How has the Internet Changed how Counterfeiters Operate?

To those of us who have been dealing with counterfeits for many years, the way counterfeiters operate on the Internet is markedly different. You might even say that counterfeit operations were primitive compared to the sophisticated, Internet sites that have prospered in this electronic marketplace.


My early encounters with counterfeiters were at flea markets, informal street markets, back alley merchants, or from the back of a pick up truck. The earliest counterfeiters operated in the shadows. Even in the most notorious counterfeit markets in China, there was never a question that the quality and price were indicative of counterfeit goods. The customers were only willing to pay low prices for goods of questionable quality, wanting only the trademarks that the goods carried. The counterfeiters evolved, offering A, B, and C grade goods. As the quality improved, prices rose and consumers were often confused into believing that they were buying authentic goods. The popular belief was that these goods were obtained from “back door” operations at authentic factories. Even with improvements in quality, the counterfeiters still operated outside of the formal distribution and retail channels.
Enforcement was very specific and the rules of engagement were clear, although differing from country to country. The brand owner would confirm the goods to be counterfeit, the work with local police to conduct a raid, confiscate the goods, and maybe even have the seller pay a fine.

The earliest indications that the counterfeiters had discovered the Internet, was wholesalers or factories offering to supply brand name products to buyers who operated in these informal markets. These sites were not easy to find and were difficult to prosecute since there was no physical inventory to confiscate or use as evidence. These early B2B sites were the start of the Internet commerce in counterfeit goods.

It wasn’t until eCommerce became commonplace, with sites like eBay, Amazon and Alibaba, that counterfeiters realized that the Internet could allow them to sell direct to consumers through a global marketplace which was largely unregulated and not controlled by any one legal jurisdiction. This shift to Internet selling has dramatically changed how counterfeiters operate and how brand owners enforce their IP rights.
The Internet differed from early counterfeit selling in many ways, all favorable to the counterfeiter:

1. The Internet provides anonymity

It is not uncommon that the registrant’s name and address on a URL that offers counterfeit goods, is fake. Registrars are reluctant to identify their clients and ISP’s, likewise, protect their clients. Warehouse, office, or retail locations need not be revealed, as they do not matter to the Internet shopper.


2. The Internet reaches a global audience

When selling in an informal market or in a metropolitan area, the counterfeiter’s audience is limited to the immediate vicinity. The Internet affords the counterfeiter an audience of thousands of wholesalers and distributors, and millions of consumers. All he needs to do is get their attention so they visit his website.


3. Prices increase, profits increase on counterfeit goods

As consumers, we all know that we will go to the Internet to shop for a better price than we’d find at a local brick and mortar store. The counterfeiters have realized that also, and they’ve raised prices from what they might have charged at their back alley shop. Increasing the price, to a level just below the authentic item, gives the counterfeit goods “authenticity” to the Internet shopper. Saving 25%, is common Internet pricing on authentic goods, so why not for counterfeiter? This increased price also increases the profit, making the counterfeit goods harder to stop.


4. Counterfeiters can advertise easily

When counterfeits were sold in informal markets, the counterfeiter relied on these markets’ shoppers to buy their goods. They would never use conventional advertising to bring in customers so as to avoid the scrutiny of the law and the brand owners. Internet counterfeit dealers are just the opposite. They will gladly use key words and meta tags in their to attract shoppers searching on line. The Internet offers numerous opportunities for attracting buyers. Domains, which include famous trademarks and brand names, are easily and legally registered. Even social media can be used to spread the word of sites that offer goods with prices “too good to be true”.


5. URLs easily obtained which include famous brand names

URLs, which are the address of these Internet sellers, are easily registered. They can include a brand name to confuse the buyer into thinking they are at an authorized site. Counterfeiters will purchase hundreds of URL’s at a time and can easily transfer their web content, should a Brand Owner take one of their sites down.


6. Enforcement is difficult

Sadly, the Internet is a difficult place to enforce IP rights. Most actions are either expensive, complicated or both. What websites are damaging? How do you stop a counterfeiter from simply moving content to a new URL? Most brand owners face the dilemma of enacting a “whack a mole” strategy only to find that they’ve spent a lot of money with little success.
Counterfeiters have realized that the fast paced technology of the Internet fits their business model to a T and have enlisted savvy technical strategies to enhance their businesses. Most brand owners do not have the resources to combat this problem. Sophisticated solutions and systems, that will help them target the most serious risks and use their resources to the best extent possible. Don’t think you can fight today’s technology with yesterday’s strategy. The Internet has created a serious challenge for brand owners that must be countered with technically advanced solutions.