Big Brands and Counterfeits

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Tim Johnson notes the surge in luxury brand purchases by domestic consumers and suggests that this could play a positive role in the fight against counterfeits.

This is a standard argument in some circles, particularly from folks who believe that the demand stems from: 1) low-income consumers; and 2) consumers that do not understand why IP infringement is such a big deal in the first place. As per capita GDP rises, goes the argument, and education about IP becomes more widespread, piracy will substantially diminish. Many examples of other developing economies attest to the connection between rising standards of living and lower levels of piracy, so in that sense, the argument seems quite reasonable.

However (there is always a however), some of these assumptions give me pause. I agree that many people will switch to genuine, and better quality, products as their incomes rise. But a lot of products, particularly those on digital media, do not substantially differ in quality from the genuine articles. Downloads of MP3s and movies occur globally, notwithstanding per capita GDP. Johnson was probably not referring to digital entertainment products, however.

Next assumption: education. I used to buy in to this one wholeheartedly. Once people understand the stakes here, they won’t buy fake stuff. Sounds good, but I changed my position on this about five years ago.

Why? I firmly believe that human beings will buy fake goods if the price is significantly lower and the quality is decent, so long as they do not think they will be caught. In other words, I do not believe that people will be swayed either by a morality argument or one based on economic or business principles. I believe in self-interest, and if someone thinks they can get away with it, they will do it.

This is why people download MP3s and movies and games. Because they can.

What’s my solution? Effective enforcement, both civil and criminal. Without that, you will never completely clean up the market.