By Nidhi Mardi

Edited by Nidhi Singh, Junior editor, The Indian Economist

It was only last week that I noticed that Gopal Bhaiya, the local ‘sabjiwala’ adored by our society’s aunties, wears a sweatshirt with ‘Puma’ imprinted on it, proudly with his ‘levis’ jeans. On being questioned, he obviously rattles on as to how these are his favorite ‘so called’ brands! Yes, that is the level of brand consciousness in our modern urban Indian society plagued with ‘bollywood’ obsession and an unending urge to imitate western culture. This brand consciousness has reached such an extent that it’s no more the quality or the comfort that people look for, but the self esteem and prestige associated with the brand-name! So when we talk of Gopal Bhaiya’s ‘Puma’ sweatshirt, we know he can’t really afford the original, so it must be a ‘knock-off’! Knock-off is a colloquial term for Counterfeit Consumer Goods which are by definition goods that infringe the rights of a trade mark holder by copying the trade mark, brand name etc. on cheaper imitations of the same product. The identification mark used is such that it “cannot be distinguished in its essential aspects from such trade mark. The spread of counterfeit goods today has reached gargantuan levels as 5% to 7% of the world trade is Counterfeit Consumer Goods as per reports by Counterfeiting Intelligence Bureau (CIB) of International Chamber of Commerce, making a total of $250 billion a year worth business of counterfeit and pirated goods globally.

This ‘imitation’ business is done for all kinds of products. Ranging from cosmetics, apparel, music to high range consumer goods like your favorite Louise Vuitton bag. Even cars and motorcycles are prey to this business such that even Porches and Ferraris’ are being “knocked off”. A recent survey by a popular daily The Guardian revealed that a majority of British adults admitted to regularly buying fake designer clothes, bags, accessories and perfumes as well as lethal counterfeit alcohol, medicines like dangerous versions of well-known slimming pills called as well as illegal versions car parts etc. The main idea that these retailers of counterfeit goods bag on is that people, especially the young generation are looking for social acceptance, style and self-esteem which they find in brands. However when they are not able to afford these brands, they obviously look for cheaper versions of the same which give them exactly the same. When I asked 21 year old student Neha as to why she preferred ‘knock-offs’, she told me that these are basically one time use goods that obviously let one gain social acceptance and at the end of the day these are use and throw goods and no one can expect quality from such cheap goods. But how many of us actually know that people like Neha and Gopal Bhaiya are indulging in criminal activity by buying ‘knock offs’ which is punishable under law in most countries.

In today’s competitive market and the never ending “game of thrones” being played in the global arena, it is China which has emerged as the supreme leader in the piracy market and emerged as the world’s leading counterfeiting superpower. As per reports by UN Office on Drugs and Crime, almost 70% of all counterfeits seized from the world market globally come from China. However Chinese domination in piracy market has much to do with its role as that world’s workshop of branded goods. Most of the original high end branded clothes are manufactured and exported from China, thus providing the necessary ecosystem for initiating the ‘imitation businesses. The harsh reality is that many companies lose control of their own supply chains when they outsource to China, be it directly or indirectly. However the remarkable contribution to this business is that of the internet where there is a plethora of sites like Paipai, tradekey.com etc. that reveal sellers offering ‘knock-offs’ of any branded high end consumer good directly to the consumer. If you’re much of a traveler, you can witness this firsthand in the new Silk Street Market in Beijing where legions of tourists and enthusiasts flock to buy the myriad varieties of counterfeit goods –many of a quality that matches the original product. Reports suggest that many Chinese cities have their own versions of such markets conducted openly with clear engagements with the tourists. The Chinese authorities are however aware of this problem and they periodically stage raids, seizures as well as shut-downs of illicit factories. Every year the Chinese Government conducts enforcement drives and arrests thousands of counterfeiters, closing numerous factories. But the fact remains that despite everything the counterfeit industry has successfully survived in China flourishing and spreading in the global arena. In cities like Dubai, New York etc. one may also be approached on a street corner by vendors with dozens of counterfeit watches inside their coats offered at bargain prices. However this is not the only way to market counterfeit goods. Last year there was a great surge in the market with the release of Apple’s i-phone 5 and this was a target market for any seller of ‘knock off’ phones. One not only encountered i-phone imitations by varied companies but the most shocking one was by a Chinese company. While exporting its own version of I-phone, the company put an easily pealable sticker of its own brand name, over the embossed trade mark of Apple, such that consumers in India can easily remove the sticker on purchasing the phone and enjoy the perks of showing off their newly purchased ‘i-phone’ for a bargain price of merely Rs 3000. The main idea behind it is to create a phone with similar exterior as an i-phone, but with cheaper plastic and put an inferior operating system in the same. They know that customers will buy it, not for its utility but for the psychological satisfaction associated with owning the same. Games like ‘fruit ninja ’, ‘temple run’ as well as ‘angry birds’ have been recreated in every possible version without any copyright agreements resulting in huge economic losses for such companies.

