$200B Lost To Counterfeiting? Back It Up

An anonymous reader writes "Over the weekend, the NY Times ran a story about how the recession has impacted product counterfeiters. In it, the reporter regurgitates the oft-repeated claim that counterfeiting 'costs American businesses an estimated $200 billion a year.' Techdirt's Mike Masnick asks the Times reporter to back up that assertion, noting two recent reports (by the GAO and the OECD) that suggest the actual number is much lower, and quoting two reporters who have actually looked at the numbers and found (a) the real number is probably less than $5 billion, and (b) the $200 billion number can be traced back to a totally unsourced (read: made-up) magazine claim from two decades ago."

Comments

Big Business

[Traze]

Trying to get more free money from the government?
Gasp!

Re:Big Business

[popo]

The idiotic claim made by big business is that every counterfeited product "would" have been purchased had it not been counterfeited.

The claim not only illustrates a complete lack of understanding of the basic supply/demand curve, but gives us yet another example of a deeply flawed business model which relies on legal threats and big government to plaster over it's shortcomings.

I for one see counterfeiters as a necessary force: Reminding us of the stupidity of major-brand retail prices, and their massive disconnect from underlying value.

Re:Big Business

[tehcyder]

I for one see counterfeiters as a necessary force: Reminding us of the stupidity of major-brand retail prices, and their massive disconnect from underlying value.

If you don't want to pay brand-name prices, how about not fucking buying brand-name goods?

Re:Big Business

[Internetuser1248]

I for one see counterfeiters as a necessary force: Reminding us of the stupidity of major-brand retail prices, and their massive disconnect from underlying value.

If you don't want to pay brand-name prices, how about not fucking buying brand-name goods?

Way to state the obvious. I have one too "if you don't want to go bust, get a working business model". Well thats my contribution to the save the obvious foundation for the week. Wait here's an even better one "drinking water makes you less thirsty". I am on fire today.

Re:Big Business

[Anonymous Coward]

> "The idiotic claim made by big business is that every counterfeited product "would" have been purchased had it not been counterfeited."

I'm sorry, in what way was that juvenile bullshit? The methodology of loss-calculations is deeply flawed.

Or maybe this was juvenile?

> "The claim not only illustrates a complete lack of understanding of the basic supply/demand curve, but gives us yet another example of a deeply flawed business model which relies on legal threats and big government to plaster over it's shortcomings."

There are loads of thinkers here who question the limits of intellectual property, and see both its dangers -- and often its absurdity.

Frankly, there is little that was said here that is immature in the least. What you are expressing, is a deep, unquestioning respect for laws which were bought and paid for by those who stand to profit from them. That the public commons (ie: your rights) were destroyed for the benefit of others, matters little to you.

You do not question law. You abdicate all criticism, free thought and frankly, your humanity. Like a good little lemming, you are part of the system -- a system which neither big business, nor the wealthy themselves adhere to. You are a lap dog. These laws were designed to limit your freedoms, your choices and maximize the profits of others. And yet you kneel, boy.

I have zero respect for you.

Additionally, it must be noted that your post, reads exactly like said man-boy in Mom's basement.

Re:Big Business

[ubermiester]

Reminding us of the stupidity of major-brand retail prices, and their massive disconnect from underlying value.

While I agree that most "brand name" products are overpriced based on their utility, you must remember that there is also a great deal of money spent to let people know that the product even exists. I am not sure of the numbers, but a surprisingly large percentage of a product's budget is allocated for marketing. And when you look at how things are sold to a mass market, it starts to make sense.

Why, for example, do we know that there even is a new "Toy Story" movie? Not because of word of mouth. We are aware of it because Pixar and their parent spent millions of dollars on advertising. Similarly, why do we know about that new Sony TV or Nikon camera? Because Sony and Nikon spent millions to buy space in the heads of as many people as they could. And when more and more people associate a brand with quality, the brand becomes the product.

Counterfeiters benefit from this because an inferior product with a respected brand name will sell faster and at a higher price. Its that simple. (Remember, counterfeiters do not have to honor warranties or take service calls.)

If a tourist in Times Square sees a hole-in-the-wall store selling knock-off cameras (I work near there and there are many of these shops), they will be much more likely to spend big bucks if they see the Nikon brand in the window than some unrecognizable brand they know nothing about. As a result, these stores sell knock-offs with Nikon branding at what appear to be very attractive discount prices and people snap them up. By the time they realize that they have been taken advantage of, its normally too late to do anything about it. And on the web this problem is a million times worse.

