Product Counterfeiting: Consumers and Manufacturers Beware

Gary Bamossy, California Polytechnic State University
Debra L. Scammon, University of Utah
ABSTRACT - Conservative estimates of the commercial counterfeiting of consumer and industrial products suggest that the activity is a world wide phenomena, amounting to hundreds of millions of dollars annually. This paper (1) identifies and briefly discusses the many factors in the world market that allow the practice of counterfeiting to thrive; (2) provides a framework to aid in the systematic research of counterfeiting activities; (3) presents findings from an exploratory study focusing on consumer experiences with and perceptions of product counterfeiting; and (4) suggests additional areas for research.
[ to cite ]:
Gary Bamossy and Debra L. Scammon (1985) ,"Product Counterfeiting: Consumers and Manufacturers Beware", in NA - Advances in Consumer Research Volume 12, eds. Elizabeth C. Hirschman and Moris B. Holbrook, Provo, UT : Association for Consumer Research, Pages: 334-339.

Advances in Consumer Research Volume 12, 1985      Pages 334-339

PRODUCT COUNTERFEITING: CONSUMERS AND MANUFACTURERS BEWARE

Gary Bamossy, California Polytechnic State University

Debra L. Scammon, University of Utah

ABSTRACT -

Conservative estimates of the commercial counterfeiting of consumer and industrial products suggest that the activity is a world wide phenomena, amounting to hundreds of millions of dollars annually. This paper (1) identifies and briefly discusses the many factors in the world market that allow the practice of counterfeiting to thrive; (2) provides a framework to aid in the systematic research of counterfeiting activities; (3) presents findings from an exploratory study focusing on consumer experiences with and perceptions of product counterfeiting; and (4) suggests additional areas for research.

INTRODUCTION

If imitation is indeed the highest form of flattery, then hundreds of American firms representing a broad range of industries and products have much to be flattered about. Conservative estimates of the commercial counterfeiting of consumer and industrial products suggest that the activity is a world wide phenomenon. Hundreds of millions of dollars in sales revenues are diverted annually through the manufacturing and trafficing of counterfeit goods. In addition to the direct and immediate loss of sales revenues by manufacturers whose goods are counterfeited, firms also face the potential loss of goodwill due to consumer dissatisfaction from experiences with the almost always inferior quality of the counterfeited goods. The purposes of this paper are: (1) to identify and briefly discuss the many factors in the world market that allow the practice of counterfeiting to thrive; (2) to provide a framework to aid in the systematic research of counterfeiting activities; and (3) to present the findings from an exploratory study focusing on consumer experiences with and perceptions of product counterfeiting.

DESCRIBING AND DEFINING COUNTERFEITING

In general terms, commercial counterfeiting can be described as the fraudulent practice of affixing a false trademark to a product. The false trademark then appears superficially indistinguishable from its legitimate counterpart. The purpose of this fraudulent activity is to dupe the consumer into purchasing the counterfeit under the mistaken belief that the product is the genuine article. For the consumer who unknowingly purchases a counterfeit, the result is typically dissatisfaction; for the firm whose goods are counterfeited, loss of revenue and goodwill are possible; for the counterfeiter, profits are reaped with little financial or legal risk and with minimal marketing effort.

The legal definition of commercial counterfeiting establishes the basis for legal redress for injured parties. It also sets out some distinctions regarding other lesser" forms of potentially deceptive product copying. "Commercial counterfeiting is the counterfeiting of brand name, trademarked merchandise . . . A counterfeit is a spurious mark which is identical with or is substantially indistinguishable from a registered mark" (The Lanham Act, Section 1127).

Two other concepts delimit the activities considered to be counterfeiting. "Knockoffs" are items which are slightly different from the original products, and they are not sold as genuine articles. Trademark infringement does not occur when shipments of Cimega (Omega), Aseikon (Seiko). Hormilton (Hamilton). Longune (Longines). and Bulovia (Bulova) watches cross national borders (Olenick, 1982). Trafficers in counterfeit goods can simply remove or change necessary letters to create a true counterfeit once the goods have cleared customs. Knockoffs are very marketable in foreign countries. For example, foreign purchasers of U.S. products who cannot tell the difference between a "loom" and a "moon" proudly sport knockoff "Fruit of the Moon," "Fruit of the Gum" and "Fruit on the Tee-Shirt" the shirts (Hansen, 1978).

