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4 Ways Retailers Combat Counterfeiting

Counterfeit goods undermine legitimate businesses of all types by siphoning sales away from them. Research shows that the combined cost of counterfeiting and piracy to American companies is over $200 billion a year and leads to the loss of 750,000 jobs. In November, two people were arrested in New York in the largest seizure of counterfeit goods in U.S. history, including designer knock-offs with an estimated retail value of more than a billion dollars.

Clothes and shoes are the most common counterfeited goods, but the counterfeiting of retail goods goes far beyond subpar-quality handbags – to cosmetics, electronics and even pharmaceuticals. And for “Quick Service Restaurant” (QSR) businesses, counterfeiting is primarily centered around the production and distribution of fake food items, which could contain harmful or contaminated ingredients.

But retailers are working hard to counter these trends and protect their customers. Here’s four ways how:  

  1. Using AI to Spot Fakes

Retail marketplaces are deploying AI algorithms to recognize features like logo placement and trademarks that distinguish genuine products from counterfeit ones. When marketplaces can partner directly with rightsholders to identify key markers, it makes these AI algorithms even more powerful. AI programs also flag sellers who engage in counterfeiting. Some retail platforms use third-party software, like Corsearch, to help them find counterfeit goods. eBay purchased 3PM Shield, a provider of AI marketplace tools, to “enhance its ability to address suspicious or harmful seller behavior, and potentially problematic items.” 

In 2023, Amazon identified and removed seven million counterfeit items from the supply chain. And the sneaker resale platform StockX stopped nearly $30 million of fake sneakers from trading on the platform.

At the same time, many luxury retailers like Mulberry and Prada are investing in digital IDs for their products to make identifying counterfeits easier. And LVMH and Cartier, along with others, have created the Aura Blockchain Consortium, which offers a certificate that guarantees the authenticity of luxury products.

  1. Creating Databases of Bad Actors 

The U.S. Department of Justice has created a database to track pharmaceutical, electronic and food counterfeiting crimes with open-source information. But retailers are also taking measures into their own hands. Etsy, for example, added a portal to report alleged copyright violations. 

Retailers can flag bad actors in the supply chain by avoiding unknown manufacturers who seem overly eager to do business – stick with reputable manufacturers instead. Ship times can also be a red flag; counterfeit products, particularly those involved in drop shipping schemes, typically take much longer to ship than reputable retailers.

  1. Taking Legal Action

Companies also aggressively pursue counterfeit goods manufacturers and sellers. In 2023, Bulgari sued several online stores for selling ‘Bvlgari’ products. The suit says the defendants sell counterfeit merchandise at e-commerce stores that are difficult to distinguish from the company’s official online presence. In 2022, Crocs won a default judgment against a footwear maker accused of selling counterfeit versions of Crocs’ signature plastic clogs. 

Amazon’s Counterfeit Crimes Unit (CCU) detects, investigates and removes counterfeit items from the site and identifies bad actors as targets for prosecution all over the world. Since its launch in 2020, the unit has pursued more than 21,000 bad actors through litigation and criminal referrals to law enforcement, according to its 2024 Brand Protection Report

In addition to the disposal of counterfeit products, in 2023, Amazon collaborated with brands and Chinese law enforcement, which led to more than 50 successful raid actions against manufacturers, suppliers, or upstream distributors of counterfeit products. This collaboration resulted in numerous criminal convictions.

  1. Educating Consumers 

Retailers are taking measures to: 1) help consumers identify potential counterfeit goods; and 2) educate consumers on the risks of purchasing counterfeit products. This includes engaging with media outlets, utilizing social media and creating reports, like Etsy’s transparency report.

According to IncoPro, millennials ages 25 to 34 are most at risk for these scams, being much more likely to buy fake goods unknowingly (41%) than those over 55 (18%). But education can help. According to Michigan State University, “the higher consumers’ awareness of the severity of counterfeit risks, the less likely they are to purchase counterfeits.” 

For example, Amazon has partnered with the International Trademark Association and not-for-profit career student organization DECA to launch the Unreal Campaign Challenge, a campaign to make consumers better aware of the risks that counterfeit goods pose.

The counterfeit goods trade often supports organized crime, including gangs, drug cartels and terrorist organizations. Profits from counterfeit sales can fund other illegal activities, contributing to societal harm. Another byproduct is environmental: Counterfeit goods often bypass environmental regulations, leading to harmful production practices and waste disposal methods. 

Worldwide trade in counterfeit products adds up to more than $500 billion each year. But retailers and online marketplaces are working hard and taking proactive steps to protect consumers and legitimate business services.