If What You Are Buying Is Counterfeit, It Isn't a Good Deal

US News

In fiction, evil twins and parallel universes pop up all the time. In real life, the equivalent is counterfeit goods.

Everyone knows money can be counterfeited, and savvy adults understand that a super-cheap Gucci purse sold at a flea market is likely a fake. But these days, almost any purchase can be counterfeit. If you aren't careful, you can buy counterfeit computer products, electronics, furniture, auto parts, toys, shoes, cigarettes, exercise equipment, batteries, sunglasses, and, as the TV ads say, much, much more.

It's a conundrum for manufacturers, retailers, and consumers. Last year, U.S. Customs and Border Protection kept $1.26 billion of counterfeit merchandise from getting into American borders, but it's likely that a healthy portion of counterfeit goods made it into the country anyway. After all, a 2007 report from the Organization for Economic Cooperation and Development estimated that $250 billion worth of counterfeit goods were crisscrossing global borders, while the International Chamber of Commerce's estimate around the same time was closer to $650 billion. By 2015, the chamber says $1.7 trillion in counterfeit goods will have infiltrated international markets.

The good news is that it's still relatively easy to be a frequent shopper and never purchase counterfeit products. But it depends where you're shopping. The big, name-brand stores are still generally safe, although even they can be taken in. In 2006, Wal-Mart was sued by Fendi for selling counterfeit handbags and wallets in its Sam's Club warehouse stores (Wal-Mart ended up settling). Two years ago, a federal jury found Costco guilty of selling counterfeit flat hairstyling irons made by Farouk Systems, Inc. And on Valentine's Day of this year, Tiffany & Co. launched a lawsuit against Costco, accusing the chain of selling counterfeit Tiffany diamond rings.

[Read: Confessions of Former Shopaholics.]

So where else are counterfeit goods showing up? As noted, everywhere, but here are some places to be aware of:

In your kitchen. Scary to contemplate, but counterfeit food is beginning to become a problem. In January, the U.S. Pharmacopeial Convention, a nonprofit with the mission of improving the world public's health, put out a warning that food fraud has shot up 60 percent in the past year.

Typically, it's the ingredients in food products that are counterfeited. That means a perfectly respected brand, if its supply chain isn't up to snuff, might unknowingly produce an inferior product.

"Companies have processes and controls where they're testing and making sure the ingredients are up to par, but in some cases, some of these companies have obviously had a breach in their system," says Gregory Thomas, a Chicago-based supply management executive at BravoSolution, which manages sourcing strategies for food and consumer packaged goods. He says a breach in a supply chain may explain how in January, tests conducted by the Food Safety Authority of Ireland discovered traces of horsemeat in a supplier to major retailers and restaurants, including Burger King, in Britain and Ireland.

Food counterfeiting can also occur when an inferior food product is slapped with the label of a trusted brand. Last year, in Dover, N.J., authorities discovered a warehouse filled with hundreds of crates of fake Heinz ketchup. The ketchup was real enough, or appeared to be, but it wasn't made by Heinz.

Michigan State University has an Anti-Counterfeiting and Product Protection Program as well as a national database for tracking counterfeit food. Its list of foods most likely to be counterfeit include vanilla extra, maple syrup, grape wine, apple juice, coffee, orange juice, honey, milk, and olive oil.

To be clear, there's no reason you shouldn't trust what you're buying in your grocery store. But if you're purchasing food at an outlet you don't know well, and if an item is priced unbelievably cheap--especially on the aforementioned food items--that might be a tip-off that something smells funny, even if the food itself smells fine.

[Read: How to Stock Your Kitchen Without Blowing Your Budget.]

In your medicine cabinet. Quack doctors have done harm to patients for centuries, but we expect better of the 21st century. Unfortunately, the criminal underworld is actively marketing counterfeit drugs and doing its best to undermine physicians and patients. In fact, earlier this month, the Federal Drug Administration (FDA) issued a warning that a doppelganger drug of Altuzan was once again being shipped into the United States. Last year, the fake drug is believed to have made its way into 19 medical practices. The counterfeit drug has no active ingredient, a heinous trick since it's a cancer medicine. The drug also sells for $2,500 per 400mg, making it a windfall for crooks and financially devastating for victims, who already have enough problems.

As it is, Altuzan hasn't been approved by the FDA--it's an approved drug in Turkey--so no cancer patient should be using it in the United States. But one can envision how a desperate patient might find an off-the-radar channel where they could buy it.

"You never know what you're going to get when you try and buy pharmaceuticals from anywhere that isn't accredited," says Jim Milford, senior vice president at Andrews International, a firm headquartered in Los Angeles that specializes in security and risk mitigation services. "There's no oversight from anybody, so you could be taking something that has arsenic in it, or sugar. You could be taking an aspirin."

Your computer. If not the computer itself, are you sure about the memory or the speakers you recently purchased? In 2010, the National Electronics Distributors Association estimated that fake computers, microchips, routers, and other accessories cost the U.S. economy $100 billion in lost revenue.

"Fake recyclers hold collecting events under the pretense of saving the environment, and then they'll ship these computers to developing countries, where they're bathed in acid and burned, leaving a trail of toxic waste, and then the parts that are usable are sold to networks and ultimately often make their way back to the United States," says Kyle Marks, CEO of Retire-IT, a Columbus, Ohio-based company that recycles computer equipment.

Marks says counterfeit computer software is also something consumers need to be on the lookout for.

Once again, it's a good idea to use established brands as your guiding light. Marks says that if you're going to buy, say, a refurbished personal computer, if the seller is a Microsoft Registered Refurbisher or a Microsoft Authorized Refurbisher, that's a good sign you're not dealing with a company buying counterfeit goods. He also says that if there's a warranty with a refurbished computer, if something does go wrong due to a counterfeit component, at least the consumer is protected.

What's the harm? One could make the argument that if you own a knockoff purse and are listening to music on a counterfeit MP3, and the purse and MP3 are working, what's the problem, really?

Tom Taylor can cite a number of them. Taylor is the president of Brand Protection for OpSec Security, an international company that handles online and physical anti-counterfeiting solutions for a variety of well-known corporations, including the NFL, Major League Baseball, and GM Europe.

He says counterfeit goods cost governments throughout the world billions of dollars in taxes and throw a lot of people out of work. It's been estimated that 2.5 million jobs have been lost in the United States due to counterfeit products (without them, there would be more orders for the real things). Then there's the fairness issue to the businesses that spent all the money on their research and development, building prototypes and marketing their products.

"Copying a product is flat-out stealing and just wrong--the bad guys are bad guys," Taylor says, observing another dilemma: "When you buy a counterfeit product, you're often helping to fund organized crime."

[Read: Save by Buying These Items Online.]

Furthermore, there is the issue of how a product performs, whether it's a handbag or something more substantial. "The quality of the goods will never be as good as the real thing," says Taylor.



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