A second and related term is "imitation." In merchandising jargon, an imitation is a copy of an original that is not sufficiently similar to constitute a counterfeit. For example, a Mexican made champagne uses the same name and label used to identify a premier French champagne, but adds enough Spanish words so that it is only imitating the French label, not counterfeiting it. While the advertising and labeling of these "lesser forms" of misidentified products may present problems of deception and violate both the Lanham Act and the Federal Trade Commission Act, the marketing of knockoffs and imitations is not a crime under current trademark statutes.

The commercial importance of trademarks is so significant that trademarks receive specific legal protection in many countries. Nearly four million trademarks are in force throughout the world, and an estimated 100,000 new trademarks are granted protection each year (Patel, 1979). The world-wide importance of trademark registration is also evident: 70 percent of registered trademarks are registered in developed countries, 27 percent in developing countries, and three percent in socialist countries. Within the developing countries, over one-half of the trademarks registered are owned by foreigners (Wasserman, 1980).

The importance of trademarks is also reflected in a firm's financial statement. A trademark provides protection for the goodwill built through a corporation's long-term marketing efforts. The Coca-Cola Company, for example, spends hundreds of thousands of dollars annually to protect the trademarks Coca-Cola" and Coke." It values the intangible goodwill associated with the trademarks at three billion dollars (Lunsford, 1974).

Finally, trademarks are an important source of information. They provide a convenient summary or "chunk" of information to consumers. They communicate something about the quality of the product bearing the mark and the reputation and reliability of the firm manufacturing the product. The visual component of a trademark evokes identification and imparts meaning to potential customers who do not, or cannot read the more detailed label information. Trademarks also offer a means for consumers to communicate socially. Wearing garments with a "designer's" label may say something about the person inside.

THE SCOPE OF COUNTERFEITING AND WHY IT THRIVES

The two most outstanding characteristics of counterfeiting today are its overwhelming financial significance, and the international scope of the problem. The International Anti-Counterfeiting Coalition (I.A.C.C.), an organization whose corporate clients include industry leaders in consumer goods, high-tech products and industrial goods, conservatively estimates the loss in revenues to legitimate producers to exceed hundreds of millions of dollars annually (United States International Trade Commission, 1983).

A wide array of consumer goods including such products as replacement automobile parts, pharmaceuticals, personal computers and luxury goods (watches, liquor, high fashion clothing) are key targets for counterfeiters. Within the general category of consumer goods, the magnitude of the counterfeiting problem appears to vary across industries. The recording industry estimates annual losses due to pirating of records and tapes to be 20 percent of all sales, with sales of legitimate tapes running behind sales of counterfeit tapes in certain areas of Europe and Asia (Walker, 1981). Designer jeans are currently haute couture, and counterfeits comprise ten percent of the market (Nagy, 1981). Levi jeans and Cartier watches both estimate recent losses at 15 million dollars per year (Parish and Groskoph-Markley, 1979), while the French luxury goods industry estimates losses of 30 million dollars annually (Walker. 1981).

Counterfeiting is not Just limited to consumer goods. Industrial goods counterfeiting is also big business, and sometimes has disastrous economic consequences. Ineffective counterfeit pesticides are estimated to have caused a 15 percent decrease in Kenya's coffee crop, their chief export crop for earning foreign exchange. The problem perpetuated itself when Kenyan farmers, afraid that the ineffective counterfeit pesticides were dangerous, became reluctant to use any pesticides (Kenyan Weekly Review, 1981). Other problems with industrial counterfeit goods have been identified in the airline industry (Harris, 1980), medical technology (Hansen, 1978), and pharmaceuticals (Lewis, 1979).

While the world wide demand for brand name products is no doubt one of the leading causes of the counterfeiting explosion, there are a number of other factors that also help to explain why counterfeiting is such a thriving activity. An assessment of world market factors suggests that the reasons are basically political and economic. Many developing countries simply do not have specific laws that address product counterfeiting. Those countries that do have anticounterfeiting statutes typically have nominal penalties for violations and very lax attitudes regarding enforcement. Even in the United States, prosecution of counterfeiters is a relatively futile exercise. Counterfeiting in the United States is a civil offense (as opposed to a criminal offense), and a corporate plaintiff must structure its case to prove either mail fraud or violation of other federal statutes. Otherwise, it must rely on unsatisfactory state unfair competition laws (McClure, 1979).

