All the Shades of Counterfeiting

90% of Apple chargers sold on Amazon.com are counterfeits, and so Apple recently decided to sue Star Mobile LLC, the supplier from which Amazon bought the products. At the International Food Exhibition in Paris last October, large quantities of American cheese were confiscated, because they misleadingly evoked the Italian DOP appellations of Asiago, Parmesan and Romano cheeses. Today, counterfeiting is going beyond the sale of patently false goods from street vendors to customers who are aware of the goods' nature. It is assuming far more worrying forms that affect legitimate supply chains and sales channels, so that counterfeit goods are increasingly sold to unaware consumers. According to the Italian tax police, in certain areas of the country the selling of fake products and extraction of high margins by organized crime has become a way for merchants to pay protection money.

It is estimated that counterfeiting represents 2.5% of world trade, worth $461 billion, and 5% of EU imports. Italy ranks second in the world, after the United States, in terms of the number of companies which have been victims of counterfeiting. But in order to fight counterfeiting, it is not enough to stigmatize the phenomenon and protect the true supply chain from counterfeiters. One needs take a holistic approach to combat illegal trade, also by countering related phenomena such as unlawful oversupply, which puts "real fakes"on the market , as occurs in the true story told in Gomorrah. Then there are parallel imports, grey markets, seepage into the supply chain and the faking not only products but also of points of sale.

With this objective the LISC Model (acronym for Legitimate Illegitimate Supply Chain) was developed, a tool to highlight the interactions between actors of the legal and illegal economies, and identify the weak links in the supply chain so as to implement the most appropriate contrast strategies. The model was used to investigate a number of cases of illegal trade that occurred in the fashion and food industries, obtained by surveying 86 transnational companies, and spotted the correlation between various aspects of illegal trading and, in particular, between the black and the grey markets. While the black market is completely exogenous with respect to firms, and is normally run by by criminal organizations, the latter is a partially endogenous phenomenon, on which a company's commercial and distribution policies can have a significant impact. The presence of grey markets generates confusion in consumer markets, and creates the conditions that facilitate the entry of counterfeit products into legitimate as well as illegitimate channels.

As for enforcement strategies, the survey shows that the perceived effectiveness of legal means of redress is greater when the problem is also considered from other perspectives, such as technology, supply chain management, the importance of traceability and the role of marketing. Examples are the strategies implemented by Prada, Versace and Luxottica, Italian companies strongly affected by the phenomenon, but also leaders in the organizing a counteroffensive, by adopting a strategic perspective which is cross-functional and puts greater focus on the protection of the authentic supply chain. Protecting the legitimate supply chain thus becomes an issue of corporate strategy. In conclusion, authenticity of the product cannot do without truthfulness, transparency and security across the entire supply chain.