International counterfeit merchandise expert Bob Barchiesi has an eye-opener for you.
The traffic in phony goods is about much more than the sale of knockoff handbags and imitation Viagra.
Not only do counterfeit goods cost the world economy approximately $650 billion annually, but some of that obscene profit helps fuel organized crime groups and terrorist networks from New York to Hong Kong and Belgrade to New Delhi. In New York City alone, Barchiesi says, a study found counterfeit merchandise drains $1 billion just in sales tax revenue.
A featured speaker at last week’s International Conference on Transnational Organized Crime &Terrorism at the Red Rock Resort, Barchiesi spent an hour putting the damage in perspective before a gathering of more than 300 law enforcement experts. Although the conference was closed to the public, I managed to finagle a seat.
Barchiesi is the president of the International AntiCounterfeiting Coalition, a nonprofit trade organization devoted to protecting intellectual property and deterring counterfeiting. Although his statistics were impressive, what made me wince was Barchiesi’s anecdote about the criminal group that marketed dirt-cheap contact lenses via the Internet. Canadian authorities eventually caught the traffickers, but only after customers started going blind and complained that the lenses kept sticking to their eyes.
“The public has a sense (buying counterfeit goods) is a victimless crime, and it’s far from that,” he says. When you talk about the cost to taxpayers, he adds, think of the revenue losses in terms of lost jobs of police officers, firefighters, teachers and nurses. You can fund a lot of first responders’ paychecks by stopping counterfeiting.
“Then there’s always the health and safety risk,” Barchiesi says. “There’s no quality control, and they don’t basically care what type of products they put out there.”
Like the contact lenses that worked like fly paper, for instance. Or the cholesterol medicine that was made of wallboard and lead paint. When it comes to fixing phony pharmaceuticals, the counterfeiters are a creative bunch. Among the many ingredients they’ve used: anti-freeze and insecticide.
The IACC executive board and board of directors read like a corporate “Who’s Who” with representatives from Calvin Klein and Rolex to Pfizer and Microsoft. While corporations have a lot riding on protecting their brands, in a world economy their challenge is increasingly complex.
Because so much of the shady business is conducted online, credit card companies and merchant banks are on the front line of preventing counterfeiting. Without credit card accounts and banks willing to handle high-risk customers, counterfeiters are challenged to do high-volume business.
The challenge is international. Barchiesi says it’s common to trace counterfeit goods trafficking through the veneer of a “Canadian” website to an Internet operation in Russia, and from there to a processing merchant bank in China. The goods? They might be from China, India, Mexico, somewhere in South America — or even in the United States.
Barchiesi’s group works with its member corporations and often assists law enforcement with intelligence information that helps provide a clear understanding of the role of counterfeit good trafficking in many organized crime operations. Traditional organized crime families commonly traffic in stolen and counterfeit merchandise.
As with most criminal activity, the key is following the money and interrupting the cash flow.
“You’re not going to arrest and seize your way out of this problem,” Barchiesi says.
On the consumer level, the protections are simple but effective. He calls them the “three Ps.”
First, there’s the price. If the discount is too good to be true, he says, it probably is.
Then there’s the point of sale. Buying heavily discounted goods online from a storefront website is a good way to get burned.
Third, always carefully examine the packaging. Although the print quality and attention to detail are always improving, the packaging of counterfeit goods is often inferior and sometimes includes misspellings.
“Consumers are looking for a bargain,” Barchiesi says, “but they might get more than they bargained for, especially on the health and safety side.”
A closer look and a little common sense could save bargain hunters a lot of grief.
John L. Smith’s column appears Sunday, Tuesday, Wednesday, Thursday and Friday. E-mail him at email@example.com or call 702-383-0295.