COLLATERAL DAMAGE EFFECTS OF NON-DECEPTIVE COUNTERFEITS ON LEGITIMATE BRANDS

“Non-deceptive” counterfeits are products known to be counterfeit by the end users who purchase them (Grossman and Shapiro 1988; Eisend and Schuchert-Güler 2006; Gistri et al. 2009). There is much debate around the effects of non-deceptive counterfeits on the original brands they copy. One common area of dispute is the extent to which non-deceptive counterfeit goods serve as direct substitute purchases for authentic luxury brands (Eisend and Schuchert-Güler 2006, Nia and Zaichkowsky 2000, Wee, Tan and Cheok 1995). For example, had counterfeit Gucci handbags not been available, how many consumers would have purchased an authentic Gucci handbag in their stead? (Nia and Zaichkowsky 2000, Silverstein and Fiske 2003, Van Kempen 2003)? The debate is often framed so that a direct substitution effect indicates that counterfeits are a problem; whereas the lack of a direct substitution effect shows that counterfeits are relatively benign, a victimless crime. The current research seeks to reframe this debate by introducing the notion of “collateral damage effects.” Collateral damage effects occur when the purchase of a brand X fake substitutes for the purchase of a brand Y original. Take for example, a consumer who purchases a fake Gucci purse for $100. Had fakes not be available, might the consumer have spent $250 on an authentic entry level luxury brand (like Coach in the US or Hogan in Europe)? If so, the legitimate brand suffered from unfair competition. It was penalized for following trademark law, by losing sales to a competitor operating outside the law. Collateral damage effects come in three types: trade up, parallel, and trade down effects. Were counterfeits somehow eliminated, in a trade up effect the erstwhile counterfeit consumer would now purchase a brand which cost more than the counterfeit, in a parallel effect the consumer would purchase a brand priced the same as the counterfeit, and in a trade down effect the consumer would now purchase a brand which cost less than the counterfeit. Which of these effects occurs depends on the preferences and budget of the consumer. In our initial exploratory study we use a student sample at an Italian public university. This population often sees counterfeits as “fun” and does not always try to hide the product’s counterfeit status. Therefore, the purchase of a fake does not necessarily indicate a strong desire to own a prestige brand. Furthermore, these students are often under strict budget constraints. Hence, we hypothesize that for this population, if the fakes were not available we would primarily see parallel or trade down collateral effects.