Combating the hi-tech counterfeiting and gray market is currently one of the most challenging issues for the IT industry. With illegal replicas of brand name high technology products flooding the marketplace, IT companies need to seriously look at ways to better understand the risks introduced by counterfeiting and the steps that can be taken to mitigate that risk.

AGMA, a non-profit consortium of IT leaders whose mission is to promote best practices in the industry for preventing technology products from entering the gray and counterfeit market, strongly believes that manufacturers who adopt a comprehensive program targeting the sale and distribution of counterfeit high tech products will have more success in protecting consumers from poor quality goods as well as securing the brand integrity inherent in their products.

Despite the sophisticated design and complex manufacturing of most IT products, counterfeiting is a pervasive problem. As many as one in ten IT products sold may actually be counterfeit, according to interviews conducted with electronics industry executives.

AGMA and KPMG estimate that about US$100 billion of global IT industry revenue is lost to counterfeiters annually. In addition, estimates by the International Chamber of Commerce suggest that counterfeit goods accounted for 6 percent of world trade in 2003, valued at US$456 billion. By reducing revenue and harming brand equity, counterfeiting IT and electronics products are eroding the integrity of the “supply and demand” business model.

Counterfeit IT products are generally hawked over the Internet instead of on street corners, therefore most end users are not aware that certain goods are counterfeit at the time of purchase.

“A good rule of thumb is to be aware that very low prices may indicate a counterfeit purchase,” said Nick Tidd, AGMA’s President and Chairman. “Suspect sources should also draw a red flag. It’s a best practice for IT manufacturers to encourage their end customers to buy directly from the manufacturer or from reliable resellers, which can be located by visiting the manufacturer’s company website.”

No anti-counterfeiting effort is entirely foolproof, but the better ones can make a significant difference. AGMA urges technology companies to educate themselves about the dangers and warning signs of counterfeiting.

AGMA is comprised of influential companies in the technology sector including founding members 3Com, Cisco, HP and Nortel. AGMA's goal is to raise awareness and educate technology companies and end-users of IT products about the perils of gray and counterfeit market activity.

AGMA and IDEMA, in cooperation with KPMG, have collaborated to develop a whitepaper titled, “Improved Point-of-Sale Reporting Benefits Manufacturers, Channels and End Users.” The whitepaper studies current channel tracking and reporting processes and offers workable solutions to enhance those processes within the IT industry for the benefit of consumers, distribution channel partners and OEMs.

After numerous tales of cell phones catching on fire due to faulty counterfeit batteries, the spotlight on the hi-tech counterfeit and gray market has grown considerably. Many of the world’s top consumer and technology journalists have taken notice and are featuring the problem in their articles. These journalists often turn to AGMA as an expert source for their story.

Earlier this year, PC World devoted a large portion of its February 2006 issue to exploring ways for consumers to detect and avoid counterfeit technology products in an article titled “Fakes!” The article credited AGMA for pointing out that “up to 10 percent of all high-tech products sold worldwide are phony;” that “printers, laptops, cell phones, and components such as memory chips and integrated circuits are the types of hardware most frequently counterfeited;” and that “such knockoffs cost manufacturers $100 billion annually in lost sales.”

Just this March, Network World published an article titled, “Targeting Bogus Goods,” which explores how the IT community is fighting back against counterfeiters using technologies that make it harder for them to successfully copy certain products. AGMA’s President, Nick Tidd, was quoted extensively in the piece, urging the industry not to underestimate the tenacity of counterfeiters. Tidd was quoted as saying, “Even as our products get more complex, with things like surface mount technologies, and components get more miniaturized, they just find a way to copy it."

Also in March, a local edition of CBS News in the Dallas-Fort Worth region reported on the counterfeiting epidemic in a piece called “New Counterfeiting Craze: Phony Technology.” Again, the report looked to AGMA’s President Nick Tidd for guidance. The report stated, “Tidd also says that these knockoffs can do more than hurt you financially. The phony devices could corrupt your data or even ‘hurt your personal safety.’ Bogus products have been known to overheat and melt.”

AGMA plans to stay in the public eye, helping journalists accurately and effectively report on hi-tech counterfeit and gray market and minimize the threat it poses to consumers and the IT sector.