Strategies to detect and reduce counterfeiting activity

While at one time counterfeit products were largely restricted to watches, designer apparel, and movies, today counterfeiting is a major problem in such diverse product categories as pharmaceuticals, automotive parts, and computer software. There are four distinct types of counterfeits: knockoffs, counterfeits that are reverse engineered from genuine goods, goods produced by outsourced suppliers on "third shifts," and goods that do not meet a manufacturer's standards but are not properly labeled as seconds or destroyed. The quality of some counterfeits is so good that some major retailers have unknowingly purchased counterfeits. But while there are new forms of counterfeit goods, there are also new strategies for combating counterfeiting. This article describes how to detect and reduce counterfeiting activity, via a plan which consists of four steps: (1) developing early warning signals of counterfeiting; (2) budgeting to monitor, deter, and remove counterfeits; (3) using demand-side strategies to deter counterfeiting; and (4) using supply-side strategies to deter counterfeiting. (C) 2008 Kelley School of Business, Indiana University. All rights reserved.