Now I know that a one-to-one ratio is way off - every negotiation starts off with inflated demands/claims - but counterfeiters are good for no one but themselves. They hurt legit companies by selling (in the vast majority of cases) inferior products that undercut the value of the real branded product by undermining the relationship between brand and quality. And to some degree they decrease sales (putting aside how much the numbers are pumped). But mostly they hurt the people who buy their crap by providing an inferior product at an inflated price.

And if you question the assumption that counterfeit products are generally inferior, perhaps you should ask the simple question: Why don't they trade on their own name? Why can't the Times Square stores tell people that they are selling Nikon-like cameras that are "just as good"?

Can't really hurt many US jobs...

[Kepesk]

I don't see how counterfeit products could do much damage to the US job market. Most of the legit products are made overseas too, right?

Re:Can't really hurt many US jobs...

[feepness]

So all we have left is design and marketing, which is what counterfeiting "takes".

Re:Can't really hurt many US jobs...

[cappp]

Think of your average Hollywood blockbuster, cd release, or Apple product. They ship out the production to the cheapest manufacturers so as to maximize their profit at home. Your $200 Rolex doesn't cost $200 to make, far from it. While it's components cost X and assembly, shipping, advertising, insurance, tax et al cost Y you can be sure that X+Y200 by a fair amount. The difference there goes back to the company of origin and therefore the economy of the company's country of origin. Whenever an Ipod gets sold anywhere in the world Apple takes a large slice. That slice in turn ends up in the American economy - be it as wages, deposits in a bank, investments in the stock market, as liquid funds, office rental, taxes, health, whatever.

That's one of the reasons countries trying to modernise their economies tend to put a focus on IP creation - it leads to a large influx of cash for a long, long time. Same goes for moving away from a primarily extraction-based economy.

Re:Can't really hurt many US jobs...

[cpt kangarooski]

That's one of the reasons countries trying to modernise their economies tend to put a focus on IP creation - it leads to a large influx of cash for a long, long time. Same goes for moving away from a primarily extraction-based economy.

Well, only so long as other countries respect it. Creation, after all, is expensive but not remunerative on its own; it is publishing that is (or at least can be) where the money is made. It's reasonable to let someone else invest the time and money in creation, and then to copy them cheaply and profitably. Convincing states to not do this is tough, especially if they don't have, and don't expect to have, much local creative effort that could be exploited elsewhere, justifying mutual respect for these rights.

Given that it seems unlikely that two countries would openly go to war over, say, DVD piracy, copyrights, patents, trademarks, etc. just don't seem like a stable, long term basis for an economy. It's just too imaginary. Extraction isn't too good either, but perhaps there's some other way.

Re:Can't really hurt many US jobs...

[Hognoxious]

Please tell met how counterfeited products take away marketing jobs? Not trying to troll, just an honest question.

At the risk of stating the obvious: if the counterfeiters divert enough revenue away from the genuine producer, the genuine producer won't be able to employ so many people and might even go out of business completely.

Maybe newspaper articles should list references

[Matt Perry]

Maybe newspaper articles should cite their sources and have a list of references at the end like academic papers do. That way at least readers or other interested parties could independently verify the facts in the article.

Re:Maybe newspaper articles should list references

[JWSmythe]

    Do you know how long it would take them to verify all their sources. Come on, it'd take several extra hours to get a story up. There's no time for that. If you want for confirmation, you'll get scooped by someone else.

    [sarcastic but unfortunately true soapbox off]

Re:Maybe newspaper articles should list references

[Matt Perry]

Do you know how long it would take them to verify all their sources.

I didn't say that the author needs to verify their source. They merely need to list them. They got that $200 billion figure from somewhere. Cite it.

Re:Maybe newspaper articles should list references

[dnahelicase]

Maybe newspaper articles should cite their sources and have a list of references at the end like academic papers do. That way at least readers or other interested parties could independently verify the facts in the article.

Heck, even wikipedia articles list their references and are conspicuously labeled if they are in need of references. This article says the figure is from "the authorities".......WTF is that???

By the way, I work for a company that sells products that could be counterfeited. I estimate that just my company loses approximately 200 trillion dollars a year just from people selling products in our name. Why didn't she report that?

Re:Maybe newspaper articles should list references

[EETech1]

I have a few friends that work for the local paper, and they all have to take turns working the night shift. Part (if not all) of the job dities on the night shift include watching the 9pm and 10pm news on all of the local networks to be sure that there isn't anything on that needs to be added to tomorrows paper quick. Ask them what time they have to work till, and they'll smile and say "right after the 10:00 news"

Re:Maybe newspaper articles should list references

[AK Marc]

That's what I was saying. If you sell "fruit cocktail" in the US without the right number of cherries, it isn't "fruit cocktail" but some other type of mixed fruit food. "Fruit cocktail" has a specific definition and passing anything else off as it is illegal. The same should be true of "news." Define "news" to have certain factual basis and disclaimers about conflicts, opinions, and unverified sources. Ban "news channels" from having opinion content that isn't labeled with a large banner across the top saying "opinion only, no facts included" and from calling themselves a "news channel" if they have more than 20% opinion pieces or something like that.

