Introduction
According to the European Union’s Intellectual Property Office, a “counterfeit” product can be defined as goods of a tangible nature that infringe design rights, patents or trademarks of a product, not very different from “pirated” products, defined as goods of a tangible nature that infringe a copyright. Illegal trading of counterfeit goods is a major impeding factor in an innovation based global economy.[1] The negative effects of counterfeit goods are not only limited to economic losses, but also endanger public safety, health, & security[2], especially in the Sports Goods Industry.[3]
A survey conducted by the European Union’s Intellectual Property Office in 2016 revealed that the footwear industry was one of the major targets of counterfeit goods, and had one of the highest number of counterfeit seizures. Similarly Nike, considered as the most valuable sports brand by Forbes Magazine[4], is one of the top 10 targets of counterfeiting[5]. This article shall be elaborating upon the global impact faced by the sports goods & sports wear industry due to the prevalence of counterfeiting goods, and probable measures that can be undertaken for the same.
Reasons for Counterfeiting Sports Goods
While there are many factors that contribute to counterfeiting in the sporting goods & sports wear industry, a primary factor can be attributed to the desire of the general public to own products of popular sports brands, with the underlying intent to validate social prestige, and follow the surge of displaying trendy products at a cheaper price.[6] Lifestyle factors, and high demand for the original goods are also factors that impact the level of counterfeiting in the sports goods industry. Another factor that elevates the malpractice of counterfeiting sports goods is the lack of awareness amongst consumers about fake sporting goods in the market.[7] In a geographical context, in various cases countries that have a poor intellectual property protection framework are privy to such malpractices.[8]
Impact of Fake Sporting Goods
Many endeavors to evaluate the extent of counterfeiting of sports goods and its ramifications for organizations, buyers and society in general have experienced the shortfall of a consensual and steady system for gathering and dissecting information on counterfeiting and robbery across different areas. Various methodologies have been utilized, for example, overviews, secret or mystery shopping, checking of online activities & exercises by consumers, making it even more hard to total data for the entire economy. However, the staggered losses are massive.[9]
Economic Losses
The Economic Costs are primarily composed of losses in sale due to the vast extent of counterfeiting. Not only do losses in economic output occur directly, there are indirect losses in the form of negative impacts of sectors of manufacturing dependent or corresponding to the sports goods & apparel sector. Associated industries also face the ramifications of widespread counterfeiting.[10] As per a study conducted by the Office for Harmonization in the Internal Market (Trademarks & Designs), European Union Intellectual Property Office, the total counterfeiting in the sports goods sector amounts to 6.5% of the total sporting goods consumed by the market in the year of 2015.[11] Thus, the biggest challenge facing the sports goods industry is the culmination of staggered economic losses which are virtually impossible to account for.
Regulatory Issues
Due to lack of strict rules & regulations and the ease of duplication of Holograms, as well as faking Digital Product Authentication certifications, various regulatory & compliance issues have also emerged with respect to counterfeited sports goods. According to a survey conducted by News18 Channel in the year of 2018, 60% of Sports Goods sold online in India are fake.[12] This leads to the contentious issue of lack of compliance with standards laid down by Bureau of Indian Standards (BIS)[13] & other International Regulatory Authorities. Retailers are avoiding accountability and compliance issues by claiming to be intermediaries, while E-commerce websites state that they conduct stringent background and reference checks and that sellers are listed on the website only after satisfactory conclusion of verification procedures. However, it culminates into another glaring issue that leads to a set-back to the sports goods & sports wear industry.
Tarnishing of Brand Name
Fake products tend to affect the reputation & brand name of the original products, which leads to shifting of the consumer base to alternate products. In cases where the duplicity of the fake or counterfeited product is very similar to the original product, consumers would prefer to stick to brands not prone to duplicity. The market revenue of major brands have taken a nose-dive due to this issue. In China, the country that accounts for more than 62% of counterfeit products, the sales of Nike fell, presumably due to the extent of counterfeit products in the market.[14] Needless to say, counterfeit goods offer a more affordable option for lower and middle consumers.
