Just the ticket for counterfeiting

In September 2015, the European Union Intellectual Property Office (then called the Office for Harmonization in the Internal Market) published its report into the impact of counterfeit sporting goods in the EU. The report not only looked at the widespread availability of fake goods, but also the economic impact that the sale of counterfeit goods has on the economies of member states. The findings were staggering—more than €500 million ($561 million) lost in revenues and up to 2,800 jobs lost within the sector through the indirect effects of consumers buying counterfeit goods.

However, the report covers only part of the story. Sports brands and organisations have to fight against not only the supply of and demand for counterfeit goods, but also ticket fraud, digital piracy and reputational damage. Protecting its intellectual property is now one of the biggest concerns that a sports organisation faces.

While the majority of infringements take place in the online environment, the number of offline issues also continues to rise. In 2012, the major professional sports leagues in the US lost an estimated $13 billion to sales of counterfeit merchandise and apparel, with the National Football League (NFL) hit hardest, with more than $3 billion worth of infringements.

Counterfeiting is the cornerstone of the risks that organisations face when they become successful and move into the world of e-commerce—imitation may be the sincerest form of flattery but it is also IP abuse.

Consumer trust is fragile and the early days of the internet were full of stories of individuals being tricked online. Technology has come a long way since those dark days but, unfortunately, human nature continues to leave consumers susceptible to fraud. Some of the most popular words used in search terms are “cheap”, “discount” and “free”. Prefix any major product or service with those words and you are half way to seeing what the major headache is for a global brand.

Super Bowl infringements

The biggest sporting event in the US calendar is the NFL Super Bowl, which traditionally takes place on the first Sunday in February. Demand for tickets for the showpiece event far exceeds supply; the most coveted primetime TV slots cost upwards of $5 million for only 30 seconds in front of a domestic TV audience of 115 million; and more than 50 million cases of beer will be bought by armchair fans.

The event also leads to a surge in online buying of merchandise, as fans rush to wear their team’s colours. Every year the federal agencies use the days in the run up to the game to underline the risks of buying counterfeit goods online and the work they are doing to eradicate a growing menace for brand owners and consumers alike. In 2014, the joint taskforce of Immigration and Customs Enforcement (ICE), Customs and Border Protection and the NFL’s own internal team announced the results of Operation Team Player, which resulted in the seizure of 202,000 items of fake sports memorabilia and counterfeit items worth more than $21 million.

“Counterfeiting is not a game,” said ICE director Sarah Saldaña at the Operation Team Player press conference in Phoenix days before the 2015 Super Bowl. “It is most certainly not a victimless crime, either. Whether it’s the child in Southeast Asia working in deplorable conditions, or local stores going out of business, intellectual property theft is a very real crime with very real victims. No good comes from counterfeiting American products, regardless of whether they are all-star jerseys, airbags or Aspirin.”

In 2012, the major professional sports leagues in the US lost more than $13 billion in revenue due to sales of counterfeit shirts and merchandise, including a whopping $3 billion alone from the 32 teams in the NFL, according to the website Havocscope, which provides information on security threats from the black market. Some top-end “authentic elite” team shirts which should retail for $250 could be found online with an 80% discount.

An age-old problem

While counterfeiting is a global problem affecting almost every sports brand, it is not a scourge that was born out of the growth of the internet. Forgery is a centuries-old profession, originally associated with the counterfeiting of money, and has dogged sports brands and organisations and the leisure sector for decades. The opening day of Disneyland in Anaheim, California back in 1955 almost ended in disaster after an estimated 15,000 counterfeit tickets were used to gain entry to the park, almost 75% more than the safe capacity of the attraction.

"Secondary ticketing companies are a way of life in the US and have provided a valuable, safe alternative to taking the risk of buying from scalpers outside of venues."

The illegal sale of tickets for sporting events has a long and colourful history. Every year, the Super Bowl brings stories of desperate fans being scammed in the run up to the biggest annual sporting event in the US. Last season, tickets for the game between the Seattle Seahawks and New England Patriots were selling the week before the match for at least $2,375 on the secondary market. While genuine tickets for the event are some of the most sophisticated ever produced, ensuring that counterfeiting is incredibly difficult, fans are often duped by remote sellers who demand cash up front, using payment facilities such as Western Union, making it almost impossible to trace the final destination of any monies sent.

When demand outstrips supply in any market, bad actors enter the economy looking to take advantage of the scarcity of the end product. Regulations on the buying and selling of tickets for events have been tightened significantly in recent years and the emergence of secondary market brokers such as StubHub and Viagogo has given a new dimension to the marketplace.

In the US, where baseball, ice hockey and basketball teams play almost daily during their season, a valuable mechanism for season pass-holders to sell individual games that they cannot attend is offered. Secondary ticketing companies are a way of life in the US and have provided a valuable, safe alternative to taking the risk of buying from scalpers outside of venues.

The genuine companies have processes in place to ensure that only legitimate tickets pass from seller to buyer, although this can never be 100% foolproof. In the run up to any major event, websites emerge offering access to tickets for sold-out events that simply look too good to be true.

Many of these organisations work on an ‘on-demand’ basis, taking money for tickets that they don’t have before trying to find the supply. Their motivation may be genuine, but rarely are they able to fulfil orders. In some cases, these companies don’t even go as far as looking for the tickets, simply taking desperate consumers’ cash and disappearing.

Print at home

For many events, the use of ‘print at home’ ticketing has reduced the administration costs for the authorised sellers (and resellers) significantly. No longer do event organisers have to rely on the postal system to get the tickets into the right hands, significantly reducing costs of printing, postage, administration and insurance against tickets that go astray. Sending one email with a link to a downloadable PDF appears to be the future of ticketing. Adding in QR code technology so that the ticket can be stored on a device such as a smartphone also enables the event organisers to track where and when tickets are activated, using that data for their own analytical purposes.

However, PDFs and QR codes are incredibly easy to copy, and not only once. The irony here is that it takes only the most basic of technologies, a black and white photocopier, to reproduce multiple copies of the same ticket and then list them for resale on different websites. Only when the ticket holders try to enter the venue do they discover they have bought duplicate tickets. The event organisers have absolutely no obligation to do anything to help anyone who holds such tickets.

The war against those who damage the IP of brand owners is continuing but there are winnable battles out there. Educating fans and consumers about the dangers of taking the counterfeit option should be a fundamental part of any strategy. Organisations including the International Trademark Association (INTA) are targeting tomorrow’s consumers—INTA through its ‘Unreal’ campaign in schools and colleges across the globe—highlighting the damage that counterfeits cause.

Working with the authorities on strengthening both regulation and punishment for IP abuse is something that must continue. If the risk for abusers outweighed the potential reward, the equilibrium between supply and demand would change. Whether that requires the intervention of IP and brand owners is a moot point—reducing the cost of official merchandise and tickets, for instance, could slow demand for inferior products or reliance on potentially dubious secondary market suppliers, making the ‘real deal’ more affordable and attractive.

Sport has the unique ability to transcend age, race, religion and geography. Making the whole sector a safer place should be at the top of the agenda for every stakeholder within the industry, resulting in future generations not having to experience the same levels of the supply of, and demand for, IP infringements that we see today.

Stuart Fuller is director of commercial operations at NetNames. He has experience in brand protection, in both retail and corporate re-sale markets. He can be contacted at: stuart.fuller@netnames.com