"News" used to mean something. Now it's a marketing term for selling opinions dressed up in half-truths and passed as facts. I call the use of deception to sell something (whether an idea/political agenda or a channel or paper or whatever) fraud. Instead people see it as good marketing.

Re:Maybe newspaper articles should list references

[JWSmythe]

    Well, I've been on the receiving end of a few C&D's for doing what Slashdot does. It all depends on who gets their panties in a wad that day. Carrying parts of their stories can be touchy. Duplicating large amounts of news is well beyond the fine gray line of copyright.

    Generally, we (bloggers and aggregators) all do it with attribution (the read more links, or embedded links). It actually helps them out. Consider a Slashdot story and the Slashdot effect. If Slashdot runs a story, it'll likely get an extra 100,000 hits or so. Some of those hits will result in increased ad revenue. At very least it'll get them a bit more attention. When PoDunk Nebraska's Daily Times, who has a readership of 15 people (population of 30) runs a story, that'll be the total exposure. When someone like us runs it, it is now internationally known. You normally couldn't beg for that kind of exposure unless it's picked up as a wire service story. Even with it showing up in the wire services, it's rare that the viewers make their way back to the publication of origin.

    If a publication is getting all their facts from another publication, it can seriously hurt their revenue stream. Why would I stay up and watch the 10pm news, when I know it'll be printed in the unrelated paper in the morning. I know they seed their news with mistakes, so it's traceable. For example, 15 people were injured in a major car crash, and it was a big story for the area (slow news day). The first media outlet may report 16 (oops, our mistake). When you see other outlets report 16 people were injured, it's pretty obvious that it was collected from you. It doesn't always have to be that obvious though. It could be an intentional misspelling of a name. "John Smithe" could be the subject of an article, although his name is really spelled "John Smythe". Unless the records were incorrect, (like, police or court records), that would have not been shown incorrectly twice.

    There's always been a drive to get the scoop on a story, no matter what it takes. We've been getting away from real journalism though, where the journalists don't necessarily check up on the leads. Getting a lead from another publication is fine and dandy, but check your information. In the case of the article in question, it seems they jacked it straight out of an old publication rather than doing basic fact finding. Who needs fact finding these days, when rumors are more than enough to handle it. I hate it when I see false information from chain emails pop up in publications. It happens more than I'd like to see. Rather than try to check up on any of the facts, they'll just rehash the lore and publish it.

    [soapbox mode off]

Re:Maybe newspaper articles should list references

[Brickwall]

Not disagreeing with you, but whenever someone points out the same BS in the climate debate, they are labeled a "denier", and subject to all kinds of calumny. The AGW crowd purposely hides the medieval warming period from their graphs, applies all kinds of (undisclosed) "adjustments" to raw temp readings (all of which apparently skew the temp upwards), close off sources of raw data (there used to be about 100 temp stations north of 60 in Canada; now there's ONE), place many weather stations in places that contravene their own regulations (close to A/C exhausts, tarmac, etc.), project doomsday scenarios about Pacific islands (none of which have disappeared).

I'm a freakin' engineer, and this complete contravention of anything that smacks of science drives me nuts. I'm not saying AGW doesn't exist; it may well be true. I'm saying on the basis of what's been shown, and more importantly, how it's been shown, the case is definitely "not proven".

Re:Maybe newspaper articles should list references

[Jeremy Erwin]

As in x acres per day times 365 days per year divide by surface area of the earth and we found that those evil farmers in the Amazon region were denuding the entire planet (including the surface of the oceans) every year.

Working backwards, the surface area of the earth is 510 072 000 square kilometres (or 1.26041536 e11 acres), yielding a daily rate of 345319276 acres lost. Considering that the Rainforest Action network typically claimed that 50,000 acres were lost per day, your estimate is a gross exaggeration.

Now, current estimates of amazon deforestation are on the order of 20,000 square kilometers, or 13540 acres per day. But RAN used a worldwide figure.

Re:Maybe newspaper articles should list references

[Jeremy Erwin]

So, based on the 216,000 acres per day in the April, 1990 Vegetarian Times article your search turned up, my estimate was off by a factor of 4. As in, Vegeterian Times was claiming the denuding of the Earth by your figures every 4 years instead of every year.