Safety & Compliance Issues
Apart from compliance & regulatory issues, fake & counterfeited sports goods also pose a risk of causing grave & serious injuries to its users, based on the lack of regulation over the material & wear of the same. Such counterfeited products often bypass regulatory & quality checks, also lacking the quality assurance appended with original products. Sports wear such as knee-caps, helmets, & gloves are designed with the primary purpose of protecting the player/person from serious injuries. However, their duplicated counterparts are not manufactured in compliance with such high performance standards and therefore are likely risk the safety of users at large. These counterfeited products also cut corners to reduce cost of production, and just do not provide a good user experience for the counterfeited product, which remains the primary focus of the famous brands. Furthermore, due to e-markets selling counterfeited sports goods, tracing the seller of such products is virtually impossible.[15]
Recommendations to Combat the Issue
While various sports companies are taking various precautions in order to combat the issue of counterfeiting of sports products, there are certain measures that can help prevent the issue, while being cost-effective to the companies at large. Companies can utilize tax stamps, holographic boards, 3-D Holographic stickers, & paper labels on their original products in order to differentiate and mark their products apart from their counterfeited counterparts.
Utilization of effective communication & PR strategies in order to effectuate communication amongst consumers regarding modes of verified purchasing can aid the companies to a large extent. Purchasing through safe mediums such as official brand websites can also ensure the verification of the product, and the pricing of the same. In-house production, as compared to outsourcing can also be utilized, to reduce the risk of counterfeiting by third parties. An all-encompassing strategy has to be deployed for long-term results.[16]
Conclusion
While the extent of losses caused to the Sports industry due to counterfeiting is undetermined to a large extent, it is imperative that urgent measures need to be taken by various sporting goods companies in order to curb the extent of counterfeiting, and its outcomes. A comprehensive policy encompassing strict regulatory standards, demarcation guidelines, and market requirements is the need of the hour to address the issue. Only then shall the market be free of the menace of fake sports goods.
[1] OECD/EUIPO (2019), Trends in Trade in Counterfeit and Pirated Goods, Illicit Trade, OECD Publishing, Paris/European Union Intellectual Property Office.
[2] Ibid
[3] OECD/EUIPO. (2016), Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact. Paris: OECD Publishing, Paris/European Union Intellectual Property Office.
[4] Martin Jahns, Brand Ranking: Nike is the World’s Most Valued Apparel Brand, ispo.com, available at https://www.ispo.com/en/markets/brand-ranking-nike-worlds-most-valuable-apparel-brand
[5] Lovemoney. (2016). The world’s most counterfeited brands. Retrieved September 11, 2017, from MSN Money: http://www.msn.com/en-us/money/companies/the-worlds-most-counterfeited-brands/ss-BBsVVXu#image=1
[6] P. Gupta, The Rise of Counterfeiting & Its Effects on Nike, soapboxie.com, available at https://soapboxie.com/economy/The-Rise-of-Counterfeiting-and-Its-Effects-on-Nike
[7] Ibid
[8] Supra Note 6
[9] Ibid at pp. 8
[10] The Economic Cost of IPR Infringement in Sports Goods, Qualification of Infringement of Manufacture of Sports Goods (NACE 32.30), Office for Harmonization in the Internal Office (Trademarks & Designs) (2015), at pp. 13.
[11] Supra Note 10
[12] PTI, 60% of Sports Good, 40% of Apparel on Sale Online is Fake, news18.com, available at https://www.news18.com/news/india/nearly-60-of-sports-goods-40-of-apparel-products-available-online-are-fake-1615763.html
[13] BIS to Formulate Standards for Sports Goods & Toys, Available at https://knnindia.co.in/news/newsdetails/sectors/bis-to-formulate-standards-for-sports-goods-toys-fitness-equipment
[14] Supra Note 6
[15] Counterfeit Goods May be Dangerous for the Players, October 3, 2018, neurotags.com, available at https://www.neurotags.com/blog/counterfeit-sports-goods-dangerous-for-the-players/
[16] Supra Note 14
YLCC would like to thank Tamanna Gupta for her valuable insights in this article.
