Buyers beware: Protect yourself from counterfeit technology products

Counterfeit technology products pose great risk to both consumers and electronics manufacturers. For consumers, purchasing a counterfeit product not only results in monetary loss but can also pose physical dangers when, for example, a knockoff battery causes a cell phone or laptop to suddenly ignite. For manufacturers, the counterfeit market brings a range of troubling issues, from reduced revenues to eroded brand integrity.

Understanding the problem

The problem of counterfeiting is relatively recent for the IT community. Now that the industry has matured, technologies are no longer too complex to be replicated by technicians who have been exposed to information technologies since early childhood and have received outstanding training in college or trade schools.

Some of the problems stem from the channel. Although most qualified resellers have the good intention of avoiding counterfeiters, they are attracted by the prices of counterfeit goods and can be easily fooled by the sophisticated design and authentic-looking labeling of fake parts and products.

Consumers are also attracted by low prices and can be enticed by deep discounts online. Unlike the fashion industry, where buyers are well aware that fake designer handbags are hawked on street corners at drastic discounts, technology products are widely sold over the Internet at comparable prices from both legitimate and illegitimate sources. This makes it very difficult for consumers to distinguish between authentic and counterfeit products at the time of purchase.

Realizing the impact of the counterfeit market

Today, counterfeiting is one of the most challenging issues for the IT industry. According to interviews conducted with electronics industry executives, as many as one in 10 IT products sold may actually be counterfeit. A popular target is standardized products like interface connectors. Every IT vendor makes them, and they are compatible with other vendor’s products. Therefore, counterfeiters can produce large volumes and label them according to the brand that is in highest demand at that time.

In fact, a recent study conducted by the Alliance for Gray Market and Counterfeit Abatement (AGMA) and the audit, tax and advisory firm KPMG LLP revealed that about $100 billion of global IT industry revenue is lost to counterfeiters annually. In addition, estimates by the International Chamber of Commerce suggest that counterfeit goods accounted for 6% of world trade in 2003, valued at $456 billion.

The effects of counterfeiting have severe implications for everyone involved. There is, of course, a direct financial impact to resellers, measurable in tangible dollars through a decrease in actual sales and loss of revenue. But there is also a cost to the consumer.

When end users unknowingly purchase a product that is counterfeit or contains counterfeit parts, they do so under the assumption of certain warranty terms. The IT vendor, however, may refuse to honor the warranty because of the counterfeit parts. The user has now lost time and money and may not have any recourse to recover monetary losses or replace the product.

How consumers can protect themselves

First and foremost, buyers should beware of low pricing. Any deal that seems too good to be true probably is. Beware of suspicious sources — check with the IT vendor to ensure you’re buying from an authorized reseller of goods.

If you feel you may already be a victim of a counterfeit product, immediately report your suspicions to the manufacturer. Look for any suspicious packaging characteristics such as a plain white or brown box, a logo on the packaging or product that does not match the manufacturer’s official logo, products that appear to have been reboxed or boxes that appear to be reused. Pay close attention to the actual product — is the print on the product label poor quality? Do materials like plastics and connectors appear to be poor quality? If so, it is likely that you just bought a counterfeit.

What IT companies can do

Resellers can also help by implementing certain processes to protect and certify the legitimacy of their products. Placing checkpoints within the product life cycle allows IT vendors to monitor the marketplace and to prevent abuse in the channel. IT vendors should specify which sources resellers should be buying from to ensure legitimate products are entering the approved partner channels.

Some IT companies already have innovative processes to authenticate genuine products. For example, Microsoft’s Web site has a page where resellers and end users can authenticate their products. In addition, some companies, including 3Com, Hewlett-Packard and Nortel, use holographic labels or other technologies to "mark" the genuine products and augment the warranty and support entitlement.

Where to get help

There are places to go to get help in dealing with this issue. One is AGMA, a nonprofit organization founded in 2001, whose members are influential companies in the technology sector, including founding members 3Com, Cisco Systems, HP and Nortel.

AGMA’s goals are to better enable its members to protect the authorized distribution channels and intellectual property of authorized goods and to improve customer satisfaction and preserve brand integrity.

AGMA encourages all illegal activity to be reported and provides a confidential tip line on its Web site. To access the tip line and the AGMA Web site, please visit

Nick Tidd is president of the Alliance for Gray Market and Counterfeit Abatement.

Copyright © 2006 IDG Communications, Inc.

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