Surface area of earth: 510 072 000 sq km
Veg Times estimate of acreage lost per day: 216000 acress
Veg Times estimate converted to square kilometers: 874 sq km
Yearly loss, assuming 365.24 days/year: 309605 sq kilometers

Years it would take to denude 510,072,000 sq km of rainforest at that rate: 1650 years.
Your estimate: 4 years.

square Kilometers get read as square miles, hourly estimates based on 8 hour work days get scaled up again using 24 hour work days. All rainforests are read as just the Amazon.

Ever been to Brazil?

[Anonymous Coward]

It's the counterfeiting capital of the universe. Because of Brazil's 60% duty on imported goods, an a very unfavorable exchange rate, a pair of Nike sneakers made in Singapore for $5 in materials and $0.30 in slave labor costs about R$600, which is a month's wages (or more) for a lot of people there. So, there's a huge demand, and therefore supply, of counterfeit goods.

Re:Ever been to Brazil?

[Anonymous Coward]

This is largely not due to high import duties but due to corrupt customs officials. Fucking hell hole, I'm longing to get out of it.

Old media sucks

[GNUALMAFUERTE]

On one hand, they are trying to salvage old media, and on the other hand they are trying to kill efforts like Wikileaks.

It seems pretty obvious.

CNN can just say anything they want, even if it's completely inaccurate and has no sources to back it up. They can just say their source is secret, and nobody is even going to ask.

Wikileaks, OTOH, shows you the actual docs. That's why they are being persecuted as criminals.

Encyclopedia Britannica is written by an unknown number of employees under unknown circumstances, and they cite no sources clearly (In the best case, they just cite a bunch of sources that might or might not back up their claims, and there's no direct way to check them easily).

Wikipedia is edited by the general public, each edit can be easily identified and accredited to a single author, and all sources are directly linked to in most cases.

And yet, Encyclopedia Britannica is considered more credible than Wikipedia, even when it's been shown that it's far more inaccurate, not to mention outdated.

Old media has to die, but the almighty economic powers that run this world won't let it go without a fight.

Re:Old media sucks

[Volante3192]

Get over it. Truman defeated Dewey already.

Re:Old media sucks

[copponex]

Just because you disagree with the facts doesn't make the facts political. It makes you wrong.

Re:Old media sucks

[belthize]

Citation needed.

Re:Old media sucks

[Anonymous Coward]

For an online encyclopedia with no political bias, see: http://www.conservapedia.com/

Re:Old media sucks

[Tim C]

Wikileaks, OTOH, shows you the actual docs. That's why they are being persecuted as criminals.

They're being persecuted like criminals because some of the documents in their possession are of questionable legality, not because they show the docs full stop.

Not surprising

[lyinhart]

Oft quoted as the "paper of record", the Times has a history of faking it.

Seriously though, estimating losses due to piracy/counterfeiting is always dodgy since it assumes that a certain number of people would have bought the real deal had the fake stuff not been available.

Re:Not surprising

[MBGMorden]

Not that I give a lot of credence to that $200 billion figure, but I think part of their claims are that people might be buying counterfeit goods thinking that they're legit. For example, it was a while back on a forum that I saw some people that had gotten fake Seymour Duncan guitar pickups off ebay. They were sold for a price nearing authentic ones, and were sold as authentic, but after scrutiny it was discovered that they were knockoffs.

That said, while it DOES happen, I think it's a lot rarer than most companies would have you believe.

Re:Not surprising

[Teun]

The "lost sales" numbers companies claim often are based on 100% of people buying the more expensive real product (which most of us would agree is a completely bogus number).

Indeed, I recently bought a fake Breitling watch for $100.-.

Even though I have to take it off in the shower (yes I bathe) I would never buy the +$4000.- real deal that's water proof to -500 meters.

Yet some lawyers would tally this as a $4000.- lost sale.

*illions lost to piracy, counterfeit goods...

[Sheetrock]

The missing element in these claims is the citation of some sort of study that combines an examination of buying power and psychology to determine when piracy or the purchase of a counterfeit good represents a lost sale to the afflicted rights holder and when it does not. You can't just multiply retail cost of original good by estimated number of IP violations; that very likely surpasses the upper bound of the "damage" that has been caused. It's faulty journalism to ignore this fact or pass the responsibility for the veracity of this information to somebody else, but that doesn't seem to stop anybody from breathlessly regurgitating these sky-high numbers.

Re:*illions lost to piracy, counterfeit goods...

[jd]

You also have to consider that the market price is artificially inflated to "cover the damage" of piracy. Thus, if there was no piracy, the prices would (hypothetically) be lower. So not only do you have to consider the sales lost rather than the total pirated, but you also have to use the "real market value" not the inflated market value. Further, you would have to subtract from this total the amount lost per sale due to the devaluation.

