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The World's Most Profitable Business? Counterfeiting

The World's Most Profitable Business? Counterfeiting . / Credit: Counterfeit medicines image via Shutterstock

Counterfeiting is one of the fastest-growing and most profitable industries in the world, experts say. Product piracy applies to just about every type and grade of consumer goods: Shampoo, cosmetics, cigarettes, food, DVDs, perfume and pharmaceuticals are just some of the recent targets. Accounting for 5 percent to 7 percent of the world trade market, phony products are a $600 billion industry.

And it's an industry that can be hazardous to the health of your business as well as your own health.

Often made in developing companies with lax regulation and controls, knockoff products have been linked to organized crime or criminal activity, posing serious threats to consumers and companies alike while draining economies, say the experts at Acsis, a supply-chain logistics company. Counterfeiting has become the crime of the 21st century, Acsis says.

More than 1 million counterfeit electrical products have been recalled in recent years, including extension cords, power strips and batteries – products that not only can destroy electronic devices but pose a serious fire hazard, says the Electrical Safety Foundation International. According to the U.S. Chamber of Commerce, 64 percent of counterfeit electrical products are purchased from legitimate shops and retailers. However, many illegitimate power adapters continue to be sold online.

Counterfeiting becomes an even more insidious problem when it involves pharmaceuticals, including products that have been diluted, are falsely labeled or contain no active ingredients. In January 2010, the Food and Drug Administration warned consumers of counterfeit Alli capsules (for weight loss) sold over the Internet. Rather than orlistat, the active ingredient in Alli, the counterfeits contained a controlled substance called sibutramine, a potentially dangerous medication that officials say should not be used without a doctor's recommendation.

While it would seem simple to warn business owners to stay away from seemingly shady deals and encourage them to buy from only reputable manufacturers and distributors, it’s not that black and white, Acsis' chief technology officer said.

"In an economy where everyone is trying to save money, it is often hard to pass up what looks like a great deal," said company CTO John DiPalo. "It’s important to remember that in nearly every instance, counterfeited goods are often made with inferior materials and not held to the high standards as the original. Despite this well-meaning intention of trying to spend less, in the end, it’s just not worth the risk.

"In an age when all parties are responsible for the product once it leaves their four walls, it's no surprise that true product visibility throughout a supply chain is not only a necessity but a means of survival."

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.We're also on Facebook & Google+.

Ned Smith
Ned Smith

Ned was senior writer at Sweeney Vesty, an international consulting firm, and was Vice President of communications for iQuest Analytics. Before that, he has been a web editor and managed the Internet and intranet sites for Citizens Communications. He began his journalism career as a police reporter with the Roanoke (Va.) Times, and was managing editor of American Way magazine and senior editor of Us. He was a Captain in the U.S. Air Force and has a masters in journalism from the University of Arizona.

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