Robert Youill, managing director, FTI Consulting.

If narcotics investigators pursued only small dealers and users, it would do little to stem the flow of illegal drugs.

That’s why government agencies – including the Hong Kong Police, where I specialized in investigating organized crime – target everyone from marijuana farmers to methamphetamine labs to the chemical component suppliers.

In the fight against counterfeit product syndicates in areas including cosmetics and fragrances, however, many global companies still focus on stand-alone targets.

They deploy investigators and intellectual property specialists to raid stores, warehouses and the occasional underground factory to seize counterfeit products. In doing so, they place their bets on the end of the supply chain – after the counterfeit products have been manufactured and brought to market.

They very often measure success by the number of finished products seized in raids, enforcements, prosecutions, or Internet website take-downs each year, but, while the numbers are often impressive, this approach does little to reduce the flow of counterfeits reaching the legitimate markets.

The International Chamber of Commerce estimates that $1.7 trillion in pirated goods will be sold around the world in 2015.

The challenge for beauty products is especially pronounced, because typically it’s nearly always the packaging that consumers use to judge a brand and its authenticity prior to purchase.

However, counterfeit product packaging has become so sophisticated that often even a discerning consumer cannot tell the counterfeit from the legitimate, and we are now seeing anever-increasing amount of “high quality” counterfeits entering the legitimate supply chain.

Counterfeiters also rely on consumers to look only quickly at the product – checking primarily to see if the packaging is damaged and if the safety seal has been compromised. In many cases, exposing the counterfeit packaging requires a microscopic analysis and comparison capability to track the origin of the high-quality counterfeit packaging, a capability most brand protection service providers do not have as a standard part of their investigation “tool kit”.


In the case of personal care and healthcare products, counterfeiting represents not only a financial loss but often a health and reputational risk.

One of many counterfeiting operations that FTI Consulting has combated for our clients involved the manufacture and export of high-qualitycounterfeit men’s skin and eye care products. In this case, an entrenched and highly organized syndicate was producing a cream-based product that contained none of the original active ingredients; in fact, the testing of the products revealed they were capable of doing harm to the unsuspecting user.

The issue with this case was that the counterfeiters produced the product packaging to significantly mimic the original product. In some countries our client was beginning to lose market share as well as running the risk of potential damage to its hard-earned global reputation if the syndicates’ operations were not stopped.

In FTI Consulting’s experience, about half of all companies suffering from product counterfeiting, especially those involved in the luxury goods and personal care industries, continue to rely on the “bump and run” approach to seizing counterfeit goods.

But with a little investment and a willingness to embrace a strategic-intelligence driven approach, enterprises can be far more effective and, at the end of the day, can save money by making a critical strategic shift to targeting the weak points in the counterfeit syndicates’ supply chains.

For decades, businesses have overlooked the counterfeit industry’s packaging and printing suppliers, because it was assumed these were low-value components that easily could be replaced. While once true, the picture is very different today.

The previously high-end counterfeiting skills – such as product assembly, warehousing, distribution, and selling – now are more readily substituted than packaging and labeling.

The good news is that with the right investigative techniques, companies can bring down these central cogs in the illicit product value chain.

Like the ballistic evidence on bullets fired from a gun, packaging carries evidence of its production origin – identifiable, microscopic, non-random defects that are unique and transferred from the production machine to the product over and over again; much like a fingerprint is unique to an individual, packaging can be unique to its production machine.

Advanced technology now makes even the most sophisticated counterfeit product detectable. Spending time and resources to go after the counterfeit packaging can bring many product counterfeit operations to an end. This is why FTI Consulting has invested resources in developing a forensic microscopic examination capability in its PRC based brand protection services.

ABOUT THE AUTHOR: Robert Youill is a managing director, based in Shanghai, in the Global Risk and Investigations practice of FTI Consulting.