If the value ends up negative, then the industry is actually making money from there being pirates, as counter-intuitive as this would seem. If they were unable to sustain a higher value per item, through a lack of justification, they would end up making less money even though they sold more products.

(This justification thing featured big time when the US and UK governments investigated the music business when it was discovered that prices for producing CDs had dropped dramatically, research had all been paid for, but consumers were actually spending more per disk. Before then, the main argument for the high prices for CDs was that it cost more to make them than it did vinyl. After the showdown with Congress and Parliament, it was all about piracy.)

I'm not saying that anyone IS making money from there being piracy, but it is something that has to be considered as a possibility.

Even after all that, there are still two more factors. The first is who is doing the pirating. Competitor A may well try pirating a product of Competitor B's, particularly on those occasions when you've a sales volume war going on. That is certainly money lost to piracy, but it is the industry itself doing it and you can't blame outsiders for that. Well, you can, as clearly they do.

The second factor to consider is unpaid royalties. We have no idea how much any given company is making in profit that it is NOT entitled to. However, this value has to be estimated, because you have to subtract not only the total illicit profit from a company from the damage caused by counterfeiting, but you THEN have to subtract the total illicit profit the company WOULD have earned had the sale happened through them. That is not money they should ever have counted.

I cannot see how any figure that exists today (or any other day) could even begin to take all this into account.

Re:*illions lost to piracy, counterfeit goods...

[Kongzilla]

"You also have to consider that the market price is artificially inflated to "cover the damage" of piracy. Thus, if there was no piracy, the prices would (hypothetically) be lower. " This isn't necessarily true if a competitive market isn't in place. Goods sold under a monopoly regime are typically more highly priced. In this case, piracy and counterfeiting introduce competition into the market, so hypothetically, if there was no piracy, prices would be higher. Your argument holds well enough for fake Gucci bags or Rolex watches, but not so well for creative works, which are monopolies in the economic sense due to their treatment under copyright and patent law.

Counterfeiting is Ok.

[Icegryphon]

We all know that the Federal Reserve prints more money all the time
without anything producing any goods for it.
Let me introduce a little friend I call Hayek.

Re:Counterfeiting is Ok.

[copponex]

It is not enough to recognize that 'social justice' is an empty phrase without determinable content. It has become a powerful incantation which serves to support deep-seated emotions that are threatening to destroy the Great Society. Unfortunately it is not true that if something cannot be achieved, it can do no harm to strive for it. Like chasing any mirage it is likely to produce results which one would have done much to avoid if one had foreseen them. Many desirable aims will be sacrificed in the vain hope of making possible what must forever elude our grasp.

-Friedrich Hayek
"Law, Legislation and Liberty"

Hayek: the unoriginal "too hard; don't try" philosopher.

Re:Counterfeiting is Ok.

[Minwee]

It is not enough to recognize that 'social justice' is an empty phrase without determinable content. It has become a powerful incantation which serves to support deep-seated emotions that are threatening to destroy the Great Society. Unfortunately it is not true that if something cannot be achieved, it can do no harm to strive for it. Like chasing any mirage it is likely to produce results which one would have done much to avoid if one had foreseen them. Many desirable aims will be sacrificed in the vain hope of making possible what must forever elude our grasp.

-Friedrich Hayek
"Law, Legislation and Liberty"

"Kids, you tried your best, and you failed miserably. The lesson is, never try."

-Homer Simpson
"Burns' Heir" [1F16]

Re:Counterfeiting is Ok.

[copponex]

The difference is between effective government and ineffective government, not the ability of a government to provide a just society. Hang on, I'll put it simply: you need to learn more than what your daddy told you. It's a big, big world out there.

Let's look at two modern western nations and see what the results are:

USA vs Norway

GDP per Capita (World Bank)
Norway: $55,000
USA: $46,000

Life Expectancy
Norway: 80 years
USA: 78.2 years

Poverty Rates
Norway: 7%
USA: 12%

Employment Rates:
Norway: 3.5% (April 2010)
USA: 8% (April 2010)

Income Inequality (Lower is Better)
Norway: 25.8
USA: 40.8

Vacation Time
Norway: 25 days
USA: 14 days

Awww boo. Reality is a bitch, ain't it?

Re:Counterfeiting is Ok.

[mogness]

Like most other U.S.-bashing slashdot members, you fail to include some important facts in your comparison. For instance, population of either country. Please note...

Approximate population
Norway: 4,478,497
USA: 309,162,581

Whether your underlying point is right or wrong, I don't consider your comparison valid because of this little detail.
I would even venture as far as to say that your statement goes against your point. The fact that the US figures in your original post are so close to those of Norway even though the US has to govern almost 80x the population is actually more of a testament of an effectively scaling government. It's unlikely that the governmental system of someplace as small as Norway would meet the needs of such a large population.

