OTTAWA The counterfeiting of electronics has long been a problem, but the economic downturn that has many searching for bargains could cost U.S. consumer electronics companies alone as much as $200 billion, according to one estimate.
An industry study found that the problem is accelerating primarily because counterfeiters are selling more of their wares online.
The counterfeiting of consumer electronics and components is advancing at an incredible rate, observers said. Even before the iPhone was introduced by Apple, for example, knockoffs were readily available. Counterfeiters are organizing on a global scale, making it increasingly difficult to detect fakes. Access to the Internet also makes it easier to reach customers who can then purchase knockoffs online.
Given the global nature of counterfeiting, it is difficult for companies to identify where or when their technology or brand is being infringed.
A global audit of 306 marketers conducted by the CMO Council and sponsored by brand protection specialist MarkMonitor found that trademark infringement is increasingly shifting online, and fraud is becoming more difficult to identify due to the increased sophistication of brand hijackers.
A recent report titled, "Protection From Brand Infection," found that product marketers view the Web as a growing source of counterfeit products, with 29.5 percent identifying the digital world as the chief threat to their brand.
The study also revealed that six market segments have the highest prevalence of abuse: digital media, luxury goods, software, footwear and apparel and Internet commerce (tie) and consumer electronics. This gray market costs companies as much as 20 percent of total sales.
The list of consumer concerns raised by counterfeiting is long. One is safety. For example, if a fake Blu-ray player proves unreliable under heavy use compared to a certified product, it could lead to a home fire. A second concern is power. Many consumers lean towards Energy Star-rated products to save electricity as well as out of environmental concerns. It's likely that counterfeit products will provide neither advantage.
Once a fake product has failed, consumers who think that can contact the victimized company for customer support or, worse, the legal department, are usually out of luck.
Technology is starting to be deployed that would identify counterfeit products. But just as the size, scope and speed of counterfeiting has increased over the years, counterfeiters who are shifting their operations online remain one step ahead of anti-fraud technologies, observers warn.