Why is it wrong to sell and buy fakes?Have you ever come across fake products? You may well have purchased illegal copies of music CDs or movie DVDs on the street. These and other counterfeit goods may be lacking in quality, but they make up for it with low prices.
But there is a worldwide movement today to wage a battle against fake goods. In a recently-held summit between the United States and the European Union, the two sides agreed to cooperate in cracking down on the production of counterfeit goods. They concluded that they will consider methods to prevent breaches of intellectual property rights through closer customs cooperation and more data sharing. The two also set out plans for joint border enforcements and the creation of joint networks of EU and U.S. diplomats in third countries working on intellectual-property protection. Last year, the Korea Customs Service formed a special taskforce team to investigate counterfeit production in Korea, with 114 units and 498 personnel.
But why are fake products bad? Some would argue there is nothing wrong with paying less for products resembling top brands. But counterfeit goods can cause a lot of trouble.
Sung Yoon-gap, head of the Korea Customs Service, said that the range of fake goods now goes beyond luxury fashion items to medicines and car parts, which could threaten public health and safety and are the focal point of the customs agency’s surveillance. Inn the past, counterfeit producers mostly targeted consumer goods, such as watches, purses, and clothes. But today, you can find fake cigarettes, auto and aircraft parts and even information technology products.
In 2000, a Concorde aircraft crashed 60 seconds after take off following a tire blow out that caused a fuel tank to rupture, causing a fire that led to two engines failing.
It was concluded at the time that the tire blew out because of an aircraft part left on the runway, and EU officials have argued that the part was a counterfeit one that had fallen off another aircraft. The accident killed all 109 people on board and four others in a hotel the aircraft crashed into.
If this doesn’t frighten you enough, there is another instance where a fake part cost the lives of innocent passengers. In 1989, a Corvair 580 departing from Oslo, Norway, crashed, killing all 55 people aboard, because a bolt connecting the body to the tail end of the plane fell off in midair. It was later confirmed to be a counterfeit part.
The European Union estimates that almost 200,000 individuals annually lose work because of the counterfeit industry. That’s because if fake items become more popular than their originals owing to their lower prices, the manufacturers of the authentic products either have to reduce their number of employees to save costs or, in an extreme case, close down their operations altogether. Also, under such circumstances, companies will have less motivation to accelerate research and development efforts to come up with new, innovative products.
Korea isn’t immune to the ill effects of the counterfeit business. The government estimates local exporters suffered nearly 17 trillion won ($17.7 billion) in counterfeit-related losses last year.
And the problem is far from over.
The World Customs Organization estimates counterfeits account for between 5 to 7 percent of all international trade, amounting to $500 billion. The number of counterfeit items seized at EU borders has increased by more than tenfold, rising to over 103 million in 2004 from 10 million in 1998.
The major reason for such a steep increase in counterfeit production is that counterfeit manufacturers can gain so much by doing relatively little. By copying established products, they avoid having to invest in developing technology or building their own market and brand recognition. In addition, the penalties for counterfeit operations aren’t very severe. The United States didn’t make the manufacture of fake goods a criminal offense until 1984. When China joined the World Trade Organization in the late 1990s, member countries complained of China’s lack of legal measures to prevent counterfeit production.
Thanks to highly sophisticated technology, it has become easier to copy products. The latest computer graphic software makes it easy to duplicate company logos, and digital printers can quickly produce labels. These new gadgets are easy to master with some money and instruction, and because of them, it has become difficult to distinguish a fake item from its original with the naked eye.
With ever expanding global trade, the problem of counterfeit production has spread worldwide. The distribution of fake goods through the Internet is one such problem.
In Japan, for instance, local luxury brands suffer 500 billion yen ($4.3 billion) in losses each year because of the circulation of fake items through cyberspace commerce. Korea Customs Service monitors nearly 45,000 Web sites suspected of being involved in counterfeit distribution.
An official at Korea’s customs agency said no matter how hard the government tries to eradicate counterfeit production, it will continue to exist as long as there are customers willing to purchase fake goods. He also said the customers’ demand for cheap forged products will only lead to an increase of those goods, and the manufacturers will use their profits to turn out more fakes.
Let’s flip the coin for a moment. Say your company invested a large sum of money in developing a new product, but copied models of that product are selling better than the original. Your company could soon be on the brink of bankruptcy.
That would hurt, wouldn’t it? That’s why we should do away with counterfeit products.
by Kim Chang-gyu