DLTs role in the fight against counterfeit goods

Is it Adidas or Abidas? Make sure you’re reading it right, or you might be contributing to a whole market dedicated to counterfeit products.

This underground economy is where vast quantities of counterfeit goods are produced, distributed, and sold. These unauthorised replicas imitate genuine products and are created with the intention of misleading consumers. Unfortunately, this deception works all too well, as the creation of counterfeit goods has built up a trillion dollar market, valued at making $3 trillion annually in the fashion industry alone, and it continues to grow. 

And the industries and product types affected are vast. They range from luxury items such as fashion products, cosmetics, and electronics, to necessities such as pharmaceuticals and automotive parts. Even sites like Etsy, once known as a place to support your local seller or small creator, has become one of the largest platforms for counterfeit products in the world, according to the Citron Research report. This discovery led to the reputation and share value of the company falling by 8.4%. 

In this blog post, we are going to explain how Distributed Ledger Technology (DLT), can be used to help organisations reclaim control, build trust with consumers, and ultimately prove their product is legitimate. 

Aside from undermining the revenue of legitimate businesses, and damaging their reputation, why else should trust be better instilled into the making and selling of goods? For one, the health hazards for consumers are also vastly increased as the materials used to make the counterfeit won’t comply with safety standards, nor will they adhere to environmental or labour laws. And worst of all, a lot of counterfeit operations can be linked to organised crime networks, and are associated with funding terrorism.

For us to build a solution to fully support businesses needs, we had to first understand their challenges:

• Global Supply Chain Complexity: By stemming from different countries it’s difficult to trace counterfeit goods and intercept their movements across the supply chains. A lack of coordination and sharing of information among businesses and countries also hinders enforcement efforts.
• Advanced Counterfeiting Methods: New methods are continually being developed to imitate genuine products, including advanced printing technologies, a replication of the packaging, and counterfeiting labels and certificates. To keep up with these evolving means would require constant innovation and expertise.
• Online Marketplaces: Counterfeiters can now reach a vast customer base while remaining anonymous thanks to e-commerce. Online marketplaces often struggle to identify counterfeit listings in order to remove them, which leads to challenges in enforcing intellectual property rights.
• Limited Resources: Resource constraints are often faced by law enforcement agencies, which can hinder the ability to conduct effective investigations and implement enforcement measures. These restraints include budget limitations and insufficient personnel trained in anti-counterfeiting efforts.
• Cross-Border Enforcement: Multiple jurisdictions are needed to coordinate and collaborate when counterfeit goods cross international borders. However, differences in legal systems and levels of commitment when tackling this issue can complicate border enforcement efforts.
• Consumer Awareness: It’s crucial to educate consumers about the risks and consequences of counterfeit goods, a lack of awareness or intentional disregard can perpetuate demand and undermine efforts to stop their presence on the market.

Current approaches towards combating counterfeiting include implementing intellectual property laws, customs and border protection, brand protection programmes, consumer education, law enforcement operations and industry collaboration. However, we are seeing some great innovations in the technology that can be used to really find those points where trust has been broken down. 

For example with Distributed Ledger Technology (DLT) – and more specifically our own purpose built solution. As a decentralised and tamper-proof digital ledger (that has digital identity and asset tracking at its core), our technology can be leveraged to securely record product information, including manufacturing details, supply chain transactions, and authentic data. By doing so, consumers and businesses alike can verify the authenticity of products and track their origin.

 It can also be combined with technologies such as Radio Frequency Identification tags (RFID), Near-field Communication Technology (NFCs), and QR codes. Here, businesses can create tamper-proof and digitally signed certificates or labels that are linked to specific products. Digital certificates such as these contain encrypted information about the product. Scanning these labels or certificates would be another way to ensure genuine products and can establish stronger connections between physical products and their digital counterparts – an approach often referred to as ‘digital twins’.

While the counterfeit market is growing, so are the ways in which technology can help to fight it. At iov42, we have worked to help businesses mitigate risk through the application of DLT, and the deterring of counterfeits is just one way to apply its capabilities.

Get in touch today to see how we can help your business, regardless of industry:  www.iov42/contact 

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