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Counterfeit products, rip-offs, grey market and third shift: read what these terms mean for your brand and how you can protect yourself against brand abuse and product piracy.
Author: Emilie Bargueno, International Product & Market Manager
Brand abuse and product piracy have increased significantly in recent years, whether they involve premium brand clothing, quality wines or copyrighted material. Companies face a whole variety of threats these days but there are ways they can protect themselves. Read all you need to know in this article.
Research, product development, marketing or security: companies work tirelessly on a daily basis to develop their products and deliver the best possible result to consumers. This costs brand owners a great deal of money and effort while brazen criminals are reproducing finished products or copyrights increasingly more quickly and professionally. Counterfeit products, rip-offs, grey market and intellectual property theft are experiencing a boom and the consequences are disastrous for companies. Besides significant revenue losses and damage to a company’s image due to substandard products, safety risks are also a serious problem for the brand and consumers.
But what do characteristic types of brand abuse and product piracy actually look like and how can you protect yourself against them? We have been a pioneer in brand protection and anti counterfeiting with our brand protection technology for over 20 years. Drawing on our many years of experience, we have listed the most common types of trademark infringement and the best brand protection options.
Conventional counterfeit products:
As the name suggests, a product is brazenly copied with all its features such as packaging, brand name and appearance. The quality of these fake products varies: even the inexperienced eye can often detect counterfeit products while unpacking them due to substandard ingredients, materials or workmanship. However, modern production methods in counterfeit workshops mean fake products are also constantly improving and can sometimes no longer be detected by the naked eye.
Unlike counterfeit products, rip-offs are quickly identified upon closer inspection if not before. They often use a slightly different brand name or a name that looks similar to the original with Ray Berry sunglasses or SQNY headphones being well-known examples, for instance. In China, this "copy culture” even has a name: shanzhai.
As a general rule, imitator products may be marketed legally. They are a source of annoyance for brand owners because both the design and brand name are often based on the well-known original. While the original product devotes a large share of its budget to product development, marketing and sales, the me-too product benefits from the original’s high profile and positive spillover at no cost and manufacturers can offer the product at a significantly lower price. The legal status is often very complicated: brand owners and lawyers often only manage to take action and have me-too products removed from the market after years of litigation.
The term "pirated copy" was first used to denote burned CDs or computer games in the 90s. Illegal production or distribution of copyrighted material is still a major problem today, especially in the media industry. Although the music industry has become less interesting for pirate copy makers due to streaming, software or computer game copying is still thriving. The industry has recorded losses worth billions of euros in recent years alone.
Refilling is a highly insidious, dangerous type of counterfeit, where the original packaging for items such as expensive wines or motor oils is refilled with inferior content and circulated at the price of the original. The unsuspecting buyer purchases the product in the belief that they are using something of particularly high quality and thus run the risk of seriously harming themselves or seriously damaging a valuable object.
Illegal overproduction and unauthorized production:
Have you ever heard of the “third shift”? This term refers to illegal overproduction by an authorized manufacturer. Equipped with original machines and materials, it is easy for these companies to produce additional brand products and put them onto the market while bypassing the official supply chain. Third-shift products are usually indistinguishable from official products, making the counterfeit detection particularly difficult for brand owners and customers.
Grey market or gray market:
Grey market trading often takes place where the product is significantly more expensive on an own market than on neighboring markets. By trading across different countries, retailers benefit from the price advantages in three different ways: when reimporting, the gray market dealer buys the product cheaply abroad and reimports it back into the country of origin. In the case of parallel importation, the trader does not buy abroad via the official sales channels, but imports products themselves instead (“backpack goods”). What are known as lateral imports combines the two methods: the trader makes use of price differences between different countries and also imports outside the official supply chain.
Protection against counterfeiting, fake products and rip-offs:
It's actually quite simple: to reliably prevent counterfeiting, rip-offs or fake products of any type, the brand protection technology used must be based on a technology that is not freely available on the market and thus cannot be easily counterfeited. The mark should also be quickly discernible and product verification must be easy.
A product authentication check of an effective anti counterfeit label can be easily done with a smartphone, for example, and does not require a special authentication device. It will then take customers just seconds to determine whether they have bought an original product. Brand owners can use the authentication platform to provide additional information such as competitions, surveys or instructions to customers. Efficient traceability tracking is also possible in conjunction with a digital platform such as tesa® 360: it takes just a few clicks for brand owners to see where their products have been purchased and used.
Protection against refilling:
Refilling is one of the most dangerous forms of counterfeiting. Anyone who wishes to reliably protect their products against illegal refilling should attach great importance to secure closures with a tamper seal. A tamper evident seal that permanently indicates when a closure has been tampered with are helpful, for example. It is also important that the security seal technology is not freely available on the market; otherwise, it can be easily copied. With our tamper evident seal solutions, we are setting new standards in first-opening protection and ensure that product and transport packaging can be quickly checked to verify it has not been opened previously.
Protection against overproduction or unauthorised production:
Distinction cannot usually be made between originals and products manufactured during overproduction. Unless you mark it with a forgery-proof security tag by a third party, that is. It is essential for brand owners to communicate the use of such a security label on the market and inform customers that a product is only authentic with this security marking.
These security tag can also be distributed to all authorized manufacturers transparently via a central platform offered by the security tag provider. The advantage of this system is that the brand owner can determine what quantities are to be produced by specified manufacturers in advance. If a producer now manufactures additional unauthorized products themselves, they do not have any security labels available in-house and these products are quickly detected as counterfeit on the market.
Protection against grey market activities:
It is essential for every product to feature an individual security tag to make things difficult for grey market importers. Another highly important thing in this respect is that the security label must be so unique that it cannot be counterfeited or reproduced. This is the only way brand owners can ensure that it can be identified on an individual basis.
Manufacturers also need to inform and raise awareness among their customers about the usage of security tags. This is because grey market traders often completely remove the product ID to cover their tracks. However, if customers expect a security marking on the packaging, traders will not remove it to avoid getting stuck with unsold goods. Anyone who also uses a digital tool that compares the true destination of goods with the actual point of sale can even expose and catch grey market traders.
Protect, check, track and interact: a smart label against product piracy
With an extensive range of smart label solutions, we protect well-known clients such as the PSA Group from all consequences of brand abuse and counterfeiting.
The centerpiece of our protection is our digital platform tesa® 360, where smart applications, modules and web solutions come together in a single system. Brand owners thus have full control, protect their products against any form of counterfeiting and can accurately track every movement of their goods with intelligent tracking and traceability modules.
Do you want to know more about this subject or do you have a specific question? Our experts are always happy to help!
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