The War on Counterfeit Cosmetics Special: Part 2

In part one of our special on the state of counterfeit cosmetics, we spoke to security experts who revealed that the global problem of counterfeit beauty products goes far beyond copyright infringement and financial losses for beauty and personal care brands…

In fact, this dark underworld of creating and selling counterfeit cosmetics has even caught the attention of illegal drug dealers and drug cartels, who see it as an equally lucrative way to make money without the risk of long prison sentences if caught.

The profits made from intellectual property theft are sometimes used to finance other organised crimes, such as drug and arms smuggling, human trafficking, identity theft and money laundering.

Interpol has even stated that there is evidence of profits from counterfeit products funding terrorist activities, a concern supported by Stephan Von Schilcher, global strategic account manager at brand protection and security company Systech. He explained that the 2004 Madrid train bombings were just one example of terrorist activities being funded by the sale of counterfeit cosmetics.

Counterfeit cosmetics pose enormous health and safety risks

The products themselves can also pose potential health and safety problems.

They are not formulated or tested under the usual conditions to meet national or regional legal requirements and are therefore not subject to the same stringent health and safety controls.

Many are produced under unhygienic conditions. For example, the UK government’s Intellectual Property Office detailed seizures of counterfeit beauty and hygiene products containing carcinogenic (cancer-causing) ingredients such as beryllium oxide and toxic heavy metals such as arsenic, lead and mercury, all of which can have adverse effects on the user’s health. Other samples were found to contain rodent urine and horse feces.

How to avoid buying counterfeit beauty products?

How can brands and consumers stand up to the problem of counterfeit beauty products?

For brands, consumer education and awareness is essential. They need to ensure that their potential customers are educated on how to spot counterfeit products. This includes sharing tips on how to spot legitimate packaging, seals and logos, and being aware of prices that seem ‘too good to be true’.

The EU trade body for the cosmetics industry Cosmetics Europe previously shared its expertise on how to spot a fake beauty or hygiene product. “One or more of the following features can help to identify them,” the company said. These include:

An unusually low price
An unusual place of sale, for example a market or a train station
Low quality packaging, such as spelling mistakes
Differences in product and/or packaging, for example colour, shape and font size
Missing information, e.g. batch number, PAO symbol, etc.

The European trade association also noted that “consumers themselves also have an important role to play in avoiding counterfeit cosmetics by only purchasing from trusted traders, such as reputable outlets or official websites, and by looking out for features such as those mentioned above and reporting any suspicious activity.”

“All genuine cosmetic products purchased in the EU will carry the name of the responsible company with an EU contact address and sometimes a customer service line number to call on the packaging,” it continued. And it also advised that if buyers suspect goods are counterfeit, they “should be encouraged to contact the brand owner or their national customs authorities.”

Packaging and technology are powerful allies

New technology can be a useful ally in the fight against counterfeit beauty products, with more brands implementing advanced technologies such as QR codes, holograms and blockchain to verify the authenticity of products.

This way, consumers can scan codes to confirm they are buying authentic products. It also adds an element of ‘traceability’ to meet the increasing sustainability demands placed on cosmetics brands, as it can track the entire supply chain.

“Brands can stand up to counterfeiters with the power of online brand protection,” explains Katerina Vlachos.

“The advanced combination of sophisticated AI technologies and expert human intelligence enables companies to stay one step ahead of malicious actors by quickly identifying and removing fake ads before they can do any damage.”

She continued: “Brands can go even further by deploying network intelligence technology to track the source of counterfeit products and neutralize their distribution networks and supply chains.”

High street retailers are not immune to counterfeit beauty products

Buyers can also be encouraged to purchase beauty products from official brand websites, authorized retailers and reputable e-commerce platforms, thereby reducing the risk of counterfeit products.

However, Von Schilcher revealed that even this is not always a guaranteed way to avoid counterfeit products. This is because some are now finding their way to reputable retailers via a ‘weak link’ in the supply chain. This is becoming more common as companies’ budgets are increasingly stretched by the inflationary economy.

He noted that ‘diversion’ is a growing problem for beauty and personal care brands and that the two issues are inextricably linked. Diversion means that an authentic product is on sale somewhere but has not gone through the verified distribution channel, and therefore cannot be accounted for and cannot be trusted, as these products are often past their expiration date. Which in itself creates more potential health and safety issues.

“If you have a diversion problem, or in any industry, you start working on that diversion problem and then after a while you probably run into the counterfeiting problem as well,” he said.

“And you can find these issues in your local drugstores. You know your local high street health and beauty chain, you name it.”

“We don’t know exactly how many counterfeit shops there are in the world because it’s all a bit of an underworld,” he continued. “It’s hard to find these things and even if you’re in a legitimate shop, you still have to check because there’s still a small chance that it’s counterfeit. Especially in a shop that sells more than one product.”

“Buy direct from the brand”

Von Schilcher advises buying directly from the brand. “If you’re in a Chanel store, for example, you know their supply chain is pretty tight,” he continued. “But if you’re dealing with a retailer that sells multiple products in multiple categories, or a franchise, you know it’s run by someone else and they’re accountable to a company. So they’re probably trying to reduce the numbers as well.”

“It only takes one bad person to create a bad reputation for everyone,” he continued.

“I’ve been doing this job my whole life and it’s scary because I’ve been caught doing it myself multiple times. That’s why companies need to do more to address this issue.”

“What I would say to beauty shoppers is, look twice and be careful. We all want to feel safe when we buy things, and it’s just become easier to buy fakes, especially online, without knowing it. It’s become really questionable.”

According to Von Schilcher, manufacturers themselves can put a kind of security label on their products to prevent imitators from making fakes. They can then teach potential customers how to verify the “real product.”

Von Schilcher has a final word for brands. “Don’t be ashamed to admit you have a problem with counterfeiting. Remember, if your product is made with integrity, you have to protect it.”