supply chains, and what can be done to stop it?

Muddled medicines and exploding electronics
Counterfeit goods aren’t just dishonest – they’re dangerous. In many instances, the use of a dodgy product can be life threatening. Wearing a fake designer scarf probably isn’t going to do you much harm, but pressing your face up against a faulty camera just might. There’s really no limitation on what criminals can replicate, as long as they have the necessary tools. Over the past year, the City of London Police have been investigating the sale of dodgy car airbags. Around 680 people are thought to have purchased the airbags, unknowingly putting the lives of themselves and their passengers at risk. It goes without saying that treating a patient with fake drugs can be lethal. The growing number of online pharmacies, coupled with under regulated wholesalers, have exacerbated the problem. As well as causing serious physical harm, manufacturing and selling fake products can damage brand identity. If a consumer never realises that the faulty item they’ve bought isn’t from the intended company, then they will blame that brand. That’s already a considerable slice of the consumer market, given the number of detained fake goods in the EU alone. Unsurprisingly, businesses including Japanese camera manufacturer Canon have levied committed campaigns against forged or fake goods. Thankfully, a range of connective technologies is now available to make this easier.

How can technology challenge counterfeiters?

Although technology has enabled criminals to create more convincing fakes, it is also helping brands to protect their products. Canon, for example, have added anti counterfeiting holograms to their goods, as well as listing simple checks that buyers can make to determine authenticity like comparing logos and product compatibility. Following recommendations from the American Food and Drug Administration (FDA), big US pharmaceutical companies including Pfizer, Johnson & Johnson, Purdue Pharma and GlaxoSmithKline all integrated RFID tags. Unfortunately, these tags can be costly to set up and rely on a centralised system. As the name implies, the technology uses one central server and therefore lacks transparency.

So what else can be done to bring visibility, accountability and decentralisation to supply chains?

The obvious solution, it would seem, is blockchain. By making every step in the production process clearly traceable, any product without this guarantee would come under question. Tightening the net in this way could help to catch items before they reach buyers. This is exactly what companies like Blockverify and Chronicled aim to do with a variety of solutions for businesses. At the same time, this could cause problems for legitimate companies that just don’t have the resources to embed tags with blockchain tech. In addition, although governments are now starting to see the benefits of blockchain, there’s still a clear reluctance.

Ironically, the ongoing challenge of counterfeit goods appears to have encouraged positive disruption in getting products from concept to consumer. Unfortunately, the reality is that counterfeiting isn’t going to go away. Even blockchain’s traceable, decentralised system won’t stop criminals for trying to swindle consumers. However, the success of fakeries can be curbed by the expansion of open data and transparent supply chains. Luckily for manufacturers and retailers, blockchain was developed with precisely those qualities in mind. Nonetheless, blockchain alone is unlikely to solve the issue. However, by using a combination of different techniques, companies can counter counterfeit. In light of the potential risks, investing in RFID tags, holograms, tracking technology and external solutions is clearly worth it. From a consumer perspective, there are various check that can be made to determine authenticity – but perhaps it’s most important to remember that you get what you pay for.

Should businesses and governmental organisations do more to teach consumers about spotting fake products? What other techniques could be used to hone in on counterfeit goods? Does blockchain have the potential to solve counterfeiting? Please share your thoughts.