The diffusion of technology has made it easier for many foreign countries to produce credible counterfeits of U.S. products. Additionally, many third world countries have cheap and abundant labor, and the output from this particular manufacturing sector provides an important source of foreign exchange. It should also be noted that the market for counterfeit U.S. goods is not restricted to the U.S.A. The increasing international appeal of brand names allows foreign counterfeit manufacturers to exploit their home markets as well as export markets. In many developing nations, highly fragmented channels of distribution provide a structure that facilitates the distribution of counterfeit products.

THE NEED FOR RESEARCH

The impact of counterfeiting is both tangible and intangible; it affects both the individual firm and society; and injury befalls both the corporation whose goods are counterfeited and the consumer who unknowingly purchases the counterfeit products. Tangible impacts include the revenues lost by the trademark owner to the counterfeiting manufacturer. Intangible impacts include the loss of goodwill and consumer confidence. These microeconomic effects are magnified when lost revenues are translated into lost jobs and dissatisfaction is translated into negative attitudes towards business in general.

Indirectly consumers pay the costs of counterfeiting through higher prices necessitated by corporate expenditures on trademark protection. Directly they also pay in the form of dissatisfaction with counterfeit products, personal injury from faulty counterfeit products, and confusion regarding avenues for redress.

Currently it is difficult to estimate the extent of these impacts. Additionally, it is difficult for firms adversely affected by counterfeiting to develop strategies for effectively dealing with the problems since their exact nature and causes are not well understood. Unless and until effective legislation is enacted to stop counterfeiting, action by individual firms likely to be aimed at preventing access to the marketplace for counterfeit goods, or recouping goodwill by effectively handling consumer problems with counterfeit products that do enter the market.

Past research on complaining behavior suggests that dissatisfied consumers are likely to take a variety of actions that may not be immediately known to manufacturers. For example, of those dissatisfied consumers who complain, most complain to the retailer from whom they purchased the product. Only about 20 percent complain to the manufacturer (Diamond, et.al. 1976). Even more importantly, a very high percentage of dissatisfied consumers does not complain, but instead stops purchasing the product, or worse, tells their friends about their disappointing experience. If this same pattern of reaction holds true for consumers' experiences with counterfeit products, the trademark owner may not become aware of the problem until sales revenues begin to suffer either through diversion of sales to the counterfeit goods or as the result of abandonment by the consumer due to dissatisfaction. Thus, it is critical to investigate consumers' experiences with and reactions to counterfeit products.

Another source of insight to the development of effective strategy-for dealing with counterfeiting is an understanding of how counterfeit products get into the hands of consumers. There are a number of opportunities for counterfeiters to distribute their goods in the marketplace, and subsequently defraud consumers. Figure 1 provides a framework to describe the methods by which counterfeit goods enter the marketplace. This figure can also serve as a systematic framework for researching counterfeit activities.

"Authorized" channel numbers include wholesalers and retailers who would not intentionally deal in counterfeit goods, as well as channel members who would do so. There is, for example, evidence of channel members who seek out accounts with manufacturers and subsequently receive literature and other forms of promotional support from that manufacturer. Using these "signs of legitimacy," these channel members also buy and sell counterfeits of that manufacturer's products.

Depending on the product category, length of channels of distribution, and number of sources for obtaining counterfeit goods, reputable channel members can unknowingly receive counterfeit goods from a variety of suppliers. Figure 1 depicts a direct link from the counterfeiter, as well as an indirect route from the counterfeiter via other wholesalers. One additional source of illegal goods (although they are not technically counterfeit goods) comes from foreign manufacturers who have a manufacturing licensing agreement with a U.S. firm. In this "grey counterfeiting" situation, the licensing agreement is violated by the importation of these goods to the U.S.A. Presumably, these licensed products are of the same quality as the U.S. firm's and the injury to the trademark owner is in the form of lost sales (rather than lost goodwill due to inferior products). While most authorized channel members do not knowingly carry counterfeit goods, there is clearly the potential for consumers to unknowingly purchase a counterfeit from a reputable channel member.

FIGURE 1

Apart from reputable channel members, there are also "unauthorized" channel members who intentionally buy, distribute, and sell counterfeit goods. Here, the channels are likely to be shorter, and less formal than authorized channels. There are consumers who will unknowingly purchase counterfeit goods from these channel members, and there are consumers who will knowingly purchase counterfeit goods.

