Distinguishing Counterfeit From Authentic Product Retailers in the Virtual Marketplace

• Author: Roy Fenoff,Jeremy M. Wilson
• Published date: 01 March 2014
• Date: 01 March 2014
• DOI: http://doi.org/10.1177/1057567714527390
• Subject Matter: Articles

Article

Distinguishing Counterfeit

From Authentic Product

Retailers in the Virtual

Marketplace

Jeremy M. Wilson

1

and Roy Fenoff

1

Abstract

Product counterfeiting is a large and growing crime that has many forms of victims, from consumers

and corporations to governments and societies. Contributing to this growth, the Internet offers a

means by which counterfeiters can easily apply their illicit trade around the globe with relative

anonymity. However, little is known about the ways in which counterfeiters market their products

online and whether and how they can be distinguished from authorized retailers selling authentic

product. In this research, we empirically explore authorized and counterfeiter business-to-

consumer websites for a luxury apparel maker and an audio electronics company. Building on the

extant literature, we statistically distinguish the websites based on effective website design features,

including interactivity and navigation, functionality, marketing, and security. We find that counterfei-

ter websites are different from authorized retailers on many key attributes. Additionally, some of

these differences hold between industries, whereas as others are industry specific. We discuss these

findings relative to advancing ideas on how counterfeiters target victims, conceptualizing crime and

place, and opportunity for e-displacement. We conclude with a brief summary of some implications

for the detection and prevention of these crimes by law enforcement, industry, and consumers.

Keywords

Product counterfeit, victimization, internet, websites

Introduction

Product counterfeiting involves the infringement of intellectual property associated specifically

with material goods (International Standards Organization TC247, 2010; Organization for

Economic Cooperation and Development [OECD], 2007). Generally, it involves the unauthorized

use of a trademark or logo. Estimates of the scale and harm of product counterfeiting are imprecise

1

School of Criminal Justice, Michigan State University, East Lansing, MI, USA

Corresponding Author:

Jeremy M. Wilson, School of Criminal Justice, Michigan State University, 655 Auditorium Road, 560 Baker Hall, East Lansing,

MI 48824, USA.

Email: jwilson@msu.edu

International CriminalJustice Review

2014, Vol. 24(1) 39-58

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DOI: 10.1177/1057567714527390

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and challenged on methodological grounds (U.S. Government Accountability Office, 2010) but

most accounts point to a large and growing problem. Some reports put dollar losses from counterfeit

goods in the hundreds of billions (Indo-American Chamber Of Commerce, 2005; OECD, 2007) and

suggest they make up at least 5%of world trade (International Chamber of Commerce Counterfeit-

ing Intelligence Bureau, 1997). Although consumer luxury items (e.g., branded apparel, jewelry,

purses, sunglasses, etc.) are commonly targeted, virtually any product is at risk of counterfeiting,

including prescription medicines, automotive parts, electronics, sporting equipment, toys, batteries,

hygiene products, alcohol, and cigarettes (Albanese, 2011; Heinonen & Wilson, 2012; Nasheri,

2005; Phillips, 2005).

Counterfeit goods reach consumers in a variety of ways. They can be purchased (either intention-

ally or unintentionally) from flea markets, liquidation sales, street vendors, illicit storefronts as well

as legitimate businesses (when counterfeiters infiltrate supply chains).

1

Notwithstanding such

physical places, the Internet offers counterfeiters a vast, easily accessible and largely anonymous

marketplace to sell fake goods. Counterfeit goods are sold online in at least two ways. First, some

counterfeiters use preexisting, legitimate websites, like eBay or Craigslist (Dolan, 2004; Newman &

Clarke, 2003; Pfeifer, 2012; Wall & Large, 2010). Second, counterfeiters also operate stand-alone

illicit business-to-consumer (B2C) shopping websites created solely to market and sell counterfeit

goods. These websites are particularly troubling because they can deceive consumers seeking to pur-

chase genuine goods, potentially undercutting legitimate online merchants. It is therefore important

that consumers can tell the difference between authorized versus counterfeit-based B2C websites.

In this article, we explore the differences between such websites based on various design and con-

tent features. Specifically, we conduct a content analysis of authorized and counterfeiter B2C web-

sites representing two industries: a luxury apparel maker and an audio electronics company (physical

products). Literature on consumer trust models guides our study and research on effective website

design informs our coding instrument, in which we organize website features into four dimensions:

interactivity and navigation, functionality, marketing, and security. We also discuss the limitations

of our study and the implications of our findings for consumer risk. First, however, we review studies

of product counterfeiting online.

Product Counterfeiting and the Internet

The number of people with Internet access has grown exponentially over the past decade. It is

estimated that Internet usage grows at a rate of 20%per year, and in 2004, the Internet user popu-

lation reached 934 million people worldwide (see Moss, Gunn, & Heller, 2006). In the United States

alone, there were over 200 million adults with Internet access in 2006 (U.S. Census Bureau, 2008).

Commensurate with this growth, consumer shopping online has reached unprecedented levels

(OECD, 2010). About 60%of U.S. consumers purchase products online at least once per fiscal

quarter (Anderson, 2010) and retail (nontravel) U.S. e-commerce spending reached almost

US$130 billion in 2009 (comScore, 2010). Despite this trend and the relative ease of shopping

online, some consumers will not purchase goods from the Internet because they do not trust

e-commerce (Lee & Turbin, 2001; Lombardi, 1998).

The risk of crime victimization is one factor that might diminish consumer trust in e-commerce.

According to Newman and Clarke (2003), the virtual environment creates unique opportunities for a

variety of crimes related to e-commerce, including identity theft, credit card fraud, hacking,

nondelivery of goods/services and, of course, product counterfeiting. The Internet is a particularly

attractive medium for product counterfeiters because it is easy to use, anonymous, accessible from

almost anywhere, and reaches the global market (OECD, 2007). As a result, intellectual property

crime on the Internet specifically is a considerable problem. If some estimates included pirated

goods sold online, for instance, estimated losses would increase by billions of dollars (OECD, 2007).

40 International Criminal Justice Review 24(1)