Reasons.. Counterfeit products, Economy, Brand

For a few years I have actively hated the fact that counterfeit goods are getting produced and bought every day. It seemed logical to me that it could only have a bad effect on the economy, because it is illegal. But I decided to actually look in to it, to see if i have been thinking correctly all this time. Actually, I was going to do my college Extended Project on this, but decided to do it on the impact of war on fashion instead.

Please note that there is a difference between 'Fake' goods and 'Look alike' goods. Fake goods are when they are made to be passed off as the real thing.. the logo of the brand is used and it is illegal. A look alike good is designed to look similar to the genuine good, for example- the famous Chanel quilted bag is the genuine product, but many stores sell quilted bags- they are 'designer inspired'. This post is on FAKE (counterfeit) goods.

This wont be an essay, I'll just list and explain what I have found out. The bits in orange are the key findings.

'They are actually good for the economy'
1) Because they are essentially advertising the real thing. It is a strange but true observation, I can imagine lots more people have been made aware of brands because they are around so many fakes. Think about it. Lets pretend fakes didn't exist. Unless you live in a place like Chelsea, how often would you walk down the street and spot a true Chanel bag? Rarely! Now lets resume to reality, where fakes do exist. The pattern and logo has been made more popular by the increasing distribution of fakes. So this could be good for the economy.. because it can encourage spending in high cost markets, providing the markets are domestic. Having said this, most of the goods, fake or real, are not made here, meaning an increase in imports which is preeetty bad UK-wise for the current account deficit.
Renee Richardson Gosline, an associate professor at MIT's Sloan School of Management, found that almost 50 percent of the women she studied who purchased a counterfeit handbag had purchased a real one within two and a half years.
This is due to the fact that they got complimented for their fakes, but im not sure i completely understand that.. because surely if someone were getting complimented for their cheap fake bag, they wouldnt see much point in splurging for a new one. Maybe they feel guilty? Maybe they should.
2) It can also be said that counterfeit goods improve production in the genuine markets. There may be an increase in competition between prestigious firms, because they are all fighting to appeal more to consumers. This increase in productivity is good for the economy because it increases employment, but also bad because it could result in workers undergoing longer hours, which may not be appealing. So it could have a negative impact on employment as well.

'This blogger is right, counterfeit goods are bad for the economy'

1) LVMH, the parent company of Louis Vuitton, is said to employ 40 lawyers and 250 independent investigators and to spend in excess of $20 million each year in efforts to fight increasing levels of counterfeiting of their products. [2]
The designer company must fork out all this money in order to protect themselves from counterfeiting. It's a shame that they must do this, because they could have spent this money elsewhere, such as advertising or increased production of the product- which would have had a positive effect on the economy of the country they are based in (could have had an increase in growth and exports).
2) Fakes damage the actual Brand. Demand for the fake goods can cause unemployment in the fashion industry, as the footwear and clothing industry in the UK is estimated to lose about 3.2% of their average revenue to fakes [3]. It doesn't seem right that an established Brand has worked so hard to develop a prestigious reputation, only to not gain anything from of it, because their work has been copied. Also, the brand loses its exclusivity, which is a crucial for maintaining the strength of the brand.

Overaaaall, I think that the conclusion should be up to you :) I just wanted to provide the list.

But for me, my original thoughts still stand. Despite the competition among the genuine brands, the production of counterfeit goods still has a negative impact on the brand in general. And as for the Economy, legal movements sometimes prevent the Brand from expanding, which means that there is not as big of an impact on the economy as there should be.

Sources: 
[1] http://www.ehow.com/info_8528744_effects-knockoff-handbags.
[2] http://michiganjb.org/issues/1/article4.pdf
[3] http://www.intangiblebusiness.com/Reports/Copying-Fair-or-Unfair~828.html