Recently, my wife announced she had been invited to a "fake purse party." When I asked what a "fake purse party" is, she explained these events are like the traditional -- and legal -- "Tupperware parties," only the attendees purchase designer knock-off purses (but, she added, she was not going to be one of the attendees). Having spent the last 15 years living and working in Asia, I was familiar with brand piracy, but I wasn't aware of how wide the practice had become in America.
I am now. A recent survey conducted by Gallup* asked Americans whether they have personally purchased, copied, or downloaded any imitation or counterfeit products in a number of different product categories during the past year. Thirteen percent of Americans indicate they have purchased counterfeit goods, and half of that group said they were aware at least one product was counterfeit.
In a 2004 report on the adequacy of intellectual property protection, the office of the Unites States Trade Representative estimated the losses to U.S. industries from counterfeiting range between $200 billion and $250 billion a year. While the economic repercussions are staggering and growing exponentially, the impact on the well-being and safety of individuals who have purchased counterfeit pharmaceuticals, auto parts, and other products that require quality and safety certifications is just as important. And concerns regarding the role of piracy in the development and funding of organized crime and terrorist organizations are growing rapidly.
The entertainment industry's challenges with respect to illegal downloading and distribution of music and movies in the form of pirated VHS, CDs, DVDs, and VCDs have been well-publicized. Gallup's study finds 5% of Americans have purchased, copied, or downloaded imitation or counterfeit music CDs or audiocassettes in the last year, while 3% purchased counterfeit movies.
According to the study, more than half of Americans who admit purchasing fake goods indicated they knew at least one of the goods was counterfeit before they made the purchase.
While counterfeit brand-name fashion clothing and jewelry are unlikely to physically harm anyone, many types of fake goods -- such as pharmaceuticals, tools, and auto parts -- pose serious safety concerns. However, many Americans are undeterred by these risks. Nearly half of individuals who said they had bought imitation or counterfeit pharmaceuticals or medicines also said they knew their purchases were not the real thing. Four in 10 of those purchasing counterfeit tools or auto parts and nearly 3 in 10 of those purchasing fake alcoholic beverages were aware the products were imitation.
The health and safety risks associated with counterfeit pharmaceuticals and medicines have become so great that the World Health Organization and the U.S. Food and Drug Administration have formed task forces to combat the problem. Recently a representative from a leading pharmaceutical company testified before a U.S. congressional committee that millions of counterfeit pills seized in a raid were made of boric acid, floor wax, and the same lead-based yellow paint used for road marking. The FDA reports that counterfeit medicines make up more than 10% of the global medicines market and the annual earnings associated with the sale of these goods is more than $32 billion.
Bottom Line
A suburban "fake purse party" may seem benign on the surface, but it's symptomatic of the serious problem posed by a multibillion-dollar counterfeiting industry that threatens nearly all sectors of the U.S. and world economies, not to mention the health and well-being of people who use counterfeit products.
*These results are based on telephone interviews with a randomly selected national sample of 1,304 U.S. adults, aged 18 and older, conducted Jan. 10-20, 2005. For results based on this sample, one can say with 95% confidence that the maximum error attributable to sampling and other random effects is ±3 percentage points. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.
