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The rise of counterfeit products and the risks they pose

Counterfeit goods are nothing new, but today, with the ever-increasing rise and impact of influencer culture and increasing market vulnerability, they pose a greater threat.
In addition, rising costs of living continue to be felt, and consumers are increasingly being served consumer product advertising (including counterfeits) via social media. Adem Kulauzovic, Director of Automation at Domino, explains how brands can protect their businesses from illicit trade and raise consumer awareness of the risks associated with counterfeit goods.
The rise of counterfeiting
Worldwide, total counterfeit sales are estimated to be between $1.7 trillion and $4.5 trillion each year. Counterfeit goods account for 5% of all imported goods in the EU, and in certain regions could make up as much as 40% of all goods sold. While counterfeiting is not a new problem, it is certainly on the rise. Data from The Pharmaceutical Security Institute indicates that illegal drug trafficking in 137 countries increased by 38% between 2016 and 2020, with the majority of drugs destined for North America, the Asia-Pacific region and Latin America respectively.
When purchasing counterfeit products online, young people are particularly vulnerable, as they are motivated by a lack of purchasing power compared to previous generations, rising prices for luxury brands, financial difficulties resulting from the economy and the “culture of saving”. Indeed, among the 22,021 people aged 15-24 surveyed by the EU Intellectual Property Office in 2022, 37% of participants reported having purchased at least one counterfeit product in the previous 12 months, an increase from 14% in 2019.
Counterfeit materials and products
Counterfeit products can be divided into two categories: deceptive and non-deceptive. A non-deceptive counterfeit product can be easily identified by its price, quality and where it is sold. For example, consumers are already aware when they buy products from certain online sellers that offer luxury brands at prices well below their retail price.
In 2021, a report by the Intellectual Property Office found that the role of influencers was instrumental in consumer purchasing non-deceptive counterfeit products. Of the 1,000 women aged 16 to 60 surveyed, 13% said that promotion on social media had led them to buy counterfeit products, while some websites actively advertise “knockoffs” on social channels.
In contrast, deceptive counterfeit products are often identical to authentic products in terms of price and packaging, but not in terms of quality. Consumers order an item they believe to be authentic, but what they receive is something else: something of inferior quality that may break after a few weeks and, in the worst case, cause direct harm to them.
A recent survey by the U.S. Government Accountability Office suggests that two in five brand-name products sold online through third-party retailers may be counterfeit. Other studies indicate that more than 25% of consumers have unknowingly purchased counterfeit products online.
Counterfeit products are not limited to high-end fashion, electronics, and designer brands. Some of the most common counterfeit products on the market include drugs, supplements, cosmetics, and skincare products, the latter of which are actively promoted by influencers.
The impact on businesses and consumers
Manufacturing and selling counterfeit products can impact a business in many ways, ranging from an initial loss of sales to damage to relationships with business partners. Counterfeiters also force legitimate businesses to deal with the consequences of counterfeiting, requiring significant investments in both time and money.
Counterfeit products pose a significant threat to consumers. A counterfeit lipstick or perfume might seem like an innocent enough thing, but these products often contain harmful or untested ingredients, making them completely unsuitable for use and potentially even having serious side effects.
In fact, cosmetics are among the most dangerous counterfeit products. In recent years, dangerous materials such as “cyanide, arsenic, mercury, lead, urine and rat droppings” have been detected in fake cosmetics. Figures from the National Crime Prevention Council (NCPC) indicate that counterfeit products cause around 70 deaths and 350,000 serious injuries each year in the United States.
Taking action together
The most effective approach to combating counterfeiting is collaboration, whereby supply chain partners, consumers and law enforcement work together to detect counterfeit products, share information and pursue the culprits. For businesses, a great starting point is to ensure that products have unique identifiers that can be used to verify the legitimacy of a product, as well as the traceability and authenticity of its supplied materials and ingredients.
In recent years, new laws have been implemented around the world requiring the use of unique identifiers and serialization at the product level in specific sectors, including prescription drugs, medical devices, tobacco, and over-the-counter drugs, to facilitate tracking and traceability, and prevent illegal, stolen, or counterfeit products from remaining in the supply chain.
These regulations rely on databases and systems that facilitate the tracking and tracing of serialized products and allow retailers to verify the efficacy of their products. The same technology can be used as a best practice to provide that same capability to logistics partners, retailers, and consumers, whether a brand is required to do so by law or not.
Consumers can use a smartphone-readable, serialized QR code or DataMatrix code as a means of verifying the authenticity of a product. Once on the product packaging, a 2D code can direct consumers to a website to verify its legitimacy. Counterfeiters can easily replicate the look and feel of a product’s packaging, but they cannot create a QR code with a unique and valid serialization that can fool legitimate systems into validating it as “authentic.”
