Counterfeiting problems are unique and industry specific. The nature and gravity of the problem vary from industry to industry. Hence, after establishing the objectives of the anti-counterfeiting program, it is essential to understand the nature of the problem in the industry in order to employ the correct approach to reach these objectives. Here are some of the considerations:
Direct and indirect competition
Counterfeit products may either be direct or indirect competitor of genuine products. Counterfeits that are direct competitors are generally very similar or identical to the genuine products. There is also little or no price difference between genuine products from counterfeits. As such, consumers are usually deceived into purchasing counterfeits under the impression that they are genuine products. These counterfeits compete directly with genuine products as the sale of the counterfeits corresponds directly with the reduced sale of genuine products. Examples of direct competing counterfeits include counterfeit consumable products like shampoos and printer cartridges.
Indirect competing counterfeits are usually not identical to genuine products. As such, consumers are able to distinguish the counterfeits from the genuine products. For example, it is relatively easy to conclude that software packed in plastic sleeves and sold by street side vendors for less than US$3.00 is a pirated copy. While pirated software compete with genuine software, the target market may be slightly different. Consumers who regularly seek out and purchase pirated software are less likely to purchase genuine software even if they are unable to obtain the pirated software. Hence, any reduction in counterfeits in the market does not necessary lead to a proportional increase in the sale of legitimate products.
Therefore, any increase in enforcement efforts in cases where the counterfeits are directly competing products would generally see an increase in the sell-through of genuine products as well as a reduced visibility of counterfeits in the market. In cases where the counterfeits are indirectly competing, increase in enforcement action may reduce the visibility of counterfeits but would generally have less impact on the sell through of genuine products.
Domestic market vs export market
It is possible for a jurisdiction to be a manufacturing base for counterfeit products and yet only moderate quantities of counterfeits are found within the domestic market. In such circumstances, it is likely that the counterfeits manufactured are generally for export purposes, with only a small proportion of these counterfeits sold in the domestic market. This is due to the fact that counterfeit manufacturers generally prefer exporting counterfeits as the returns are higher and the risk of detection is usually lower. Hence, enforcement actions against manufacturers would help to cut down counterfeiting in overseas market without substantial impact on the domestic market. Therefore, if the anti-counterfeiting program’s objective is to restore market share of genuine products in the domestic market, it might be more useful to have enforcement actions against the domestic distribution channels of the counterfeit products than to target manufacturers and exporters.