PURPOSE OF THIS STUDY

One of the key contentions of corporate clients of the I.A.C.C. is that public unawareness of counterfeiting, couplet with public indifference about counterfeiting, has resulted in a lack of effective legislation which could help control the problem. This climate provides a "natural refuge" in which counterfeiting can thrive (I.A.C.C., 1983). This study is a first attempt to describe consumers' experiences with counterfeit products, problems they perceive with counterfeiting, and their perceptions of the magnitude of the problem faced by different industries. In the tradition of past research on complaining behavior, this study attempts to identify the types of industries and the channels through which counterfeit products reach consumers, the types of problems encountered by consumers with counterfeit products, and the processes consumers go through to resolve those problems. Of particular interest are consumers' awareness (or lack thereof) of the problem of counterfeiting and their perceptions of available avenues of redress.

METHODOLOGY

In December 1983, Parade magazine (an insert in zany of the country's Sunday newspapers) ran a feature article on product counterfeiting (Parade, December 18, 1983). The article was based on an interview with the president of the I.A.C.C., and concluded with an editor's note that if readers had "doubts about the legitimacy of a product," they could send inquiries to the I.A.C.C. In the eight weeks following the article, 114 letters were sent to the I.A.C.C. Fifty-six of these letters were inquiries about how to deal with counterfeit products generally, while 58 were letters with complaints about an unsatisfactory purchase wherein the consumer either knew or suspected the product was counterfeit. These 58 letters, from all regions of the U.S., formed the basis of a sampling frame for a telephone survey. There were no refusals by those respondents who were contacted by phone. Interviewers were unable to contact twenty members of the sampling frame after a minimum of three callbacks over a nine-day period. The telephoning resulted in 38 respondents or a 64 percent response rate.

For purposes of comparison, the same questionnaire used in the telephone survey (with omission of five questions that were specific to a counterfeit purchase) was administered to a convenience sample of consumers. Data were collected from 48 consumers through shopping mall intercept interviews in a large metropolitan area in the Western U.S. The same three interviewers who conducted the telephone interviews also conducted the mall intercept interviews. The shopping mall sample did not differ in demographic characteristics from the telephone sample.

The questionnaire included questions similar to those used in studies of consumer dissatisfaction and complaining behavior (Andreasen, 1977; Westbrook, 1980). Both groups o f respondents were asked to identify a product with which they were dissatisfied, the strength of their dissatisfaction, when they became dissatisfied with the product, the reason(s) for their dissatisfaction, and the nature of redress taken, if any. Respondents rated the relative importance of brand name, manufacturer and seller reputation and other product qualities as purchase criteria and they reported where the product had been purchased and the method of payment that had been used. In addition, respondents in the telephone survey were asked what steps they took, if any, to determine if the product was in fact counterfeit, the nature of redress attempted, if any, and whether their attitudes towards the seller, manufacturer, or business generally had changed as a result of their experience. Both groups answered questions regarding their perceptions of the significance of counterfeiting problems across a variety of industries, as well as their opinions about the nature of penalties that should be imposed on manufacturers, sellers, and consumers of counterfeit goods. Respondents provided standard demographic information, including occupationS education level, age, gender, and region of country. [Space limitations preclude a detailed description of the questionnaire items and their scaling. The complete questionnaire is available upon request from the first author.]

RESULTS

Perceptions of the Problem

The I.A.C.C. contends that counterfeiting thrives not only because of lax legal attitudes and enforcement abroad and ineffective legislation in the U.S., but also because of a lack of consumer awareness and public indifference towards the problems resulting from product counterfeiting. While the sample results are not representative of the general population, results of this exploratory study do suggest that a lack of awareness of the extent of counterfeiting activity across a variety of industries is clearly an issue. Results from both groups of respondents suggest a considerable lack of awareness of the significance of counterfeiting problems across industries.

The results suggest a wide range of beliefs about the origins of counterfeit products, their distribution, and the potential consequences from having counterfeit products in the marketplace. Two-thirds of the total sample correctly responded that most counterfeit products are manufactured abroad and imported to the U.S., while the remaining one-third did not know if these goods were domestic or imported. Even of those who responded that counterfeit goods came primarily from abroad, 33 percent could not correctly name one country that is active in producing counterfeit goods. (Taiwan and Hong Kong account for roughly 60 percent of counterfeit goods in the U.S., and these countries were the two most often identified in the survey).

