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We aim to shed light on the role of consumers and what can be done to make them stay away from these illegal business practices and win them over (again) to originals. Specifically, through bringing together the counterfeiting and the piracy literature and highlighting similarities rather than differences between the two product categories, we outline (1) how these consumer insights are already reflected in consumer-directed anti-counterfeiting measures (CAMs), (2) how effective these activities are, and (3) what can still be done in the fight against counterfeits and digital piracy.

In this chapter, the discussion centers around the size and growth of illegitimate pharmaceuticals; the porous supply chain in both physical and virtual markets, which allows illicit traders to penetrate (or circumvent) the licit trade of pharmaceuticals; a succinct clarification of both formal organized crime groups and informal illicit traders fueling the supply; the evolution of agencies designed to govern and enforce this type of criminal activity; and an array of anti-counterfeiting tactics designed to curb this major problem.

Counterfeiting is one of the oldest crimes in history. In ancient Rome, wine traders counterfeited wine trademarks on amphorae, selling inexpensive local wine as fine Roman wine. By the 13th century, counterfeiting had become so common that, in some European countries, copying a trademark was punished with torture and death. Today, counterfeiting hits almost every sector, from pharmaceuticals to toys, from auto-parts to content goods (movies, music, software, video games, etc.), but luxury and fashion goods are often the preferred targets of counterfeiters. These products are the most illegally reproduced worldwide for a multitude of reasons, linked to both demand and supply. On the demand side, counterfeiters exploit the heritage of meanings associated with the original goods, enticing status-seeking consumers who cannot afford the authentic goods into buying false versions in order to project the same prestige, high brand image and social status as the authentic goods. Some consumers of counterfeits may think they are “smart shoppers”, getting a great deal on a product that resembles an original. Still others may hold “anti-big-business” sentiments towards luxury brands, perceiving them as distant corporations charging unreasonably high prices for their products. On the supply side, counterfeiters are very interested in reproducing luxury goods since they are part of a very lucrative market with significant margins yet require relatively simple, mass-production technologies. Thus, counterfeiting may imply large profits with small investments and limited risks, given that the probability of being caught is rather small, and even if caught, the conviction rates are low and penalty rates often light. For these reasons, counterfeiting is especially flourishing in emerging economies, where Intellectual Property Rights (IPRs) enforcement is still in its infancy and local governments are oftentimes permissive with local “entrepreneurs”, particularly when these countries may be more focused on more immediate needs, such as hunger, employment, safety, and transportation. As a result, complying with international policy and enforcing the IPRs of global, luxury companies is certainly not a priority. The consequences of these instances are dramatic for legitimate brands, as “loxury” products, meaning counterfeit luxury goods, not only reduce revenues and profits, but also tarnish the brand’s image, equity, and reputation, which are the essence of what a luxury brand really is.

This chapter takes a detailed look at one aspect of the counterfeiting and piracy problem: how intermediaries in the global supply chain are being used, knowingly or unknowingly, by counterfeiters and their criminal networks to produce and distribute counterfeit goods and pirated materials. The chapter discusses the roles and responsibilities of intermediaries to stop the infiltration of these illicit goods, and presents examples of current best practices and recommendations for what can be done to stop it.

This chapter describes the concept of product authentication as a system which comprises the authentication device, tools to examine the device and examiners who are trained and equipped to carry out the examination of the device. It shows that the purpose of authentication systems is to detect counterfeit goods in the supply chain and thus prevent them from reaching consumers, not to prevent the production of counterfeits. Overt, covert and networked authentication features are described, and a conclusion reached that the most effective features combine overt and covert elements. The function of track and trace as an anti-counterfeiting method is discussed, concluding that it offers control of supply chains but does not provide authentication, and it can only operate in the legitimate supply chain, not in the illicit supply chain, which is the route used by many counterfeiters. The function of smartphones in authentication is examined, concluding that they have a role to play in the hands of specialist examiners but are unlikely to lead to the involvement of the public in examining goods to determine whether they are genuine or fake. Finally, the chapter discusses the return on investment for authentication systems.