Re:Counterfeiting is Ok.

[copponex]

Also note that we have 3.7 million square miles of real estate and resources, and Norway has 125,000.

I think the inability to effectively use a nation's resource because that nation has too much stuff is a pathetic way of defending that particular argument. In fact I think it's self-defeating. It's like arguing that your company is broke because it has too many assets.

Re:Counterfeiting is Ok.

[snowwrestler]

U.S. military installations in Norway: 9
Norwegian military installation in the U.S.: 0

One reason the U.S. does not spend as much on social welfare is that we spend a lot more on our military. This benefits the social welfare states of Western Europe, including Norway.

Got the wrong message off that tagline

[SuperKendall]

The whole "back it up" line made me think for a second, they wanted people to copy money to preserve it from counterfeiting...

ACTA propaganda campaign?

[SIGBUS]

When they start using rectal numerology to prop up a story like this, I can't help but think that this is a propaganda piece to grease the skids for ACTA.

The obligatory Obama comment

[NynexNinja]

An article would not an article without the obligatory "Obama" comment. It doesn't matter if the article is about counterfeiting or sewing, I read the comments intently for the Obama comment, and sure enough am able to find it.

Re:The obligatory Obama comment

[WillDraven]

Well then why didn't you reply to it? Oh, wait, it isn't there. I expanded all the comments and ctrl+f'ed Obama, the only three instances were in your post..

Yeah but $200B 20 years ago is worth

[kawabago]

Yeah but $200B 20 years ago is worth in the trillions in todays dollars! They better get on that counterfeiting before the losses are greater than the economy can possibly produce!

Direct or Indirect?

[cdrguru]

The place to start with this is doing something like purse shopping. You can go to a Coach store or Prada and find a really nice purse for $1500 and an OK one for $500. Then go to a store that sells similar knock-offs and you can see things that look more-or-less like the Prada ones for $100. Then stop by the street vendor with a absolutely faithful Prada copy for $35.

There are two things that the average Joe learns from this adventure:

1. Only an idiot would buy a "real" Coach or Prada purse.
2. There has to be cheaper version of just about everything else.

What this does is by the mere presence of the counterfeit goods in the marketplace is reduce the willingness of the public to buy originals. It doesn't matter what the "original" is, obviously there has to be a cheaper counterfeit version available. This applies to everything from caviar to computers and automobile parts to luggage.

$200 billion lost because of the presence of counterfeit goods? Easy. The direct losses might only be a few million, but pushing the idea of "just as good as" in front of people pushes the originals out completely.

Re:Direct or Indirect?

[Urza9814]

Eh, I'd say the lesson there is 'don't buy overpriced name-brand'. I mean, I'd never buy a Rolex watch. I see a counterfeit Rolex and all that tells me is 'this is what that expensive watch is actually worth, in terms of parts and labor'. But I'm not gonna buy the counterfeit either. Instead I'll buy a Casio or a Yes.

If there's a dramatically cheaper counterfeit of something available, that means you're probably being ripped off when you buy that item. Notice that it's mostly the overpriced luxury goods that get ripped off. And movies and such, but that's just because blank DVDs are dirt cheap compared to a DVD movie - again, you're getting ripped off when you pay $20 for a piece of plastic. Money too - worth $100, costs a couple cents.

Anyway, my point is that there only has to be a cheaper version if the original version is a colossal waste of money.

Re:Direct or Indirect?

[Aceticon]

So you're telling us that counterfeiting produces informed consumers which means that those selling high-price-high-margins branded products loose money because people ... *gasp* ... know better!?

We should close price comparisson sites then: by the same argument they cause the loss of trillions of dollars by letting consumers find out where to buy equivalent products for the cheapest price.

Same thing for reviewing sites and magazines: if they didn't inform people, they might very well have gone and bought things like $3000 Denon digital cables instead of equaly good $5 Cat5 cables.

I don't see why this is a problem.

[feepness]

The "victim" still has their product to sell. It's not like I'm "stealing" something from them.

Re:$5,000,000,000

[paulsnx2]

5 billion is a small number in the context of the national economy. In fact, it is so small as to be dwarfed by the margin of error when Considering economic trends.

