Counterfeit and pirated consumer goods: Causing untold damage
Have you ever bought a counterfeit product or downloaded pirated software? Perhaps you thought it was no big deal. Well, think again…
Counterfeit or pirated items are extremely popular. According to a 2019 report by the OECD and the European Union Intellectual Property Office (EUIPO), counterfeit or pirated goods accounted for 3.3% of world trade at that time. That category is a broad one, including counterfeit clothing, shoes, electronics, cosmetics, toys, jewellery and medication, as well as pirated movies, music and software. Their popularity was growing even before the pandemic, with experts predicting that by 2020, the value of trade in counterfeit goods and pirated works could reach $991 billion USD and the value of digital and streaming piracy in movies, music and software could reach at least $384 billion USD.
A study called Consumer Attitudes and Their Role in Reducing the Impact of Counterfeit and Pirated Goods and Services, conducted by the Consumers Council of Canada, sheds light on this industry and how much consumers know about it. The study found that young people are the main consumers of counterfeit products – specifically because the products are free or cheap. In fact, 28% of respondents in the national survey had knowingly acquired counterfeit goods, or knew someone who had made such a purchase, while 18% had done so without realizing it – only becoming aware of the subterfuge when they saw that the items were of poor quality, had poor or missing packaging, or lacked a warranty.
Online sales are a particular problem because, since the consumer cannot examine goods, its packaging and its labeling, they’re not in a position to evaluate quality before buying.”
Jay Jackson, Director of Policy and Strategy at Consumers Council of Canada and co-author of the study
Pirated goods were even more popular with respondents – 50% had either downloaded pirated content themselves or knew someone who had done so. In this case, however, everyone was well aware what they were doing. Adults between the ages of 18 and 49 with relatively high educations and incomes were the keenest consumers of this type of content. Here again, however, many experienced disappointment. Most of the participants described the material they downloaded as mediocre, 26% reported having their computers affected with malware viruses, and 7% had been the victims of identity theft.
Some – but not all – were concerned about the situation. Some participants in every age group downplayed the phenomenon, saying that only luxury goods were counterfeited or that companies were asking too much for the original products – which could also present problems, in fact. “Many see the savings they make, but not the consequences of their decisions,” says Jackson. All the same, they’re not prepared to buy just anything. “Many say they would not knowingly purchase counterfeit pharmaceuticals.”
No matter what products consumers purchase, the consequences are serious. Legitimate companies are losing substantial amounts of money, and workers are losing their jobs. Some distributors of counterfeit products are linked to organized crime and terrorist groups, so that’s where the money goes. According to the report, the money generated by this trade can be used to support other criminal activities, such as drug and human trafficking.
The negative impact that counterfeiting has on society and the economy is enormous, and most people don’t even suspect it.”
Yet another problem is that counterfeit products can be hazardous to consumers. The report mentions exploding batteries in smart phones and vaping pens, cable chargers and batteries in smart phones causing injuries and fires, as well as cosmetics causing skin irritations and breakouts. It also mentions toys with parts that can injure or even choke children, and drugs lacking the (supposed) active ingredient or, worse yet, containing harmful products. People have died from using these products. “You can find everything in counterfeit products,” says Jackson. “It can therefore be extremely risky to use them.”
There are problems with pirated goods too, including increased exposure to identity theft. While this may seem somewhat abstract, it can have a major impact on consumers’ lives. “People who have lost their identity may have difficulty finding housing, obtaining a loan or obtaining insurance,” says Jackson. “Re-establishing their identity is also a real obstacle course.”
All of this can be extremely confusing, even for consumers who want to do the right thing. Counterfeit products often come with a certification logo, even though they haven’t actually been certified. Counterfeiters use the logos without authorization from the certifying bodies – and, of course, without meeting the established manufacturing standards.
How can all this be turned around? Study participants believe it’s up to the government. However, not much is being done — and when it is, the message isn’t getting through. The report deplores the lack of coordination between corporate messaging and government attempts to address the issue. Both sides put the accent on violations of intellectual property rights, a concept that’s too abstract to interest consumers.
Currently, the strongest movements to stop the distribution of counterfeit goods in Canada come from the consumer goods industry sector. But their primary objective is to protect client brands – not consumers.”
The authors of the report suggest that a single organization be set up with a mandate to fight counterfeiting and piracy. The agency could coordinate tracking, analyze trends and raise consumer awareness. “There are many Canadian government agencies in addition to the police that could do far more to combat counterfeiting. Health departments, consumer protection ministries and agencies, competition authorities, public works procurement agencies, border protection authorities, etc. They don’t seem to have coordinated their efforts to combat this problem. Imagine what could happen if they did!” says Jackson.
The study suggests that consumer organizations could also be important partners in the battle, even playing a key role in efforts to address the issue. “They are in a good position to act,” Jackson points out. “They are well aware of the needs of consumers. They are familiar with provincial and federal consumer protection laws and are accustomed to working with governments and the private sector to help prevent consumer harm.”
However, it will take real money to make this a reality. The report suggests that only with sustained funding can consumer groups “provide valuable support in combatting and reducing demand for counterfeit goods and pirated digital content in the Canadian marketplace”.
The study, Consumer Attitudes and Their Role in Reducing the Impact of Counterfeit and Pirated Goods and Services (Consumers Council of Canada, 2019), sheds light on the consequences of counterfeiting and piracy on society and on consumers. It also addresses consumer attitudes to these phenomena and suggests some strategies designed to counter them effectively.
To carry out the survey, the researchers established an ad hoc expert advisory panel. They conducted a literature search and used an online national survey of 2,000 Canadians to assess their experiences and knowledge of counterfeit products and pirated services, along with six focus group panels to collect consumers’ views on the subject. They also spoke to various specialists and consumer associations.