Consumers did seem to have clear ideas about the potential consequences of counterfeit goods in the marketplace. Manufacturers' loss of profits and goodwill seemed likely outcomes to 85 percent of the sample, while monetary loss to the consumer and lost jobs in the U.S. seemed likely outcomes to 72 percent. There were differences in the perceptions of the consequences between the two groups in the sample, with the mall intercept respondents less likely to view "loss of profits to the manufacturer" (x2 .8.1, P<.05), and "monetary loss to the consumer' (x2 .8.1, P< .01) as outcomes.

Both groups of consumers were much less certain about the magnitude of the problems that various industries face with regards to counterfeiting activity. Fifty percent of the respondents felt that counterfeiting was most serious in the consumer goods category, 17 percent felt the most serious problem was with industrial goods, while 33 percent did not have any idea of which category was most prone to counterfeiting.

Table 1 lists a variety of consumer and industrial goods industries, each with strong evidence that counterfeiting is a significant problem to the industry (U.S.I.T.C., 1983; I.A.C.C., 1983). While the respondents were correct in their perceptions of counterfeiting problems for some categories of consumer goods, their general level of awareness was fairly low (note the responses in the "Do Not Know" column, compared to the "Not a Problem' column). This is particularly true regarding levels of awareness for credit cards, replacement auto parts and prescription drugs. Counterfeiting of the latter two products poses a potentially significant physical risk to consumers, while the fraudulent use of counterfeit credit cards represents losses of millions of dollars to retailers--a loss which is eventually absorbed by consumers.

TABLE 1

PERCEPTIONS OF COUNTERFEITING PROBLEMS ACROSS INDUSTRIES

The Buying Process

Descriptive results from the study reinforce the wisdom of a product branding strategy. They also highlight the potential fraud and deception inherent to product counterfeiting. Eighty-five percent of the total sample responded that the reputation of the manufacturer was an important reason for selecting a product, while 8; percent of the products designated by respondents az dissatisfying or counterfeit were national brands Forty percent of these products were purchased at a price that was "about the same" as prices seen elsewhere while 30 percent of the purchases were 'lower priced' than elsewhere (12 percent were "higher priced" and the remainder "did not know"). Independent retail store and local department stores accounted for 50 percent of the purchases, while discount stores accounted for another 20 percent.

Sixty percent of the total sample believed that the seller of counterfeit goods is aware that the goods are counterfeit, while an additional 25 percent reported they were not certain if the seller would know the good are counterfeit. Only 15 percent of the respondents believed that the retail seller was unaware the goods were counterfeit.

Dissatisfaction

For most of the purchases, dissatisfaction with the product was fairly immediate. Forty-two percent of the telephone respondents were disappointed after the first use, and an additional 34 percent were dissatisfied after only a few uses (clothing and household appliances were the most frequently mentioned as disappointing). Poor quality materials, poor performance, and manufacturing defects (all of which are "trademarks" of counterfeit goods) were the three top reasons given for dissatisfaction with the product.

The respondents from the telephone survey were clearly not indifferent to the problem of counterfeiting. Fifty percent of the telephone sample responded they were "mostly dissatisfied" with the product in question, while the other 50 percent responded that they felt "unhappy" or "terrible." Many of the telephone respondents went on to say that they had very strong feelings about the experience. They felt "incensed," "cheated," "very angry," or "sick about it." These strong emotional reactions are not unlike those described in the Belk study of possessions (1983) in which respondents described their feelings following the loss of their possessions due to burglary. Respondents from the telephone survey went to great lengths to suggest antiquated methods of capital punishment for product counterfeiters, and some likened sellers of counterfeit goods to "dope sellers." While the researchers estimated 15 minutes for administering the telephone survey, the actual interviews averaged 26 minutes, primarily because of the respondents' need to express their frustrations.

Is It A Counterfeit?

The results clearly suggest that for most consumers, the possibility that the product in question may be counterfeit simply does not occur to them. Eighty-two percent of the telephone sample responded that their first thought was that they had just purchased a defective product from the legitimate manufacturer. Sixty-three percent of the respondents never determined if the product was in fact counterfeit. Thirty percent of the respondents in the telephone survey claimed that their product was in fact counterfeit, although only one-third of them could offer substantiation of their claim beyond merely insisting that the product was counterfeit.