However one can definitely not ignore the global response to this illegal business. In the US, on 29th November, 2010, the U.S. Department of Homeland Security seized and shut down as many as 82 online underground sites selling counterfeit goods. This event coincided with ‘Cyber Monday’, the beginning of online shopping season. Many IP addresses are seized by cyber police globally to tackle with this problem. Members of Congress in the U.S also proposed the PROTECT IP Act in order to block the access to Chinese websites selling ‘knock-offs’ and fine those who indulge in the purchase of the same. In Europe myriad non-profit organizations like the European Anti-Counterfeiting Network are working for the same cause. The main problem faced is that counterfeiting is considered a ‘soft crime’ and in most countries like India, the penalty for the same is miniscule. Many attempts are continuously being made for instance, the U.S. Customs and Border Protection agency now supports supplemental registration of trade-marks through their Intellectual Property Rights e-Recordation program thereby facilitating identification of counterfeiting brands and ensure brand protection. The Stop Online Piracy Act (SOPA) introduced in October 2011, enforces the copyright holders to fight online trafficking in copyrighted intellectual property and counterfeit goods. Many economists argue that this bill must not hinder or threaten the open and innovative online market. On October 1, 2011, the governments of eight nations signed the Anti-Counterfeiting Trade Agreement (ACTA), which is designed to help protect intellectual property rights, especially costly copyright and trade mark theft. This agreement was initially negotiated by 11 governments including the EU, Mexico and Switzerland which have not signed the agreement. The agreement was not even signed by China, a notoriously prolific producer of faked goods. This counterfeiting market is so deep rooted that if such laws are enforced in China, then public protests and political pressure itself will deride such agreements. In most countries the penalty for indulging in such crimes is a fine of an amount as less as $307 which is gladly paid off by any offender as it is less than a quarter of his/her daily income.

Other ways to fight this include Anti-counterfeiting packaging that help to primarily reduce package pilferage as well as theft and resale. These packages have pilfer indicating seal such as authentication seals and security printing to help indicate that the package and the content are not counterfeit. Other methods include anti-theft devices such as dye-packs, RFID tags or electronic article surveillance. There are also the encrypted micro-particles i.e unpredictably placed markings that are not visible to the human eye as well as Micro-printing which is second line authentication often used on currencies. Imitation Movie DVDs can be prevented by using colour shifting ink or film which is visible marks that switch colours or texture when tilted.

There are myriad innovative ways to diminish these ‘soft criminal’ activities. However the big question here is whether the consumers are actually victims of these counterfeit goods retailers or partners in their crime. Gopal Bahiya obviously did not buy the counterfeit Puma sweatshirt thinking it was original; he knew exactly what he was buying. In a scenario where there is an underground market of willing consumers and seller, an Anti-counterfeiting package cannot do much. The need of the hour is effective legislations, penalties and punishments for both the consumers as well as sellers of Counterfeit consumer goods. However in a country like India with a brand obsessed middle class young generation, no one really knows if any law will effectively work because when Virat Kohli endorses Adidas who can stop Cricket fans from getting themselves one, no matter how fake it is, who cares? A realist would definitely tell you that successful anti-counterfeiting legislation is only a fantasy in a world obsessed with brands. This is the dark side of brand culture we must accept!

Nidhi is currently pursuing Economics in Lady Shri Ram College, Delhi University. She has a keen interest in global economic affairs. An avid reader, she loves writing on various topical issues in economics, politics and international affairs. She loves traveling and considers herself much of a movie buff.
 

Posted by The Indian Economist | For the Curious Mind