Supply Chain Digest: Companies Pulling Out All Guns to Thwart Counterfeit Goods
Through a special arrangement, what follows is an excerpt of a current article from Supply Chain Digest, presented here for discussion.
The International Anti-Counterfeiting Coalition estimates that the level of counterfeiting has grown more than 10,000 percent over the past two decades, spurred on by globalization - which has produced more sophisticated production capabilities outside Western countries - and rising economies among developing nations, which fuels demand.
The dollar impact is difficult to measure, but the number is certainly in the many billions of sales of fake products, even at low-ball prices, and there are also multiple risks to a company's brands.
Eighty percent of all the items confiscated last year by U.S. Customs authorities as counterfeits were produced in China. But the distribution of those goods is truly worldwide - and a nightmare for companies to control across global geographies, hundreds of countries and jurisdictions, and wildly varying laws, enforcement and resources. In many parts of the world, counterfeiting of Western goods is not seen as law breaking, but as smart business.
According to a recent article in CFO magazine, companies are taking dramatic action and adding substantial resources to combat this scourge. Examples include:
- New Balance, the athletic shoe maker, limits access to its trade show booths at various events, to prevent would be counterfeiters from taking samples and pictures, and has significantly raised its annual budget for brand protection programs and resources to as much as $2 million per year;
- Apparel retailer Abercrombie & Fitch hired Shane Berry, a former special supervising agent with the FBI's global intellectual-property program, as its first senior director for brand protection. The company also incorporates tight controls over the use of its IP in its contracts with its vendors, including language that prescribes who is allowed access to their facilities and how excess labels, buttons, logos, and other trademarked identifiers are stored and managed;
- Juniper Networks Inc., the computer networking equipment maker, now adds technology into some of its products that detects counterfeit and other illegitimate hardware on a customer's network.
Companies must certainly do the basics, like registering brands and trademarks in every country on the planet. Many are also providing a variety of new mechanisms (websites, 800 numbers, etc.) for consumers to report fake goods and, in general, being more aggressive about prosecuting alleged counterfeiters, rather than just stopping the flow - which is usually temporary.
That's a bit of a change, because supporting a full prosecutorial action or civil suit can cost hundreds of thousands of dollars, which in the past may have caused companies to be satisfied with smaller victories. However, the stakes are getting too high now for that strategy to continue, even though it may take years to pursue legal action.
Discussion Questions: Just how bad is the counterfeiting problem? Is it beyond the scope of most companies to really deal with it? What strategies do you see as being most effective?