For small businesses, adopting these solutions was considered unfeasible and unattainable, given the enormous expense and effort involved in managing serialized codes to effectively track the product throughout the supply chain. However, more and more logistics providers today recognize the importance of upholding the brand reputation of their suppliers. For this reason, many of them now offer services, such as Amazon Transparency, that provide unique numbers and track those numbers through your shipments for a modest fee.
Meanwhile, technology companies specializing in traceability services are experiencing rapid growth, offering comprehensive, out-of-the-box solutions that integrate seamlessly into existing production lines. While the idea might initially seem financially prohibitive, many suppliers present viable alternatives by providing hardware, support, and general maintenance for their traceability packages for an affordable monthly fee. This shift from capital expenditure to operational expenditure has democratized the accessibility of advanced traceability measures for many.
Conclusión
The fight against counterfeiting is global, spanning all sectors, from industrial, electronic, and automotive products to food, beverage, pharmaceutical, and personal care products. With economic pressure on living costs and the rise of social media influencer culture, the risk of counterfeit products is more tangible than ever.
Therefore, facilitating traceability and transparency in global supply chains and increasing consumer awareness of product authenticity will be critical in both regulated and unregulated sectors. To remain resilient, brands will need to collaborate with supply chain partners to combat counterfeiting through product identification and data sharing.
WORKING WITH LOCAL AUTHORITIES TO ADDRESS COUNTERFEITING:
Strategies for Brands
ISSUES
Latin America has serious security problems such as terrorism, drug trafficking, among others. However, there is often a lack of understanding in the region about the importance of counterfeiting issues. Authorities often ignore that behind minor crimes, there are other more serious and complex crimes operated by criminal organizations that use counterfeit goods to finance nefarious activities.
In each country where counterfeiting activities have been discovered, the actions to be taken range from cease and desist orders, criminal prosecution to lawsuits for intellectual property (IP) theft, the forms of litigation may differ. Brand owners will have to determine which agency to contact, which policies and laws are in a position to give them protection to combat counterfeiting and piracy, and even more importantly, what path will give them the best results; there is no one-size-fits-all solution, each case will need its own individual process.
There are very few interdisciplinary government entities that work together to combat counterfeiting. Authorities in most of Latin America work individually. Brand owners will have to approach each government in each country. Most of the time, brands are referred to several offices before finding the appropriate one to handle these crimes, resulting in costly delays where cases are often forgotten and squashed under matters deemed more urgent.
CHALLENGES
Training on counterfeiting is typically handled by law enforcement officers, customs agents, and tax officials, but almost never by judges – who, after all, are the ones in charge of sanctioning criminal conduct. Therefore, this lack of training and understanding of the issue leads to impunity.
The emphasis on the elements of counterfeiting across Latin America varies from country to country. Some countries with authorities focused on intellectual property could provide the standards in the region for actions against this practice. Others seem to be lagging behind their criminal justice system, which can be either archaic or newly created, and as a result, some law enforcement officers are still learning how to handle evidence, prosecute such actions, etc.
BEST PRACTICES AND RECOMMENDATIONS
It is vitally important to identify that the operating authorities in each region have the best intentions and ensure that they would support anti-counterfeiting actions; in any case, cooperation with brand owners is essential to gain experience and knowledge to help dismantle criminal networks. Additionally, brand owners can contribute to preparing border agents regarding counterfeiting and supply chain vulnerabilities; reinforce the profiles of transport trucks and containers; and prepare officers for future incidents. However, training is only the beginning – the most important aspect is to accompany the authorities in the destruction of these goods as well as in the subsequent legal investigations for prosecution.
Local authorities often face difficulties in transporting and safeguarding illicit goods, resulting in contaminated evidence due to lack of storage knowledge, and many legal cases end up being dismissed due to flawed evidence. Brand owners should be on hand to assist in transporting and storing goods, so that nothing stands in the way when the case is brought to court. In addition, brand owners should collaborate in developing a standardized industry approach.
Counterfeiting and intellectual property rights (IPR) violations in Latin America represent a complex problem that spans a variety of sectors, including clothing, electronics, perfumes, footwear, technology, and luxury goods. This illicit activity is concentrated primarily in large cities and capitals such as Mexico City, Buenos Aires, Bogotá, São Paulo, Lima, and Caracas, where established networks of production and distribution of counterfeit products are located.
Main countries and sectors affected
Mexico is one of the most notorious countries for counterfeiting in Latin America. The famous Tepito market in Mexico City is a key hotbed of counterfeit products, selling everything from luxury brand clothing to electronics and pirated DVDs. The problem persists despite the efforts of authorities, as the high demand for low-cost products, coupled with weak law enforcement, perpetuates this parallel economy.

