Scale of counterfeiting

According to Bosworth and Yang (2002), counterfeiting has become a global problem of enormous magnitude. The phenomenon of product counterfeiting – the illegal practice of manufacturing goods impersonating other branded goods and sold as registered legal goods (Staake et al 2009) – had been considered by original goods manufacturers as a serious threat since the 1970s, albeit it had existed since long (Harvey and Ronkainen 1985). Presently the markets are flooded with fake products; the presence of counterfeit goods in the world market has grown over 10,000 percent in the past two decades (Frasca 2009; MarkMonitor® 2009) and by 1100 percent between 1984 and 1994 (Bian and Moutinho 2009). Recently it has been estimated that counterfeits account for 6 to 8 percent of world trade (Frasca 2009; Wilcox et al 2008), and ten percent according to Yoo and Lee (2009). World Customs Organization 2004 report confirmed that global market for such goods exceeded $600 billion and accounted for 7 percent of the world trade approximately (Wilcox et al 2008), Asia being the market that incurred more than one-third of the losses due to counterfeiting (Ang et al 2001). Other figures by Commuri (2009) suggest that counterfeits reduce the sales of genuine-items by $15 billion to $50 billion, and $250 billion if pirated goods are included out of which knock-offs account for $9 billion (Commuri 2009). According to Sridhar (2007), “while the world is growing by three to four percent, counterfeits are growing by 150 percent”.

International Chamber of Commerce in 2004 reported loss of $12 billion every year in luxury goods sector due to counterfeiting, despite the commendable efforts of luxury brand marketers (Wilcox et al 2008). Fashion related items are leading in this menace. Counterfeit products seized by U.S. Customs in 2002 which account for 18 percent of the $98 million were fashion related items (Hilton et al 2004). 30 million dollars in estimation are lost annually by French luxury goods industry (Bamossy and Scammon 1985).
Out of the total, only designer jeans counterfeits account for 10 percent of the market. Calvin Klein‟s counterfeited jeans accounted for $20 million in sales in 1981 compared to $250
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million of sales of original jeans (Grossman and Shapiro 1988). Levi jeans incur 15 million dollar in losses every year. Cartier Inc. reported the presence of 40,000 copies of its watches compared to 50,000 originals that were produced by the original brand itself (Grossman and Shapiro 1988) and reported losses of 15 million dollars per year. Fake designer sunglasses and designer watches account for about 25 percent share and over 25 percent share respectively of U.S. market (Bamossy and Scammon 1985).

The increase in counterfeiting sales is also due to advent and subsequent rapid development of internet; internet has provided sellers and buyers of counterfeited products with additional, powerful and easily accessible channels. Organization for Economic Cooperation and Development (OECD) noted that significant share of counterfeit products‟ sales is attributable to the internet (International Trademark Association (INTA) 2009). The key factors identified by INTA (2009) include the world wide reach of internet; online payments; anonymity gained from operating via internet; easier to deceive buyers by showing pictures of original products – which have made it simpler for counterfeiters to sell their products.