Stopping the fakes

April 20th, 2016

By Larry Jackson

All around the world the pressure for authorities to take a more active role in combatting counterfeit products is increasing. Over the past few years, we have seen criminals diversify their products, from the usual knock-off handbags to the counterfeiting of wines, washing detergent and even stationery sets. The Australian Border and Custom Services, who are responsible for investigating the importation of counterfeit products, seized over half a million in counterfeit products in 2014/15 alone. These products had an estimated retail value of more than AU$23 Million[1], up from AU$17 million worth of seizures in 2013/14.

These seizures may only be the tip of the iceberg, with the International Chamber of Commerce (ICC) estimating that it accounts for between 5-7% of all world trade – a $600 billion industry[2].

But it’s consumers that face the most danger. There is a vast difference between knowingly purchasing fakes – after all, no-one expects the $10 pair of “Fay-bans” bought on holiday to be the genuine item, and being conned by a well packaged, seemingly genuine fake. Consumers tend to be unware that the product they’re buying isn’t the genuine item and this can lead to extremely dangerous situations, such as the recent counterfeit Toyota brakes which contained asbestos.

These ‘genuine fake’ products are also very lucrative for criminals. These are products that are usually sold online, convincingly packaged, close to the manufacturer’s RRP and accompanied by a decent story to explain the discount – such as the product being opened for inspection or an unwanted gift. Ultimately this type of con plays on the well-established consumer desire for a good bargain.

All industries are vulnerable. Pharmaceutical products for example are another hotspot, stimulated by constant consumer demand and the often high cost of products. It is currently estimated over half of the pharmaceuticals purchased online are fake. These products pose an obvious health risk, and internationally the level of concern is high enough for the EU to have introduced its recent Falsified Medicines Directive. The directive brings in a new range of packaging requirements for vulnerable products around labelling and serialisation to support the European Medicines Verification System (EMVS), a point-of-dispensing verification system.

The pharmaceutical industry is also an example that it’s not just end-consumers that are at risk from fakes. Consumers turning to fakes instead of the genuine article is an obvious case of lost revenues, but there are also wider risks from elaborate fakes entering the supply chain. The consequences in reputational terms of an established brand inadvertently selling fake products are severe.

Brands have focussed on two related areas to protect them from fraudulent products; labelling innovation and packaging innovation.

Addressing labelling innovation, well known basic security measures include security inks, holograms and tamper-evident seals. But unfortunately, counterfeiters have kept up and fake holograms are now an established feature of high quality fake products. This is driving innovation into new areas, some of the most interesting include the development of 3D barcodes for all types of products. Developed in collaboration with UK company Softmat Ltd and a group of engineers at the University of Bradford, the system uses a series of pins and depths to create sequential and individual barcodes for products. The barcodes afford companies the ability to individualise barcodes for each product making counterfeit products immediately stand out within supply chains.

From the packaging perspective, there’s a level of crossover between fraud-prevention and tamper resistance. Many of the systems designed to prevent tampering; itself often a form of fraud, particularly in food and beverage also help to prevent forgeries – through their recognisable and often difficult to emulate form. Nonetheless, whilst the tamper-proofing used to protect food and beverage is generally effective, partly because of the relative low value of the protected items, less can be said of the beauty sector which tends to be packaged in boxboard with security and tamper-evident strips.

The response from the packaging industry has been to focus on design innovation, whether in terms of shapes or difficult to emulate printing techniques. The San Francisco based company Benefit Cosmetics, is well known for its combination of uniquely shaped and uniquely printed packaging. This in practice makes the cost of replication and forgery much higher, helping consumers to identify the real deal and to deter prospective counterfeiters.

Regardless of the form of product protection, added advanced forms of packaging or advanced labelling comes at an increased cost. Businesses should be embracing the added brand security and focusing on the added value this investment brings. For example, a more luxurious package that through a combination of materials, printing and design becomes difficult to emulate is also justifiable through its positive impact on the consumer brand experience and shelf presence.

While it is up to the brands to introduce these protections into their product lines, retailers need to be careful about what they are stocking. By ensuring the products they stock are legitimate, retailers can protect themselves and their customers from any nasty surprises.

Larry Jackson is the CEO of APP business partner Paper Force. Larry has more than 20 years’ experience working in the paper industry in Australia, New Zealand, Hong Kong and Canada and took over Paper Force following the announcement of APP’s Forest Conservation Policy.

[1] https://www.border.gov.au/ReportsandPublications/Documents/annual-reports/ACBPS-Annual-report-2014-15-optimised.pdf

[2] http://www.iccwbo.org/products-and-services/fighting-commercial-crime/counterfeiting-intelligence-bureau/