In Brazil, the counterfeit market is equally worrying. Densely populated urban areas such as São Paulo and Rio de Janeiro are home to large counterfeit districts, especially for clothing, accessories, footwear, and electronics. Rua 25 de Março in São Paulo is widely known as a hotspot for counterfeit goods, including products from global brands such as Nike, Adidas, and Louis Vuitton. According to Brazil’s National Confederation of Industry, counterfeits cost the country approximately $40 billion annually in economic losses.

Argentina faces a similar problem. Markets such as La Salada in Buenos Aires, the largest informal market in Latin America, have specialized in selling counterfeit clothing from international brands such as Levi’s, Polo Ralph Lauren, and Lacoste. Although authorities have attempted to shut down such markets, their resurgence is continuing due to strong demand.
State of Intellectual Property Laws
At the regional level, most Latin American countries have adopted international intellectual property treaties, such as the TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights) and, in some cases, the Madrid Protocol to facilitate trademark protection. However, the implementation and enforcement of these laws vary considerably between countries.
Chile is one of the leading countries in terms of IPR protection, with its National Institute of Industrial Property (INAPI) managing trademarks and patents. Chile has improved its legal framework with trade agreements that reinforce IPRs, but counterfeiting remains a problem due to the lack of effective enforcement of laws in certain urban areas.
Colombia, for its part, has made progress in modernizing its regulatory frameworks through the Superintendency of Industry and Commerce (SIC), which simplifies the process of trademark and patent protection. However, Bogotá remains a hotbed of digital piracy and counterfeiting of luxury goods.
Peru has made notable progress through its National Institute for the Defense of Competition and the Protection of Intellectual Property (INDECOPI), which has improved the processing of trademark and patent applications. Despite this, cities such as Lima face high levels of counterfeiting of clothing and technology.

Major infringers and markets
Among the biggest IPR infringers in Latin America are local and international criminal networks operating in areas with weak state control. The most common counterfeit products include clothing, electronics, software, and pharmaceuticals.

Informal markets are key in the distribution of these products. In addition to Tepito (Mexico) and La Salada (Argentina), other important hotspots include:

El Gran San in Bogotá, Colombia, where counterfeit textiles and clothing are sold.

La Victoria in Lima, Peru, which is known for the sale of counterfeit clothing on a large scale.

San Salvador and Guatemala City, where pirated electronics and software are distributed, often from China.

What can be done to stop counterfeiting?

At the policy level, the most effective solution requires a combination of education, rigorous enforcement, and international cooperation. Public awareness programs, such as those implemented in Chile and Peru, are key to educating consumers about the risks of purchasing counterfeit products. In addition, collaboration between governments, businesses, and international organizations such as Interpol and WIPO (World Intellectual Property Organization) is essential to dismantle international counterfeiting networks.

However, the difficulty lies in corruption in some areas, lack of resources for law enforcement agencies, and the constant demand for low-cost counterfeit products, making these markets an attractive source for local consumers who often do not notice, or do not care, the difference between original and fake products.

In summary, although legal frameworks are improving in Latin America, efforts to stop counterfeiting require greater investment in law enforcement, international cooperation, and consumer education.

Software counterfeiting is a serious problem in Latin America, particularly in countries with emerging economies and limited access to legitimate software at affordable prices. Software piracy not only affects large technology companies, but also creates a favorable environment for cybercrime, tax evasion, and the spread of malware. Pirated solutions are distributed both physically, through informal markets, and digitally, on websites, forums, and cloud storage services.

Main affected countries and sectors

Brazil is one of the main hotbeds of software piracy in Latin America. According to reports from the Business Software Alliance (BSA), 46% of the software used in the country is illegal, which especially affects sectors such as construction, graphic design, video games, and business applications. The country has a strong law against piracy, but the magnitude of the problem complicates its enforcement.

In Mexico, the situation is similar. It is estimated that more than 50% of the software used in companies is pirated, which generates significant annual losses for the economy. Markets like Tepito sell not only counterfeit physical products, but also pirated software that is distributed nationwide. In addition, the use of illegal software in companies creates a significant gap in innovation and computer security.

