Fakes or Bootlegging are a billion-dollar industry today. The sale of fake luxury goods is estimated to be worth USD $600 billion a year worldwide with brands such as Louis Vuitton and Gucci among the biggest targets for counterfeiters. OECD estimates 3.3% of global trade is of counterfeit goods. These markets sell counterfeit items such as clothing, shoes, and jewellery at a lower price or of lower quality than the original. The new age technology has also made it easier to produce counterfeit goods and trade them over the internet which has resulted in a huge increase in the supply of counterfeit goods over the last few years. The extensive use of counterfeit goods, piracy, and smuggling in India are having a negative impact on the economy, as well as on health and safety.
Since they affect almost every industry area worldwide, counterfeiting and piracy are enormously widespread global concerns. By 2022, according to projections from the International Chamber of Commerce, counterfeiting and piracy would have a worldwide economic impact of $4.2 trillion and threaten 5.4 million genuine employment.The Anti-Counterfeiting Society of India (ASPA) released its report "The State of Counterfeiting in India 2021" on World Anti-Counterfeiting Day. The report found that the number of counterfeit incidents in India increased by 20% YoY between 2018 and 2020, with a 17% increase between 2019 and 2020. The top 5 sectors most affected by counterfeiting are Alcohol, Tobacco, FMCG, Currency, and Pharmaceuticals, constituting over 84% of all incidents reported. There was a sharp increase in crimes related to counterfeit PPE kits and sanitisers during the COVID-19 lockdown.
The report also found that counterfeiting activities are not limited to luxury items, with common daily use items such as cumin seeds, mustard oil, ghee, hair oil, soaps, baby care, and medicine being increasingly counterfeited. The Trademarks Act of 1999 in India provides remedies for brand counterfeiting and trademark infringement through sections 102 and 103. The act includes criminal penalties of up to 3 years imprisonment and a fine of up to 2 lakh rupees, as well as civil remedies such as injunction and damages. Moreover, Section 135 of the Trade Marks Act, 1999, provides for the appointment of trademark officers, who have the power to seize counterfeit goods and issue notice to the infringing party. The Copyright Act, of 1957, provides protection to original literary, dramatic, musical and artistic works, cinematographic films and sound recordings. In case of copyright infringement, Section 51 of the Copyright Act, 1957, provides for an injunction and damages. Under the Geographical Indications of Goods (Registration and Protection) Act, 1999, geographical indications are protected and any unauthorised use of such indications can lead to prosecution. The Designs Act, 2000, provides protection to original designs and a suit for infringement can be filed under Section 22 of the said Act. The Patents Act, 1970 for pharmaceutical drugs, Section 276 of the Indian Penal Code, 1860 for the sale of fake drugs, and the Drugs and Cosmetics Act, 1940 for imitation or spurious drugs. Import and export of infringing goods are prohibited under the Customs Act, 1962 and the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007.
Counterfeit consumption. Luxury brands represent an aspirational lifestyle and often signify success, power, and status. They create artificial scarcity of their products through marketing techniques such as limited editions or trademarking their designs. This in turn creates a sense of exclusivity that increases the demand for their products among customers. Increasing demand can lead to price increases, which encourages counterfeiters to manufacture fake versions of luxury items in order to capitalise on the high demand for these products. Understanding why people are willing to pay more for counterfeit products than for the real thing requires an understanding of the psychology behind why they make the decision to purchase these products in the first place. A number of different factors can influence this decision including the influence of social norms, perception, emotional reasoning and cognitive biases such as the Availability heuristic, Normalcy bias, effort justification, and the halo effect.
With the availability of counterfeits becoming easier because of the Internet and Social media, it is now easier to find good quality items at a lower price than ever before. Those who associate a product with luxury or prestige brands form a positive impression of it because of its halo effect. In other words, even if a person knows something is fake, they might still want to buy it because it makes them feel or look good. Maybe few words from an advertisement that catches your eye – throw "Get it before it's gone" or just a quick glimpse of someone sporting an expensive-looking outfit and then all of a sudden your being flooded with this euphoric feeling that you can't live without it and you're running to the closest shop with cash in hand to buy it immediately.
This is the infamous halo effect in a nutshell; you can't escape the feeling that something is probably good when you've just read about it or seen it advertised repeatedly. However, the negative effect of "halo effect" is far greater than its positive effect. The halo effect distorts consumers' perceptions of the original value of a product and eventually leads to an irrational demand for counterfeits. You can also think of the effort justification effect.
It's when people justify their actions, even if they're unethical, on the basis of how hard they worked to get them. Because people spent so much time looking for and bargaining for fakes, they can justify buying them. Or if you bought it on the internet for a much lesser price than you saw in a store, you also can justify your purchase as that's a great deal.Production of counterfeit goods:Counterfeiting and piracy behaviours are driven by the low perception of risk and high perceived reward. Some producers may not view the production and sale of counterfeit products as risky, due to factors such as lack of enforcement or weak IP laws, high demand for counterfeit products, or a low likelihood of being caught. This highlights the importance of strengthening IP protection and enforcement measures to increase the perceived risk for producers of counterfeit products. By increasing the perceived risk, it may be possible to discourage producers from engaging in this illegal behaviour and protect the rights of IP owners.The perceived rewards of counterfeiting can vary for different actors involved in the production and sale of counterfeit products. For producers, the perceived rewards may include high profits with relatively low overhead costs and a low risk of being caught or punished. They may also see counterfeiting as a means to quickly and easily enter into a profitable market without investing in research and development or obtaining necessary licenses.By examining how psychological and social factors influence consumers' purchases of counterfeit goods, behavioural economics can contribute to regulating counterfeit goods and enforcing intellectual property rights. This understanding can inform the design of policies and interventions aimed at reducing demand for counterfeit goods and promoting compliance with IP regulations.