Wednesday, 24 June 2009

Counterfeiting: The Industry is on the Wrong Track

Many products targeted by counterfeiters are very easy to copy due to their simple-to-copy packaging. Undifferentiated packaging is one of the first things to be addressed to, to stop making it easy for the counterfeiter to copy. But that’s not the case with perfumes and up-scale alcohol beverages. With designers having all the freedom to create the most fantastic and sometimes exclusive bottles, the danger of being illegally copied is not the undifferentiated packaging, but confusion.

Confusion, a strong ally of the counterfeiter, occurs when the consumer is confronted with many different, ever-changing versions of the packaging. How is the consumer to know when a new product package arrives that it isn't legitimate? You just have to do a Google search for some upscale perfume brand to discover how many different bottles and packages the brand carries, and introducing new ones with high frequency.

The brand doesn’t have a choice, as the market is plummeting, companies are desperately trying to keep the attention of the consumer by creating new presentations and fragrances, knowing perfectly well that they give counterfeiters innumerable chances to fake the brand, not necessary to copy the packaging.

And the consumer? He has nothing other in his hands to qualify a product as genuine, than his confidence in the retailer. As counterfeit products are unstoppably turning up on shop shelves with fakes simply being knock-offs, relabelled sister products, a mix of fake and genuine product, or a refill masquerading as a virgin product, the consumer may become victim of a do-it-yourself counterfeiter or of a vertically integrated international operating counterfeiting organization including well-established factories, international distribution chains and distinguished retailers. The consumer’s trusted store could be an unsuspecting conduit or a complice in the crime. One thing is clear: the problem is getting worse.

So, what is the answer of the industry?
There is a tremendous array of companies providing security systems, such as special papers, inks, foils, holograms, taggants, built-in electronics, authentication codes or even forensic authentication tests. Most brand owners know they cannot rely on a single method, so they deploy a variety of defence systems that incorporates overt and covert elements. The overt elements, like watermarks or optically-varying inks, serve as a very public warning, but can be easily counterfeited to either duplicate or obtain similar materials. Covert effects remain hidden from the consumer and often require special instruments for detection.

The covert elements: You can’t expect the consumer to walk around with an infra-red detector or any other hi-tech device in his/her shopping bag.
And the overt elements: This is what happens when the consumer sees a hologram and assumes that any hologram must be genuine. Who can distinguish a genuine hologram from a fake one the moment you decide to buy?
The problem is, the consumer expects the partners in the distribution chain to be honest, but in many cases they are not and partner-up with the counterfeiter in order to maximize their bottom-line.

To this problem the industry answers with the most fantastic, mouth watering technological and intellectual tour-de-force, entirely forgetting what the real goal is in his battle against counterfeiting. The goal should be the consumer and not exposing the counterfeiter. A common misconception is that a counterfeiter will quit the practice if he gets caught ........

For a counterfeiter, success is having every non-complicit person handling the product downstream to accept the fakes as legitimate products. The products do not need to be exact copies, only good enough to fool those handling or buying the goods.

In his article “Authentication - are brands under siege?” in Packaging World Magazine of December 2008, Pat Reynolds has an interview with Randy Allen, vice president of operations of OPI Products a manufacturer of beauty products. In this interview Mr. Allen states that he “is working closely with a number of ink suppliers and manufacturers of marking and coding equipment to come up with better anti-diversion solutions that are covert in nature. He sees special promise in infrared inks and what he calls “narrow-spectrum readability”.
Unlike a broad-spectrum UV-type light such as black light, which makes everything readable, infrared inks are only excited and made readable by a narrow range of light frequencies.”
The other key strategy that Allen is exploring is “to incorporate a covert diversion-tracking code within the batch code. This twin code would be ink-jet-printed on a label that goes on the bottom of OPI containers. If diverters discover this code and try to remove it, they’ll be tampering not only with a diversion-tracking code, but also with a batch code that is incorporated into the diversion-tracking code. Removing a diversion-tracking code so that product can be diverted is not illegal, but defacing a batch code is.”
And then he explains why he is doing all this research:
“That takes it out of civil court and puts it into the criminal court system,” says Allen. “That’s huge, because in criminal court, the identity of the distributor who is doing the diverting will be revealed. That doesn’t happen in civil court cases that we bring against a retailer selling diverted product.”

And that is exactly what happens with the ‘war against drugs’. Catch a guy, get him convicted, turn around and discover that he is replaced by ten others. Counterfeiting doesn’t go away by putting the tugs in prison.
All hi-tech solutions, as inks, authentication, tracking and tracing are useless. You can only track and trace your own genuine products, not the counterfeited ones as they don’t have the codes. So, what happens: You discover a non-coded fake. What does it give you? In the meantime consumers have bought a fake and are disappointed by the quality, taste, fragrance and never buy again.

The industry has to go back to the basics. And the basics are its consumers. It is the consumer who decides to buy. And there is no consumer willing to buy an expensive perfume or liquor knowing it is not genuine. He/she will go for the original. That means that the industry, suffering under counterfeiting attacks, has to supply a tool to the consumer. A way the consumer can easily verify whether the product is genuine or false. All covert security measures are useless and are only of interest to the company itself, the consumer needs an overt system which enables him to check the authenticity of the product.

Back to the basics implies a simple tool the consumer can handle and always has available. His cell phone or mobile phone. Both RFID labels and 2D bar codes can be faked and don’t give a 100% guarantee to the consumer but can be used in combination with ...... nano-technology.

A new collaboration between Life Technologies and NanoSys is aimed at developing quantum dots, also known as fluorescent nano-crystals, to provide what they claim a unique fingerprint, a forge-proof stamp of authenticity to fight counterfeiting.

The nano-crystals can be mixed in ink and printed onto surfaces in a precise pattern of colours, providing a fingerprint effectively invisible to the naked eye, detectable under blue, violet or ultraviolet light to specifically identify the source of the product as authentic. However the unique fingerprint only can be visualized with a special detection device.

That is exactly the mistake the entire industry is making. The fluorescent nano-crystals might create a unique fingerprint but they are not visual to the naked eye. When starts the industry to realize that the solution to counterfeiting is the consumer. The nano-fingerprint, however, is a promising start.

I think it is time for a roundtable conference between the suppliers of anti-counterfeit systems, consumer products companies and mobile telephone manufacturers to create a counterfeit-system which the consumer can easily handle and gives him the guarantee that a product is genuine.

The challenge of brand authentication remains and won’t be going away anytime soon. The industry has to do something substantial and stop fighting windmills.

Update: The day after I wrote this article I received the daily newsletter from PackWorld, in which Pat Reynolds in his article “Authentication that also engages consumers”, argues that the industry is moving towards inclusion of the consumer in regard to anti-counterfeiting. Unfortunately the systems he describes, including the computer-authentication-code which the consumer can call-in with his cell phone, has proven not be reliable. The counterfeiter can mislead the system very easily and the industries involved could not supply me with satisfying answers as a counterfeiter could buy a genuine product and then copy the number. The first time the code is registered the system will confirm that the code is genuine. However, and most importantly, subsequent attempts to register the code will confirm that the code has been previously checked. This is a red flag that should raise concerns and alert the consumer to a potential problem with their product.

photos courtesy: MicroSoft, Pro-tex, eProvenance, HP's Digital Printing & Imaging, Kodak.


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