A World of Fakes
Counterfeit goods threaten firms, consumers, and national security
Until recently, Marilyn Arons's only experience of counterfeit goods was the fake Louis Vuitton handbag she bought on the street 25 years ago. "It's something you never think about," says the 64-year-old New Jersey resident. But when she learned in March that her refill of Lipitor, a popular cholesterol-lowering drug, contained fake pills, she had plenty of angry, anxious thoughts on the matter. "If it wasn't Lipitor I was taking," she worried, "what was it?"
While digital technology has opened a new realm of illicit copying (story, Page 40), counterfeiting--the traditional threat to trademarks and patents--is thriving as never before. Most people, like Arons until recently, think it means cheap knockoffs of Rolex watches and Kate Spade purses. In fact, the practice goes far beyond fake luxury goods--and more is at stake than corporate profits.
Arons's pills had the same active ingredient as Lipitor and seem to have done her no harm. She was lucky. The World Health Organization estimates that worldwide, 8 percent of medicines are fakes; in poorer nations it's a shocking 25 percent. While some are close matches to the real thing, others are dangerous substitutes. Early this year the Food and Drug Administration intercepted a large shipment of bacteria-tainted water labeled as the anemia drug Procrit.
Big business. Drugs are a small but alarming part of the global tide of counterfeit goods. Cigarettes, sneakers, toys, golf clubs, makeup, perfume, soft drinks, chemicals, film, baby food, liquor, electronics, auto parts--you name the item and brand, and someone's selling a bogus version. The International Chamber of Commerce reckons counterfeit and pirated goods account for up to 8 percent of world trade, some $375 billion this year. The volume seems to be rising. The U.S. Bureau of Customs and Border Protection seized about $100 million in fake goods last year, compared with $57 million in 2001. "It affects virtually every type of product made," says Bill Dobson, director of the Global Business Leaders Alliance Against Counterfeiting.
Behind the increase are better technologies, including photo-quality scanners and printers that convincingly fake packaging, and the Internet, which puts all the product information a counterfeiter could want at his fingertips. By opening borders, globalization makes fakes easy to distribute. And with factories located in remote countries, counterfeiters can divert the technology and supplies needed to produce knockoffs.
Products from China, Taiwan, and Hong Kong made up 78 percent of the fakes seized by customs last year. "There are thousands, if not millions, of people in China devoted to counterfeiting, including entire towns," says Peter Lowe, director of the International Chamber's Counterfeiting Intelligence Bureau, based in London. Cheap, skilled labor and weak enforcement of trademark and copyright laws create the ideal climate there for counterfeiters, adds Lowe. Other hotbeds include North and South Korea, Pakistan, several former Soviet republics, and Paraguay--particularly the lawless Triple Frontier region bordering Argentina and Brazil. All told, U.S. businesses lose between $200 billion and $250 billion each year to counterfeiting, the FBI says. In 1995 the auto industry estimated it could hire 210,000 more workers if the fake auto-parts trade disappeared. Counterfeiting also saps tax revenues.
advertisement
