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Counterfeiting's Real Costs

May 1, 2011
Besides being unsafe, bogus electrical products can obliterate a company's brand reputation.

This industry has a significant stake in the effort to raise awareness of the dangers of counterfeit electrical products and the adverse affects they have on consumers. Counterfeiting has been a growing problem worldwide — increasing exponentially over the past 20 years. Unauthorized products falsely and illegally carry the trademark, service mark or copyright of another with intent to deceive prospective customers into believing that the product or service is legitimate. Inferior look-alike products rarely perform as intended and, especially in the electrical market, pose tremendous safety risks.

Counterfeiting also affects jobs, creates unfair competition and results in lost revenue. The International Anti-Counterfeiting Coalition (IACC) estimates that counterfeiting costs the worldwide electrical products industry $600 billion and reduces U.S. employment by approximately 750,000 jobs each year.

One important, but often overlooked, downside to counterfeiting is its negative effect on brand reputations. A sound brand reputation is the sum of many important elements, including innovation, quality, design, marketing, packaging and technical support. Counterfeit products can undermine these efforts and erode consumer confidence.

Protecting a brand is similar to protecting a culture. When consumers are loyal to a brand, they are a part of the culture that they have created. A consumer immediately identifies a brand with its quality and reliability. However, without proper awareness of the repercussions and potential hazards of counterfeiting, consumers may be tempted to let price dictate purchase choices.

Eaton has a zero-tolerance approach to counterfeiting that includes education and awareness, partnerships with industry and product technology enhancements that detect and prevent counterfeiting. The company also established a Global Task Force to coordinate anti-counterfeiting initiatives across diverse markets and develop programs to influence and train government officials, law enforcement, distributors and customers.

The company puts visible markings on its electrical products and uses covert technologies, unique moldings and cartons to identify its brand. An authentication program, with tracking and tracing capabilities, helps to ensure its products are sold and distributed properly and that its brand is protected. Avoid products without identifying branding labels or that show evidence of tampering.

As counterfeiters become more sophisticated, the counterfeit products have become even more difficult to detect. The relatively new Internet consumer culture presents an additional layer of challenges. Wider acceptance of online purchases increases the opportunity for illegitimate counterfeit products to find their way into the marketplace and increases the likelihood that customers will unknowingly resell counterfeits. As compared with products sold through traditional channels, counterfeits sold online often have poor-quality labels, out-of-date product codes or packaging legitimate manufacturers don't use. Consumers must be careful when dealing with online brokers and resellers and avoid “bargains” that seem too good to be true. Ask yourself these questions if you are uncertain about a source of electrical products:

  • Do you know and trust the person who sold the product?

  • Is the seller a recognized or authorized dealer?

  • Was the price in line with the current market?

From a brand-protection perspective, the most effective approach to combating counterfeits is to promote purchasing through authorized dealers and retailers. Authorized retailers have an on-going relationship with manufacturers and a stake in protecting the brand. This also provides a tangible “chain of commerce” to the original manufacturer.

But what if you suspect you have encountered or actually purchased a counterfeit product? Contact the original manufacturer or brand owner and request authentication of the suspected product. If it is, in fact, a counterfeit, the unsafe product can be removed from the marketplace and potentially traced. Consumers, manufacturers, the certification industry, resellers, law enforcement and governments all have a role in protecting consumer safety and brand reputations. Education and awareness are the most important first steps.

Kevin McLean is Eaton's senior V.P., global marketing, Electrical Sector. For more information about electrical counterfeiting, visit