A matter of trust

Trust is arguably the most important aspect of a business’s success. Most of us have experienced times when our trust in a company has been broken. We feel wronged or cheated, making it unlikely we’ll ever do business with that company again.

Such is the outcome when online consumers receive a counterfeit product instead of the genuine article. Trust is broken, and the seller’s reputation is forever tarnished in the consumer’s mind.

But new legislation that took effect on June 27 may help preserve that trust. Known as the INFORM Consumers Act (the acronym stands for Integrity, Notification, and Fairness in Online Retail Marketplaces), the law is designed to protect consumers from the online sale of counterfeit goods.

Counterfeits are big business. In fact, counterfeiting is now the largest criminal enterprise in the world, totaling more than $4 trillion annually. Counterfeit products account for 2% of all world economic output and 10% of goods sold, according to The Counterfeit Report, an industry watchdog and corporate-backed website that promotes consumer awareness of counterfeit products.

Online marketplaces are particularly vulnerable, as it’s nearly impossible to monitor the hundreds of thousands of outside vendors that use their services. Amazon claims it spends more than $1.2 billion annually to protect consumer brands against fakes. Yet The Counterfeit Report says it alone has been responsible for identifying and removing more than 1.5 million counterfeits from Amazon’s listings.

Fake products do more than just tarnish a brand. Some counterfeits can also be dangerous. The Counterfeit Report cites information from the World Health Organization claiming that 10% of all pharmaceuticals sold online are counterfeit and that 500,000 people die from counterfeit medications each year. Deaths have also been reported from counterfeit products that fail in dangerous ways, such as poorly manufactured lithium batteries that explode or faulty automotive and aircraft parts.

In the hope of limiting fakes, the new INFORM Act requires online marketplaces to collect, verify, and disclose information from high-volume third-party sellers—vendors that have made 200 or more discrete sales of $5,000 or more in a 12-month period. The act is designed to prevent organized retail crime from flooding the market with fake goods.

The INFORM Act has wide support from manufacturers, distributors, retailers, law enforcement, and consumer groups. While it may not halt the tide of counterfeit products, it is a first step. It will still take continued diligence on all of our parts to protect consumers and the brands we have come to value.