Dr. Regina Henkel
Dr. Regina Henkel

Selling Counterfeit Products Has Never Been Easier

Product Piracy: What Sports Retailers and Brands Can Do About It

Today, there are more cases of product piracy and counterfeit goods in Germany than ever before. Cross-border online trading has dramatically exacerbated the problem. Many sports brands are also affected. What can brands and specialist dealers do to defend themselves against counterfeiters?

Auf den ersten Blick nicht zu unterscheiden: Links das echte Victorinox Taschenmesser, rechts das Plagiat.
At first glance, it's indistinguishable: On the left the real Victorinox pocket knife, on the right the copy.

Increase in seized products

The figures are alarming: in 2017, German customs confiscated goods worth over 196 million euros due to product and brand piracy. Around 148 million euros of this was accounted for by the clothing category alone, including shoes and accessories such as bags, watches and glasses. Compared to 2015, when goods with a total value of 132 million were withdrawn from circulation, this represents an increase of more than 30 percent within two years. Country of origin number one of fake goods: China, followed by Hong Kong. These countries accounted for 75 percent of all goods. Turkey is also a leader in the field of counterfeit clothing.

Internet Commerce Makes It Easy for Fraudsters

The number of unreported fakes is estimated to be much higher. What is actually filtered out and destroyed at the borders by customs is just a drop in the ocean. "The Internet in particular has opened the door to fraudsters," explains Stefan Hoffmeister, Head of Online Brand Protection at Ebrand Services in Munich. It is commissioned by companies to search the net for counterfeits or plagiarisms - on online marketplaces, in the social media and in app stores.

Ebrand Services serves brand companies from various industries throughout Europe, including several sports brands. The reason for the increase is quickly explained. Hoffmeister: "The Internet makes getting started very easy. Via marketplaces such as Amazon, Alibaba and Ebay, a counterfeiter can set up an international distribution network within a few days and sell directly to customers." Counterfeiting is now more lucrative than drug trafficking and, above all, less risky.

Die gefälschte Engelbert Strauss Weste (links Original, rechts Fake) wurde 2016 vom Plagiarius Verein mit dem Negativpreis „Plagiarius“ ausgezeichnet.
The fake Engelbert Strauss vest (left original, right fake) was awarded the negative prize "Plagiarius" by the Plagiarius Association in 2016.

Multiple Damage Caused by Counterfeit Products

The damage caused by product and brand piracy is enormous. A study by the EU Intellectual Property Office (EUIPO), published in 2018, puts the loss of revenue across the EU at 60 billion euros. According to the German newspaper Handelsblatt, German manufacturers of clothing, shoes and accessories lost 4.2 billion euros each year. 66,500 jobs were lost as a result.

The revenues of the counterfeiters in turn finance terrorism and other crimes. In addition, counterfeit products resemble the original, but in most cases there are serious differences in function. For example, counterfeit sports equipment and sports nutrition can quickly pose a health risk. Moreover, it is annoying for the customer and thus damaging to the brand's image if an expensive product does not keep what the customer expected from it.

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Amazon and Alibaba Work on Solutions

There are different types of piracy: the classic counterfeit that tries to be a copy of the original product, the almost identical plagiarism and the product that simply uses the brand name without imitating a specific product. Hoffmeister collects the evidence and hands it to the lawyers. If successful, the products are destroyed, accounts blocked and shops closed. Amazon and Alibaba have long been criticized for doing too little against the counterfeiters. AI programs and Big Data are now helping the retail giants to contain the flood of plagiarism.

In 2017, Alibaba published a blacklist of 100 companies that sell counterfeits online. In conjunction with a Big Data-backed initiative to combat product piracy, this led to the closure of 240,000 online shops in the Taobao marketplace, Alibaba reported a year later. Amazon, too, has just announced Project Zero, which aims to reduce counterfeit products to zero. With this, Amazon wants to use image processing and pattern recognition to automatically detect counterfeits and take action against them.

Mit dem Siegel von Authorized.by will das Start-up die autorisierten Händler kennzeichnen.
With the seal of Authorized.by, the start-up wants to mark the authorized dealers.

Brands Authorize Dealers in Digital Commerce

The German start-up authorized.by dedicates itself to the topic of illegal trade from another side: Instead of putting a stop to the "bad guys", it identifies the "good guys" and ensures more transparency and trust in online trade. "We play out the real business relationship between brand and retail via an authorization seal in real time," explains Felix Nottensteiner, founder and CEO of authorized.by.

That means: Using a authorized.by seal signals the customer that the online retailer is authorized by the brand to sell this product. The seal is initialized in real time with every page call and is therefore forgery-proof. Brands such as Ortlieb, Tatonka, Deuter or Patagonia are already using the tool and are thus strengthening confidence in online trading. According to Nottensteiner, "The aim is to use the seal across channels, i.e. also on marketplaces."

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Dr. Regina Henkel
Dr. Regina Henkel