In Argentina, the use of pirated software is entrenched in various industries, especially in small and medium-sized companies. Authorities have implemented measures to combat piracy, but the lack of effective enforcement and the large number of users who prefer free or low-cost software complicate the situation. In addition, many consumers are not willing to pay expensive licenses, which fuels the market for illegal software.

Distribution and Focus

Pirated software is distributed mainly in two ways in Latin America: physically through informal markets and digitally through illegal platforms. In markets like La Salada in Argentina or Tepito in Mexico, it is common to find DVDs and USBs containing pirated versions of software from companies like Microsoft, Adobe, and Autodesk. These counterfeit products are also distributed in unofficial retail stores and, in some cases, in more conventional points of sale where they are inserted without the customer noticing.


The digital channel has increased access to pirated software through torrents and websites offering cracks and keygens, allowing the illegal installation of high-cost programs such as operating systems, productivity suites (Microsoft Office, for example), and specialized software for graphic design or audiovisual editing. Cloud storage platforms such as Google Drive or Mega have also been used to illegally share these files on a large scale.

Challenges in legislation and enforcement

Although many Latin American countries have implemented laws protecting intellectual property rights, the application of these laws is irregular and is usually stronger in large cities than in rural areas. In Brazil, the government has carried out numerous operations to close factories and distribution networks of counterfeit software, but the massive use of these products remains a major problem due to the lack of education and awareness about legal alternatives.

For example, in Chile, the Intellectual Property Law 17,336 establishes clear sanctions for the distribution and use of pirated software. However, a lack of resources to enforce regulations and limited accessibility to legal software remains a major barrier in the fight against piracy. Countries such as Colombia and Peru have also attempted to improve their legal infrastructure, but face similar challenges.

Impact on consumers and the economy

The use of pirated software has significant consequences for Latin American economies. First, tax evasion by illegal distribution networks generates multimillion-dollar losses for governments. In addition, pirated software is often accompanied by malware and other vulnerabilities that put both individual users and businesses at risk, increasing the costs associated with cyberattacks and information theft.

From a consumer perspective, many are not aware of the differences between original and counterfeit software, while others consciously choose the pirated version for its low cost. In some industries, demand for legal software is limited due to the perception that pirated software is just as functional, even though the risks are high.

Solutions and Perspectives

To combat software piracy in Latin America, a comprehensive approach is needed that includes educating consumers about the risks of illegal software, implementing more affordable prices for legitimate software, and greater cooperation between the public and private sectors. Companies such as Microsoft have developed programs to facilitate access to legal versions of their software at reduced prices for small and medium-sized businesses, but a greater effort is needed at the regional level to curb counterfeiting.

In addition, strengthening existing legal frameworks and increasing the resources available to law enforcement agencies are key steps to reduce the use of pirated software in the region. International cooperation between Latin American countries and global organizations such as WIPO (World Intellectual Property Organization) is essential to combat large-scale illegal distribution and ensure the protection of intellectual property rights.

Counterfeiting in Latin America covers a wide variety of products, and the countries most affected by this problem include Mexico, Brazil, Argentina, Colombia, and Peru. These countries are known for both the production and distribution of counterfeit products, with clothing, electronics, perfumes, and software being the most common sectors.

1. Mexico:

Mexico is a hub for counterfeiting in Latin America. One of the most famous markets is Tepito in Mexico City, where counterfeit products such as brand-name clothing (Nike, Adidas, Louis Vuitton), perfumes, electronics, and even pirated software are sold. Demand is high due to low costs, and Tepito is known to be a wholesale distributor for other cities in the country.

Counterfeit products: Clothing, footwear, technology, cosmetics, and software.

Major cities: Mexico City (Tepito), Guadalajara, Monterrey.

2. Brazil:

Brazil faces high levels of counterfeiting, especially in large urban areas. Rua 25 de Março in São Paulo is a key selling point for counterfeit clothing and accessories, while the software piracy market is especially worrying in business areas.

Counterfeit products: Clothing, footwear, accessories, electronics, and software.

Main cities: São Paulo, Rio de Janeiro, Porto Alegre.

3. Argentina:

In Buenos Aires, La Salada is one of the largest counterfeit markets in Latin America, specializing in clothing from brands such as Nike, Adidas, and Puma. Fake technology products and perfumes are also sold. Despite government efforts to shut down the market, it continues to operate on a large scale due to the high demand for affordable products.

