Conservatively, counterfeiting costs the global economy an estimated USD 500 billion annually, according to UL Standards & Engagement. The annual turnover of Amazon in 2023 was USD 514 billion. If you'd rather like to compare with countries, the World Bank estimates the 2022 GDP of the United Arab Emirates at USD 507 billion. (This is a conservative estimate for the cost of counterfeiting. We've come across much greater numbers!)
Looking at specific examples, we've found the following information about industries and well known companies.
In the world of luxury brands, which many spontaneously think of as a primary target for counterfeiters, Business Insider estimates counterfeit goods to account for 1/10 of the market. The annual loss for the LVMH Group (Moët Hennessy Louis Vuitton) is estimated at € 4.5 billion. (via ChatGPT).
In a 2018 study, the US Chamber of Commerce estimated that sales of counterfeit Michael Kors handbags alone cost the company up to USD 8.9 billion each year (via Gemini)
At the other end of the market, in consumer goods, Procter & Gamble estimate their loss at USD 10 billion annually. (P&G Annual Report via ChatGPT). Just imagine the cost for the industry in total.
Pharmaceuticals may be the industry where the impact of counterfeiting is the most worrying. It's not only widespread (estimated at up to 30% of the market in some developing markets), it is also dangerous! If the counterfeit medicine is ineffective or useless, you're actually lucky. There are countless examples of counterfeit pharmaceuticals causing overdoses or containing dangerous components. .
A 2017 report by the International Chamber of Commerce estimated the global trade in counterfeit pharmaceuticals at USD 75 billion annually.
According to a Pfizer pressrelease, the company's cost from counterfeit versions of their drugs is around USD 3 billion each year
Also medical devices are counterfeited. Medtronics, for example, estimates the yearly cost to the industry at USD 1 billion. (Medtronics corporate blog via Chat GPT). The risks from counterfeiting in medical devices are chocking. There have been instances of defibrillators failing due to counterfeited semiconductors. Or, imagine your child's ventilator malfunctioning!
The fashion industry is another industry being hit hard from counterfeiting. Both through actual counterfeiting (imitating designs) and trademark infringement (putting prestigious logos on standard products - or substandard, rather).
Nike, for example, have reported losing USD 1.5 billion annually to counterfeited products (ChatGPT).
Are you sure the garage used original parts when they last worked on your car? The Automotive parts industry has substantial problems with counterfeiting. Everything from brake pads, via ball bearings to shock absorbers. In 2020, Motor Trend reported the cost to the industry to be around USD 45 billion each year.
Finally, electronics is like a pot of honey for counterfeiters. Tests of smartphone chargers bought online found most of them being counterfeit, some even with life-threatening faults. In 2016, USD 1 billion worth of counterfeited products were seized according to Forbes (via Chat GPT).
All this said, the economic impact from counterfeiting is much greater than just lost sales by the companies whose products are copied (on top of how people are impacted through health, safety or poverty from counterfeiting):
Lost brand value - On top of lost sales for legitimate manufacturers, their brands get devalued. Both through the inferior quality of the knock-offs and through the uncertainty caused by the prevalence of counterfeits, an uncertainty likely to make consumers choose other brands, believed to be less hit by counterfeiting.
Lost tax income - from VAT, customs duties and other taxes. Don't imagine that those who don't care about immaterial property legislation care any more about any other legislation, like taxes.
Health care costs - from accidents or poor health, hitting both customers, the general public, workers producing the goods under often dangerous and unhealthy conditions. Add to that the health problems caused in the local community through the often disastrous environmental impact from irresponsible production methods.
Environmental costs - We have not seen any estimates of the costs of repairing the environmental damage, but conclude that it will be astronomical. Obviously where the counterfeit products have been produced, but also where they finally "go to rest". Again, a manufacturer who doesn't care about immaterial property rights has no reason to care about material or chemical safety. Counterfeit toys, for example, are notorious for containing chemicals banned due to their carcinogenic properties or for their impact on hormone balance, or on brain development of children. Chemicals potentially released into our environment (sooner or later) either from landfills, or through waste incineration.
The issue of counterfeited products is a far cry from "getting buying fake stuff at a price too good to be true". The measurable costs for legal manufacturers and society are steep, but even worse are the human costs and risks to health & safety both in manufacturing and for the general public.
Don't buy counterfeit products, quite simply.
Image by imagedepotpro on iStock
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