With fake goods making up 2.5% of global trade at a cost to economies in the trillions, the sale and manufacturing of counterfeit items was thriving way before COVID-19 struck. Still, recent evidence connects the onset of the pandemic with an even greater proliferation of illicit goods.
Counterfeiting isn’t a product of today’s complex trading ecosystem – the ecosystem has just evolved in ways that help it flourish. Supply chains lack transparency, selling channels lack accountability and the internet itself is one that favors the opaque. COVID-19 has just exacerbated these problems.
The pandemic wreaked havoc on global supply chains. Disruptions cost U.S. and European businesses over $4 trillion in 2020. The International Chamber of Commerce said that the pandemic was “the most substantial negative supply chain security effect in history.” With shortages of parts and products, counterfeiters jumped on the opportunity to make a buck, even offering raw materials at low prices, ultimately polluting the supply chain with fake and inferior products.
Another contributor to the increase is that, with shuttered stores and stay-at-home orders, nearly all commerce moved online, and it became easier than ever to buy and sell via the internet. Unfortunately, the sudden, mass migration to online shopping combined with the increasing ease of setting up shop was a boon to counterfeiters, who exploit the opaqueness of transactions on third-party platforms.
Even before COVID, The Government Accountability Office (GAO) in the U.S. conducted an experiment, purchasing items from third-party sellers on popular consumer websites then sending them to the respective manufacturers for testing. A shocking 20 out of 47 items purchased by the GAO turned out to be counterfeit.
It’s not just marketplaces. The more social media turns to social commerce, the easier it is for bad actors to profit from unwitting (and sometimes totally aware) consumers. In April of 2020, analytics firm Ghost Data reported that nearly 20 percent of all posts about fashion products on Instagram featured counterfeit products. Policing the platforms is nearly impossible. Ghost data found 95 million bots posing as real accounts on Instagram, and it’s common for scammers to operate multiple mirrored websites at once, enabling them to reach consumers directly while ensuring they continue to profit, even if one site is taken down.
Fake Louis Vuitton bags and Yeezy sneakers are bad enough, but the problem can be far more dangerous than. According to a recent report from brand intelligence platform Red Points, there’s been a manifold increase in counterfeit healthcare and sanitary products – things like personal protective equipment and pharmaceuticals. Another organization, Europal, reported finding offers of fake vaccines on the dark web, and there have been a number of stories in the news about government-led seizures of fake health-related products worldwide.
All of this points to a hard truth: counterfeiters are nefarious, opportunistic and ready to exploit the most vulnerable. They saw trade restrictions relaxing to ease the flow of healthcare-related items and they used the opportunity to flood the market with fakes.
To combat counterfeiting, governments have introduced legislation such as The Shop Safe Act in the U.S. and The Digital Services Act in Europe to protect consumers through the regulation of e-commerce. In response to the pressure, firms are beginning to take action. Amazon notably launched a Counterfeit Crimes Unit and an online monitoring program coined Project Zero, while LVMH, in partnership with Microsoft and blockchain software company ConsenSys, has developed a blockchain system for tracking and authenticating luxury goods called AURA. A prominent UK retailer, uses the Entrupy Fingerprinting solution to verify the identity of returned items at the point of processing, protecting them from return fraud and the public from illicit goods that may have made their way into the supply chain.
Still, much more needs to be done to build a robust defense, and collaborative anticounterfeiting solutions involving multiple stakeholders are required to fully address the problem. In the meantime here are some things you can do to protect yourself and your business from counterfeit luxury goods.
- When purchasing luxury goods online make sure to ask the seller for an Entrupy Certificate of Authenticity. Hosted securely on Entrupy servers, these certificates can be checked online, and they’re backed by a financial guarantee ensuring full protection from fakes.
- Before you buy, make sure to vet sellers. Read customer reviews and check out user profiles. Brand new accounts and low ratings should be instant red flags that indicate the seller is not trustworthy.
- When it comes to payment, make sure to insist on secure transactions. If a seller wants payment outside of a reputable website or payment app, that’s a sign they’re up to no good.
- Be realistic. If prices seem too good to be true, they probably are! A too-low price for a luxury item is a tell-tale sign it’s probably fake.
- Always report scammers to stop them in their tracks. You can contact the relevant website or app as well as with the Federal Trade Commision and your local attorney general.