Redress Pursued

Telephone respondents seemed unclear as to what steps to take regarding redress. Sixty-five percent of the sample did nothing to improve their situation, while 20 percent complained to the store, and 10 percent reported complaining to friends.

Respondents from the telephone survey also did little to improve their purchase outcome. While all of these people wrote to the I.A.C.C., only 30 percent complained to the store, and only four percent complained to the manufacturer. The remaining 66 percent did nothing.

Of those respondents who did complain to the store, 90 percent received some settlement, either an exchange or a refund. There were no reports of compensation from manufacturers. Many of the telephone respondents volunteered that settlement with the store was not a particularly easy matter. Further, with such a large portion of the sample receiving no settlement, it is not surprising that the respondents felt some resentment about the experience. In this case, 71 percent of the respondents felt less favorable about the store where the product was purchased, and 29 percent felt less favorable toward the manufacturer.

Appropriate Penalties

The respondents were strongly opinionated with regard to the penalties that they felt should be imposed on manufacturers and sellers of counterfeit goods. Seventy-five percent of the total sample felt that manufacturers of counterfeit goods should be subject to both fines and jail terms, while 20 percent felt fines alone were enough. Respondents were somewhat more lenient with sellers of counterfeit goods. Sixty percent felt they should be both fined and jailed, 34 percent said they should be fined only, and 6 percent had no opinion. Respondents expressed the most sympathy with consumers purchasing counterfeit products. Forty percent had no opinion about how to deal with purchasers or felt that nothing should be done to consumers, while 37 percent felt purchasers should be fined, 16 percent felt they should be jailed, and the remaining 7 percent felt the purchase of counterfeit goods should be legal.

Here again, there were differences between the two groups of respondents, with the 'complainers" from the telephone survey favoring stiffer penalties for producers of counterfeit goods (x2, 7.4, I< .05). Once the questionnaire was completed, respondent were told that counterfeiting in the U.S. is considered a civil offense, and violators are subject to fines onlyCa fact that was unknown to most, and a disclosure which greatly disappointed many of the respondents.

Limits of the Data

Two important caveats about the data reported here should be mentioned. First, although respondents were questioned about a product problem that had occurred sometime during the last year, it was apparent that a few of the respondents were not at the end of their efforts in seeking redress. In others, the telephone survey seemed to serve as a stimulus to renew their efforts for redress. Given this lack of resolution, it remains unclear what some of the respondents' attitudes towards the store or manufacturer may eventually be. Second, it is likely that there were some demand effects inherent in the administration of the questionnaire. The interviewers could sense in some of the interviews that respondents were getting on a "negative roll" regarding the activities of counterfeiting and its consequences for consumers and society. It seems likely that if respondents had been asked to identify some of the consequences of counterfeiting as opposed to responding to them, that the range of responses would be more narrow in scope.

AREAS FOR FUTURE RESEARCH

Reviewing the literature on produce counterfeiting is a fairly tedious task. Apart from a very descriptive piece in the Harvard Business Review (Kaikati and LaGarce, 1980) and a number of Journal articles that focus on the legal aspects of trademark and copyright infringement, the majority of publications are news reports from weekly periodicals and newspapers, or proceedings from testimony given to various government agencies such as the International Trade Commission as part of lobbying efforts by industries interested in tightening import controls.

There does not appear to be any systematic review and synthesis of the political, economic, legal, technological, and social factors that influence counterfeiting activities and allow them to thrive. At the macro level, an identification of the sources and flows of counterfeit goods both within the U.S. and internationally would be a useful first step. For example, the diffusion of technology over the past two decades allows counterfeiters not only to skillfully copy product labels and manufacture a wide variety of consumer goods, it also allows for the counterfeiting of high tech products such as personal computers and electronics. A systematic review of the factors that make an industry more or less prone to counterfeiting, including an identification of the characteristics of individual firms who are most and least in jured by counterfeiting should provide a number of findings with strategic and managerial implications.

Figure 1 provides a framework for a variety of research projects related to product counterfeiting. An investigation of the nature of the linkages between the legitimate manufacturer and channel members who carry the product may provide insights into how counterfeit products enter the marketplace. For example, one hypothesis is that the longer the channel of distribution, the more opportunity for counterfeit goods to enter the marketplace. Researchers interested in the nature of interdependence between manufacturers and channel members may investigate the methods by which manufacturers become aware of and attempt to monitor counterfeiting problems. Are there perceived areas of conflict between manufacturers and channel members regarding the policing and resolution of counterfeiting problems? If so, how are firms and trade associations dealing with these issues?

