Are we at a big watershed when our digital society is spawning more problems than it can solve?
Answering this big question means looking at the big picture involved. Let’s go back to “how things used to be” before the digital age. Take counterfeiting, as an example. When I came into this world, the size of the problem was 1% of what it is today. Now, global counterfeit trade amounts to the GDP of a mid-sized European economy (for example, Austria). Moreover, the money involved drives ever increasing power and reach and the capability to do yet more.
Illicit trade has vastly outstripped conventional economic growth. In fact, it is more exponential in nature where figures ramp up and then compound. It is prevalent everywhere, although Asia is considered the origination point of many goods. Some 83% of fakes come from East Asia but suppliers are increasingly offshoring to other countries to drive manufacturing costs down.
But, back to how the big picture came about. It took just a few, but very powerful, drivers and actors to become an enormous and rather horrifying economic reality.
First, digital networks around the world have proliferated. Most of the time, society enjoys huge benefits of connectivity as a result. We have enjoyed ever cheaper telecom services. Mobile telephony is well established. Social networking services is part of a global fabric of society.
And it is global. According to statistics compiled by the International Telecommunication Union (ITU), a specialist United Nations agency, Internet users surged to 4.9 billion people in 2021 from an estimated 4.1 billion in 2019. The surge of 800 million people was boosted by the post Covid recovery period, but the user base had already been growing for many years.
On the back of these networks came e commerce, itself sent into exponential growth (growth of 82% in the three years leading up to 2019, and further propelled by the pandemic into another 26% increase). During this time new players entered the market – 24 million sites as E-business bypassed retail outlets and boosted distribution international delivery service channels.
But in all of this, one thing remained grossly underdeveloped: policy and regulation. In many countries, open networks and platforms saw abuse difficult to identify and impossible to enforce. The problem was compounded further by the degree of cross border activity that mushroomed. Oversight was necessary but was ineffective and patchy without harmonization.
Organised crime spotted the potential. It also spotted the gaps in policy and enforcement. In a mere 15-year span, it has transformed the counterfeiting space – from a standing start. The emergence of digital organised crime has grown alongside “traditional” organized crime (OC). The groups involved learned, very quickly, from each other. “Traditional” OC networks invested in the digital world whilst “digital” OC networks learned to organise themselves into specialist areas – developing new forms of illicit trade, including money laundering and identity theft. These “new” crimes aligned perfectly with the digital space in terms of capability and management.
In counterfeiting, dynamism is now the name of the global game as the OECD’s 2019 report recognised. The crime is exceedingly opportunistic in behaviour. Fake goods appear everywhere at the same time once the opportunity is detected. It was no surprise therefore the pandemic itself triggered vast online counterfeiting opportunities. Transnational counterfeiters reacted quickly, recognised growing opportunities from e-buying by consumers and business, increased manufacturing and exploited legal logistics channels and companies.
As a result, they have flooded countries where enforcement authorities operate on limited budgets and dealt with competing priorities. The new digital leverage meant huge capability, pinpoint accuracy and disaggregated operations. Latest figures reveal that across the world 64% of worldwide of border seizures were made from mailed packages carrying small items bought online. In short, global digital reality has re-engineered illicit trade.
How can we fight back? My view is that we need a global way of regulating e-commerce trade – currently authorities are dealing with crime and defence, but digital infrastructures are in private hands. Even where they are legal constituted and operated, they exist in an ecosystem of differing degrees of compliance. And the picture is constantly shifting because increasing digital opportunity will encourage further realignment in criminal behaviours. Catchup is no longer sufficient. It’s time to anticipate this and prepare for it with better regulation.
Part 2 of this article will discuss the need for a policy makeover in the future digital space.
ACG represents more than 3,000 brands affected by this influx of fakes into the UK and delivers an international network of information, advice and contacts on all aspects of IP protection. Working with Government and law enforcement agencies since 1980, ACG is focused on providing an effective and sustained response to counterfeiting.
Membership with the ACG is the best way to work with government and enforcement bodies to protect your brand. Our Roadshows and training days help you reach out to police, trading standards and border force officers and tell them about your genuine products.