Re:Old comment style sucks

[GNUALMAFUERTE]

This article, and:

http://collateralmurder.com/
http://www.theregister.co.uk/2010/03/16/army_wikileaks/
http://www.examiner.com/x-6495-US-Intelligence-Examiner~y2010m6d20-Censored-news-Pentagon-attacks-Wikileaks-more-gulf-drilling-approved-Fed-fights-reform-more

http://en.wikipedia.org/wiki/Wikipedia:Errors_in_the_Encyclop%C3%A6dia_Britannica_that_have_been_corrected_in_Wikipedia
http://news.cnet.com/2100-1038_3-5997332.html
http://thestatsblog.wordpress.com/2009/06/16/britannica-versus-wikipedia/

Re:$5,000,000,000

[Lloyd_Bryant]

Five billion dollars is still a lot of money.

But put the numbers in perspective.

US GDP $14,260,000,000,000 (2009 estimate, courtesy of the CIA)

$200 Billion equals 1.4% of the GDP
$5 Billion equals 0.035% of the GDP

One is a problem worthy of immediate attention. The other is a problem to worry about when nothing else is pressing.

Re:$5,000,000,000

[dnahelicase]

Not only is $5,000,000,000 a relatively small number compared to GDP and the market as a whole, but you have to look at who is losing the money.

The counterfeit manufacturers only sell this product once. Once they sell it to a distributor (most likely someone in the US) the product becomes part of the economy.

Those counterfeit goods that are sold on the street (as in pictures article) were originally purchased from China (probably also true for the legit product) but the one making the money is the street vendor. That street vendor in turn probably uses this money to buy food, clothes, other retail goods, etc.

While it is very wrong to use a trademark without permission and there is no legal way to justify this type of counterfeiting, the economic arguments aren't necessarily so strong against it. That money is going to stay fairly locally to where that good was purchased, consumption is going to increase, and dollars spread more evenly. Instead of the mall/retailer getting a half decent margin and the trademark holder getting a decent margin, the street vendor gets a very good margin and the consumer gets a steep discount.

I'm not saying that counterfeit goods are good for the economy, I'm just saying that if you are going to throw out numbers (either high or low) without sources, support, or justification, it can lead to a lot of questions about what that number contains. Are 5/200 Billion dollars disappearing from the US economy? From the trademark holders? From local communities? From sales tax coffers?

Bad numbers

[uvajed_ekil]

I've said it a thousand times, and I'll say it again: the statistics that the RIAA, MPAA, BSA, etc. claim are misleading, and very wrong. They are drawing conclusions that suite their cause (wallets), not getting to the root of things. I do not condone outright piracy and counterfeiting, though hopefully this explains some of it. They count every instance of and illegal or unauthorized copy being transferred as a lost sale, or a net loss. This is not so, and I contend that most downloads or sales of cheap counterfeit merchandise are in fact a direct result of ridiculously high prices for legitimate items, rather than a cause of high prices.

Back in the days of cassettes and when VHS was king, I used to get all sorts of things from the local library. I'd often dub copies for myself and return the borrowed copy almost immediately. When we all transitioned to CDs, I kept up this practice. I was also known to download a fairly hefty amount of software from local BBS's, and later the internet. My reason for doing this? I simply could not afford to spend $12 on a tape I wasn't sure I'd even like, $15+ for a CD that might include one song I liked, or $20-$30 for a movie I'd watch once or twice then stick on a shelf. Buy a shirt, a hammer, or a TV, or a pizza that turns out to be crap? You can return it for a refund. Not so with music, movies, software, etc., even if it doesn't work right (in the case of lots of software and computer games). Nearly everyone has bought a CD they don't like, and they are all screwed.

So perhaps downloading, torrents, and p2p file transfers are rampant. I'm sure of it. But much of this is due to high prices and the flooding of the music/movie/software markets with utter crap. Were the opportunity to download for free not there, most of these unauthorized downloads would absolutely NOT translate into sales. I buy a few CDs a year to support my favorite few artists, as I have for the past 15+ years, which is what I can afford to buy. Yes, I download more than that, but if I couldn't, I still would not buy more. I did not buy movies before I could download them, and I never will - not enough re-use value. Software? I use linux and almost strictly free software now, and have no need for windows junk. A lot of people are like me, too.

It is killing retail too

[linzeal]

As well as retail. My ex-gf works in fashion down in LA and to pay the lease she needs to sell at leas a single high-end designer dress every few days. Last year she in the garment district she saw someone selling a fake Dolce Vita skirt for 20 bucks, this skirt retails for over 400. How can she compete with that? Should she start buying the fakes to stay in business, because that is what it comes down to.

Re:It is killing retail too

[cpt kangarooski]

Well, did the person selling the fake skirts make it clear that they were fake (or at least, did the customers know)?

If so, then all they wanted was a skirt that looked a particular way; they didn't care who made it. Your ex's store, or the designers who supply her, can only try to compete in three ways, it seems to me.