Efforts to research consumer behavior within the context of counterfeit products should improve our understanding of consumption behavior generally, as well as improve our understanding of consumers' reactions to fraudulent business activity. Figure 1 depicts two separate outcomes involving consumers: one in which the consumer unknowingly purchases a counterfeit good, the other one in which the consumer knowingly purchases a counterfeit. In spite of whether the channel member is authorized (i.e., a licensed dealer, or a major department store) or not (i.e., some discount stores, mail order retailers or flea markets), consumers who believe they are dealing with reputable dealers can still be defrauded by counterfeit goods. Within this context, research into the risks perceived and the motivations underlying retailer selection by consumers may identify purchasing situations in which counterfeiting is a_re likely to be expected, and provide a different perspective into consumers' decision processes. A number of testable hypotheses could focus on whether consumer expectations of redress or compensation are influenced by the nature of the product category, sales conditions, or type of retailer involved.

While most consumers unknowingly purchase counterfeit goods, there is evidence in the fashion industry of consumers who intentionally seek out and knowingly purchase counterfeit goods (Hansen, 1978). In this situation, it seems unlikely that the consumer would think of himself as a customer of the legitimate manufacturer, and may therefore have a different set of expectations regarding product performance and redress should the product fail. Research into this "fraudulent status signaling" may improve our understanding of status 'symbols, symbolic consumption, product images, and self-concept.

REFERENCES

Andreasen, A.R. (1977), "A Taxonomy of Consumer Satisfaction/ Dissatisfaction Measures," Journal of Consumer Affairs, II, no. 2 (Winter), 11-24.

Belk, R. W. (1983) "Three Scales to Measure Constructs Related to Materialism" in Advances in Consumer Research (T. Kinnear, ed.) Vol. 11, Association for Consumer Research.

Diamond, S. L., S. Ward, and R. Faber, (1976), "Consumer Problems and Consumerism: Analysis of Calls to A Consumer Rot Line," Journal of Marketing, 30 (January), 58-62.

Hansen, J. (1978) "The Capital of Counterfeiting" Duns Review, (October), p. 69.

Harris, J. (1980) "Report of Bogus or Altered Aircraft Bolts Leads to FAA Alert and Coding Proposal" Wall Street Journal, (July 7), p. 2.

International Anti-Counterfeiting Coalition (1983), Newsletter, Vol. 2, No. 2, (March), San Francisco, Ca.

Kaikati, J., and R. LaGarce, (1980) "Beware of International Brand Piracy" Harvard Business Review, (March-April), p. 52.

Kenyan Weekly Review (1981) "East African Economies Threatened with Ruin" (February 20), p. 21.

Lanham Act (1946), 15 USCA 1051-1127.

Lewis, D. (1979) "A Show of Fraud" International Herald Tribune, (April 13).

Lunsford, S., (1974) "Consumers and Trademarks: The Function of Trademarks in the Marketplace" Trade-Mark Report 64, 75.

McClure, B. (1979) "Trademarks and Unfair Competition: A Critical History of Legal Thought" Trade-Mark Report 69, 305.

Nagy, (1980) "Those Prestige Goods: Have You Been Hat?" U.S. News and World Report (September 7), p. 57.

Olenick S. (1982), "Draft International Anticounterfeiting Code: Neo-Realism as a Vehicle for Analyzing the Effect of Nonsignatories' Perceptions on the Development of an Anticounterfeiting Norm,- Vanderbilt Journal of Transnational Law 15, 803.

Parish, and Groskoph-Markley (1979) "Counterfeit! L.A.'s Hot Status Crime for the 80'S" L.A., (February), p. 128.

Patel, A. (1979) "Editor's Introduction" in World Development, 7, 649.

United States International Trade Commission (1983), "The Effects of Foreign Product Counterfeiting on U.S.Industry" Acme Reporting Company, Washington, D.C. Investigation No. 332-158.

Walker, A. (1981) "A Program to Combat Commercial Counterfeiting," Trade-Mark Report, 70, 117.

Wassermann, J. (1980) "UNCTAD: Trademarks and Developing Countries," Journal of World Trade 14, 80.

Westbrook, R. A. (1980), "A Rating Scale For Measuring Product/Service Satisfaction," Journal of Marketing, 44 (Fall), 68-72.

----------------------------------------