Counterfeit products: Clothing, footwear, perfumes, and technology.

Main cities: Buenos Aires (La Salada).

4. Colombia:

In Colombia, the counterfeit market is also present in cities such as Bogotá. Gran San, a popular shopping center in the capital, is known for selling counterfeit clothing from international brands. Additionally, pirated electronics and software are very common.

Counterfeit products: Clothing, technology, software, and luxury goods.

Main cities: Bogotá, Medellín, Cali.

5. Peru:

Lima, the Peruvian capital, is another center of counterfeiting in Latin America. The La Victoria district is famous for the sale of counterfeit clothing and accessories. Additionally, pirated software and illegal electronic products are distributed, affecting both consumers and businesses.

Counterfeit products: Clothing, footwear, technology, and software.

Main cities: Lima (La Victoria).

Challenges to stop counterfeiting

Efforts to stop counterfeiting face major challenges due to corruption, lack of resources to enforce intellectual property laws, and high demand for cheap products. Although legal frameworks exist in each country, such as the National Institute of Industrial Property (INPI) in Brazil or the Superintendency of Industry and Commerce (SIC) in Colombia, enforcement is patchy. Furthermore, international cooperation is critical to dismantle the networks that operate between these countries and China, where many counterfeit products come from.

Consumer attitudes

Limited access to original products and high prices for luxury brands lead many consumers to opt for counterfeit products. In many cases, local consumers cannot tell the difference between a genuine product and a counterfeit one, or do not care as long as it does its job. This perpetuates the illegal market in many areas.

In summary, counterfeiting in Latin America remains a structural problem affecting multiple sectors and regions, with strong concentrations in large informal markets and in the digital distribution of software and technology products. Solutions require a comprehensive approach, combining legal efforts, international cooperation, and consumer education.

The fight against counterfeiting in Latin America requires a Chinese strategy

China is central to Latin America’s counterfeiting problems
Counterfeiting problems in Latin America are closely linked to manufacturing in China, as a significant proportion of these counterfeits can be traced back to China. This means that an effective brand protection strategy for Latin America often requires an effective brand protection strategy for China as well.

For many brands, concerns about counterfeits and other unauthorized production (e.g., overstocks from their authorized suppliers) of their products in China stem, at least in part, from the potential impact of such activities on the Chinese market. At the same time, there are many brands that do not target the Chinese market, but that have strong brand protection in place in China to prevent the export of counterfeits and other problematic products. While these are brands that often manufacture their products in China, this does not have to be the case: A brand that manufactures its genuine products in a country other than China may want to do everything possible to prevent the manufacture and export of counterfeit products outside of China, simply because China is by far the largest source of counterfeit products.

How to protect yourself against counterfeiting in Latin America
The steps you take to protect your intellectual property in China may ultimately be more effective than those you take in Latin America. Here are some steps to consider if you face counterfeiting problems in Latin America, or if you want to avoid them:

1. Register trademarks in China: Even if your brand doesn't manufacture or sell in China, you should consider registering your trademarks there, especially since trademark registration in China does not require use as a prerequisite. Once registered, brands can also register their trademarks with Chinese customs, significantly reducing the risk of counterfeit exports.

2. Identify and monitor supply chains: Working successfully with law enforcement in Latin American countries can lead to regular and significant product seizures. But if you want to crack down on counterfeiters, you have to go up the food chain. Identifying factories that produce counterfeits is rarely easy, and the process can take many months. But shutting down one counterfeit manufacturer is likely to put a dent in overall counterfeit activity, which is often quite concentrated, especially when it comes to higher-quality counterfeits.

3. Monitor your Chinese manufacturers: If your brand is linked to manufacturers in China, it's vital to ensure that your Chinese manufacturers aren't part of the problem. The unfortunate reality is that many Chinese manufacturers engage in unauthorized production. A well-structured, China-specific non-disclosure, non-use, non-circumvention (NNN) agreement can protect you against these types of problems. Proactive compliance programs can further strengthen this protection.

4. Strengthen your IP controls in the U.S.: It's not uncommon for counterfeits to transit the U.S. on their way to Latin America. Strong enforcement by U.S. Customs and Border Protection gives brands the opportunity to seize counterfeit goods during this transit. Since many Latin American regulators assume that products from the United States are authentic, strengthening intellectual property controls in the United States becomes even more crucial.

Conclusion
While local protection measures in Latin America are important to combat counterfeiting, understanding and addressing the source of the problem – primarily China – will amplify the effectiveness of your brand protection strategies.

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