Crises Fuel Counterfeiting

The global economic weakness and persistent inflation are leading consumers and business customers to deliberately replace originals. To compensate for their current income losses and sales slumps, consumers and businesses are deliberately replacing high-priced originals with cheap copies from China. By replacing, they can significantly reduce their purchasing costs in the difficult economic situation – losses in quality and damage to reputation are consciously accepted for the time being.

For the original manufacturers, communication with distributors and dealers is becoming increasingly difficult because trips to China are no longer possible. Quite a few are cutting their ties. They cancel or break contracts, launch similar or counterfeit products, and register the Western brand in Chinese. Manufacturers lose control of their intellectual property in China – with far-reaching consequences if the copied products are exported from China.

Fractured supply chains provide further points of attack for brand and product piracy. As suppliers fail, counterfeit brands and products enter the supply chains of original manufacturers and replace the missing original products. They swap original shipments for counterfeit ones in intermediate warehouses, repackage individual shipments, or manipulate labels and accompanying documents. Unknown carriers and additional loads are critical, and are now increasingly being used in the wake of the current logistics bottlenecks.

The Ukraine war is also boosting the counterfeit business. Because Chinese companies are filling the supply gaps left by Western brands in Russia, more and more pirated products from China are flowing into the Russian market. The Kremlin is allowing the import of pirated products, including CPUs, to mitigate the impact of Western sanctions. The Russian government also legalizes intellectual property theft by not compensating IPR holders from “unfriendly countries” for the unauthorized use of their patents, utility models, and designs. This gives Russian companies a competitive advantage; they can manufacture patent-infringing components or end products cheaply and export them to China – resulting in imported product piracy. 

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