First, quality; their skirts may be made of better materials than the fakes, or may be made with better techniques. If so, try to differentiate based on this. Of course, some people are satisfied with synthetics instead of natural materials, or poorer materials instead of finer ones, or single stitching instead of double stitching, so it won't always work, and the price difference may remain substantial. (There was an interesting article in the NY Times the other day about the Italian fashion industry and wool quality)

Second, price; how cheaply can the real skirts be made? Maybe it would be more efficient to sell skirts out of a van, instead of out of a store that is expensive to lease. It looks like the fake guys are winning on this front, but there's no reason that they necessarily have to.

Third, brand; there may be some cachet that can be used to make money out of the brand of the manufacturer or the distributor. Some people presented with identical products from different vendors at different prices may prefer the more expensive one as a form of conspicuous consumption. (You can see it elsewhere; a real Picasso is worth a lot, but a forgery, no matter how identical, is worth a lot less to people who care about this sort of thing) It can work, but it has problems. Some people don't care about brands, but just want a nice skirt. If the fake is good enough, they'll probably buy it since it costs less than the same thing from elsewhere. Some people care about brands, but are excluded due to artificially high prices set by the people controlling the brands. They'll deliberately seek out the fake skirts in order to most closely approximate the real thing.

I suspect that the ex et al have been trying to compete only on brand, and perhaps partially on materials (although usually brand justifies more of an increase in price than materials). If it's not working as well as they'd like, perhaps they ought to try a different approach?

Re:It is killing retail too

[ultranova]

My ex-gf works in fashion down in LA and to pay the lease she needs to sell at leas a single high-end designer dress every few days. Last year she in the garment district she saw someone selling a fake Dolce Vita skirt for 20 bucks, this skirt retails for over 400.

Assuming the counterfeit dress makes any profit at all, the genuine one must be making at least 380 bucks of profit for a price of 400. That means your girlfriend and her suppliers are getting at least 95% profit margin.

In other words, cry me a river.

How can she compete with that? Should she start buying the fakes to stay in business, because that is what it comes down to.

Frankly, if your entire business model depends on selling cheap items at insane markup because they're "genuine", you deserve to go out of business. How could you possibly avoid that, in an economic system that's entirely based on using competition to lower prices?

Re:It is killing retail too

[riperrin]

I work in purchasing, and used to work buying for banded goods. Factories are usually designed to make single types of items, as they are specialised the quality usually improves and so these are used by multiple brands to make their goods. For example you might find two designer hand bags being made out of the same factory. The owner of the factory is likely to receive an order for x amount but he'll make 2x and then sell the other x to highest bidder. Alternatively the official supplier will have two factories on the go, one churning out the goods to the brand owner and to whom ever wants to buy. Also if the brand owner changes factories the factory is likely to continue making the goods anyway. In one case we even found that a brand that had changed to a cheaper supplier. The previous supplier, whom we were in discussions with, showed us the quality of his work and the new suppliers work. For a whole USD saving the brand now had a bag that was significantly poorer in quality. While this was a bit of a sales pitch he'd actually shown us the new suppliers work in the brands HK shop.

Re:It is killing retail too

[Pollardito]

That's not true. A custom tailored dress/suit can cost thousands, but will fit much better than a $400 dress/suit, let alone a 99$ JC/Penney special.

"Custom tailored" means someone doing alterations so that it fits you. You pay extra for that because of that person doing the work. Counterfeits are going to be off-the-rack copies of off-the-rack originals, and while there may or may not be a difference in the materials most of the savings are in the name. They're often made in the same factory with the same materials, so the only difference is not having the markup.

Lik you do?

[SmallFurryCreature]

You claim media should list their sources and that old media fails because it doesn't do so.

But you then are supposed to be new media, social media, and you don't list your sources either.

You make claims, with no way for me to verify them.

See how EASY it is to sounds like a know it all who claims to hold the one truth in his hands and expect everyone to believe you on your word alone?

I am willing to bet that the article you read that made these claims didn't list its sources either and that those sources were some highly biased research were someone found that the Britannica didn't say what he thought it should say and insisted that because Wikipedia listed the Muslin[sic] Obama was president one pico-second earlier, that is is more up-to-date, accuracy be damned.

SOURCES. Or you are just blowing air.

And what are facts anyway. Who knows what Obama believes in his own mind. He could be a scientologist! Claims he ain't a muslim are based on what? A mind probe? If he IS a spy, then he would hardly say so would he? A lot of facts can't be proven, we assume them to be true. For that matter I can't even verify he ain't Muslin, never met the guy and never met anyone who met him or anyone who met someone who met him. He could be a disney robot for all I know.

Facts, not nearly as common as people like to think.