Counterfeiting a moral hazard


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Counterfeiting a moral hazard

  2. 2. INTRODUCTION The good, the bad and the ugly : There are three main channels to market 1) The good - authentic goods travel through authentic channels. 2) The bad - The grey market , authentic products find their way into non- authorized retail distribution outlets which are beyond the control of the brand owner. 3) The ugly - The black market, where unauthentic goods are sold throughunauthorized channels. This can have disastrous consequences with products that are imbibed. These ,are the counterfeits and we will study their moral hazards.
  3. 3. What is counterfeiting ? A counterfeit is an imitation, usually one that is made with the intent of fraudulently passing it off as genuine. The activity is called counterfeiting. Counterfeit products are often produced with the intent to take advantage of the established worth of the imitated product.
  4. 4. DIFFERENT TYPES OF COUNTERFEITING1. Counterfeiting Money is probably as old as money itself. - Means copying currency notes to pass them off as genuine. - how do counterfeiters pull it off? - they usually go in for small denominations to counterfeit because they are normally checked. - next they go in market to purchase the smallest product ,useless it may be and are tendered real cash money in return.2. Counterfeiting Documents with the intention to deceive. - birth certificates and driving licenses are easiest and cheapest to counterfeit. - for a sum very petty.
  5. 5. 3. FBI estimates that American companies lose up to $250 billion annually due to counterfeit Goods. - goods like clothes ,toys ,cosmetics, utensils are easiest to counterfeit.4. Music , Movies , and Computer software may be easily copied. -it is easiest to copy and counterfeit music, movies and software for it just takes a few mouse clicks.5. A counterfeit Drug or a counterfeit medicine is a medication produced and sold to deceptively represent the originals -origin, -authenticity or -effectiveness
  6. 6. 6. Forgery of Identity .- Starts from forgery of documents.- This is the counterfeiting type that has been and still is a rage given the improvement in technology.- A person X when forges documents , that actually belong to some person Y (dead or alive) , to pose as Y then X is said to have forged /counterfeited identity.- It makes ,existence of two people with everything exactly same (documentation) , possible.
  7. 7. BE CAREFUL !
  8. 8. RELATION BETWEEN MORALS ANDLAW  Morals = Law (a social instrument) + Standards of acceptance. We infer that it is possible for something to be morally acceptable but being prohibited by law and vice – versa. Q. Why is it possible? A. Morals descriptively refer to a code of conduct put forward by a society , group , religion, or accepted by an individual for his/her own behavior .
  9. 9. EXAMPLE In tort , the moral obligation of doctors to treat their patients comes from the Hippocratic oath , although doctors have been able to justify withdrawing feeding to patients as in the case of bland (food).  Tort – Mock Court.
  10. 10. WHY IS COUNTERFEITING IMMORAL ? We know :- Morals = Law (a social instrument) + Standards of acceptance. Statement :-- Counterfeiting is immoral. Proof- (PART 1) In most countries, counterfeiting is punishable by criminal and civil laws, with penalties ranging from injunctions , damages , imprisonment.
  11. 11. (PART2) Parties involved :- 1. Counterfeit producer -(acceptance , fear of getting caught) 2. Workers under (1.) - (unskilled and under paid, unhappy lot)3. Buyers of counterfeit products – 1.who deliberately buy ( a probable target of police) 2.Victims ( unacceptance , drained financially , do not satisfy marginal utility , unhappy lot) 4. Legitimate producers – (are taken advantage of on their established worth , G/W might also be tarnished). We see almost negligible buyers for the 1.Acceptance part and 2.Happiness part.
  12. 12. Famous Case Of Identity Theft 3.Frank Abagnale jr. There is no doubt that everyone has talents, whether hidden or exposed. Frank W. Abagnale was no exception to the rule. He was a genius in the truest sense of the word, however misdirected he may have been. The truth is, among some of Franks best known and least appreciated talents was his remarkable ability to create and utilize false identities as well as bogus checks. He was a con artist extraordinaire and probably one of the century’s most cunning . His talent for deceiving the authorities and cheating banks, airlines and hotels out of millions of dollars was unprecedented.Even more extraordinary was that he was between the ages of sixteen and twenty-one- years old when he committed the majority of his crimes.
  13. 13. “Two little mice fell into a bucket of cream. The first mouse quickly gave up and drowned, but the second mouse, he struggled so hard that he eventually churned that cream into butter and he walked out.” – Frank Abagnale Jr. Currently : CEO Abagnale & Associates , security consultants . Helps FBI in solving ‘counterfeit’ cases , fabricates - instrument security nets for companies and makes millions of dollars every year.
  15. 15. JOB LOSSESSource: EuropeanCommission, USInternational TradeCommission, 1996.Direct losses in sales are sometimes referred to in terms of job losses, The numbers arederived by taking the1.Loss of sales of a sector due to counterfeiting .2.Calculating the number of additional people that could havebeen employed with that revenue.200 000 jobs are lost due to counterfeiting in these two regions alone.
  16. 16. EXPORT LOSSESSource: La Tribune des Fossés, 16 February 1995.
  17. 17. SOCIAL COSTS  Ultimately, it is the Consumer who pays the cost of unfair competition , they end up paying an excessive price for an inferior product.  The Inferior quality of many counterfeits, particularly those relating to health and safety, have had disastrous effects.  It is No longer rare to find counterfeit parts in aircraft and other vehicles and even fake pharmaceuticals .  Causing Death and Injuries to workers and consumers alike .  Workers (making counterfeits) are generally Poorly paid.
  18. 18. Negative Impact Of Counterfeiting On1) Legitimate producers – - counterfeiting tarnishes the already established brand name. - lose a clientele . - They have to spend another fortune to track fakes than to advertise. - This sends a bad word of mouth (about the brand) into the market.2) Legitimate buyers – -Fake drugs or other goods having lead content etc. , can actually cause even death. -Financially hit for they end up paying a price equal to the original . -Their marginal utility is not satisfied. -No or poor after - sale support services , is frustrating and eventually forces them to give up the brand.
  19. 19. 3) Workers of legitimate producers –- Mentally and physically hit for they do not reap rewards for their input .- They fight a low morale .4) Workers of counterfeit producers –- They work in inhumane environment- Are grossly underpaid.- Causes energy drain and frustration.5) Government –- Fact is counterfeiters are small manufacturers who have no idea of taxes which costs government a fortune.- Counterfeiters being a 7% part of world trade can actually lead to an economic slowdown at their will or due to sheer negligence .- Has to handle all consumer complaints and pressure from all over the world urging it to check counterfeiting.