For the successful qualifiers who now dream of lifting the Jules Rimet trophy in Johannesburg’s sparkling new Soccer City Stadium come July, the countdown to World Cup 2010’s kick-off is well and truly underway.
Sadly, the same is true for counterfeiters and pirates. While the battle among the world’s top players on the pitch begins on 11 June, the off-the-pitch brand and product protection battle is already at its height. That battle pits FIFA, sponsors, merchandising partners and teams of IP lawyers against those who will seek to cash in illegally on the 19th FIFA World Cup tournament.
The problems to be faced by security officials are varied, from counterfeit and sub-standard merchandise through to illegal ticket sales. In fighting back, there’s the growing role the authentication and anti-counterfeiting technologies are playing, leading to many valuable lessons other brand managers can learn from the whole scenario.
Sporting events now big business
Sporting events are now very big business indeed, with the spin-off sales from merchandise alone worth millions.
For its part, the FIFA World Cup – the world’s biggest sporting event – typically attracts a global viewing audience of more than 30 billion, and is expected to rake in more than GB pound 300 million for the organising committee alone.
The first corporate sponsorship programme for the World Cup (designed for Spain back in 1982) generated $19 million from nine sponsors. This is nothing compared to the sums paid by 15 partners and six official suppliers of the last finals in Germany. Internationally known brands including Adidas, Emirates and Budweiser paid up to $50 million each to supply products and associate their brands with the event.
With such riches on offer, it’s little surprise that the World Cup, the Olympics and other popular sports (the FA Premier League, the NFL and the NHL to name but a few) are prime targets for brand pirates. Among the multitude of complex problems encountered across these sports are counterfeit, sub-standard and unauthorised merchandise; illegal and black market tickets, the improper use of logos and trademarks and ambush marketing.
Each of these areas of criminality will be exercising lawyers and customs officials before the finals begin.
Licensed merchandise: one of the biggest targets
Licensed merchandise – from replica football kits through to T-shirts, programmes, scarves and mascots – are among the biggest targets. More than three million counterfeit products were seized worldwide before and during the 2002 World Cup tournament, while organisers of the Beijing Olympics were faced with countless street traders brazenly selling unauthorised merchandise (often mascots) outside key venues.
The situation encountered by the organisers of the 2010 Vancouver Winter Olympics highlights the growing challenge for both organisers and licensees who pay millions for their contracts. Brand police recently uncovered counterfeit shirts emblazoned with the Games’ inukshuk logo being sold across the country by a major retail chain. The shirts, themselves counterfeit versions of a product made by an official partner, were supplied to the retail chain by a regular supplier.
Counterfeit and unlicensed products are a global phenomenon, affecting small villages and back streets right up to big retail stores in major cities. The dual impact of globalisation and growth of the Internet has made the problem considerably more acute (and a major challenge for FIFA and its partners in policing the use of images, logos and goods).
With supply chains lengthened, there is greater opportunity for counterfeit and unauthorised goods to permeate the market. The edges of once geographically-based markets become blurred, and it’s increasingly difficult to maintain brand image and security by selling only in premium channels.
Internet has brought its own problems
The rise of the Internet has been a particular problem affecting the distribution of tickets for major sporting events. The growth in sites selling tickets has made policing more difficult, and posed new and serious security problems on the ground.
There is also a burgeoning grey market economy where legitimate goods are produced in unauthorised quantities or diverted to a market in which a retailer has no right to sell them. This was certainly true ahead of the Beijing Olympics, when sub-contractors working for the company making official mascots supplied goods in unauthorised quantities.
Taken together, counterfeits, unauthorised and diverted goods, piracy, IP infringements and ambush marketing present a complex web for brand managers of major sporting events and their merchandisers to cut through. They threaten revenue streams, erode margins, damage corporate reputations, add extra stress to distributor and retailer relationships and generally open up the opportunity for service and warranty fraud on a grand scale.
Striking back
Despite the obvious problems in combating such criminality, FIFA and its partners are fighting back. Millions have been spent enforcing trademarks, tackling IP infringements, anti-counterfeiting drives and working in close alliances with Governments and Customs and Excise Departments around the world.
FIFA itself was forced to wise up to the IP law after the 1998 World Cup in France when ambush marketing by a non-sponsor obscured coverage given to Adidas.
Since then, there has been a far more aggressive pursuit of those falling foul of the law. FIFA logged 2,000 violations of IP during the 2006 World Cup – including going head-to-head with Korean electronics giant LG, which sponsored a World Cup supplement in a magazine without permission.
It’s a lesson that others have been quick to follow. In 2002, Arsenal took a sole trader to court for selling unofficial goods and passing off the club’s trademark outside its (then) Highbury home. A clear sign of Premier League clubs flexing their muscles and becoming savvier in protecting and enforcing the integrity of their brands.
Authentication and anti-counterfeiting
It’s in the areas of authentication, anti-counterfeiting and security features where big sporting brands like FIFA and its partners have flexed their muscles most. They now have in their armoury a growing array of security devices – both sensory and digital – to authenticate and ID products, improve inventory control and track and trace goods through the supply chain
A huge amount of time and money has been invested by sportswear manufacturers with a multitude of technologies incorporated on products and packaging from holograms and security labels to tags, inks, serial numbers and RFID (radio-frequency identification) features. These can be used for on-the-spot identification of replica shirts and linked to online databases capable of tracking and tracing their whereabouts at any time.
At the 2006 World Cup in Germany, branded labels and swing tags with a holographic label were produced for every single piece of FIFA-branded and licensed merchandise. Personalised tags were produced for individual licensees making for easy, intuitive first level recognition. The complexity of this operation is underlined by the fact the 2006 tournament involved 170 licences and the delivery of labels to 400 different locations worldwide.
Word spreads to other major sports
Other major sports are also embracing such technology. Formula One teams protect their identities and official merchandise in this way, while all of America’s major leagues are using labels and tags to varying degrees to protect reputation, brand image and, importantly, revenue streams (which, on an annual basis, top several billion dollars).
Since sports merchandising spiralled in the 1980s so have these technologies. They are critical in helping licensors protect their brands – stopping counterfeiting and grey market diversion – and also protecting their revenues by helping them to collect royalties from licensees.
For the licensee, too, there is the benefit of product security and the guarantee that the premium price paid for official merchandise is not undercut.
Devices increasingly incorporate more than one security feature. As well as the obvious depth, colour and switching effects of labels and tags, there are secondary features which are less likely to be noticed visually by the consumer to add extra security. Some require a magnifying glass for inspection and are used by in-the-field enforcement teams. Third level features, verifiable only with the aid of sophisticated equipment, are also present.
This includes unique serial numbers allotted to individual products and shipments – allowing products to be tracked and traced through online portals and databases to the point of delivery.
In Germany in 2006, official labels and tags were shipped to approved licensees and factories, with the volumes and serial numbers logged. Enforcement officers could then verify goods by checking their serial number online. This simple and speedy authentication process is an integral element of the system – the easier it is for officials to check, the more chance there is of picking up the fakes.
Ticketing forgeries: of major concern
Ticketing is another concern for promoters of sporting events. Here too major steps are being taken in using the latest technology to crackdown on counterfeits, in turn stopping the escalating black market in secondary ticket sales and boosting security inside stadia.
Tickets at the 2006 World Cup (3.5 million of them) and the Beijing Olympics (15 million) included RFID chips that allowed the name of the purchaser to be written onto the ticket and then read by scanners at the stadium. While no personal information was contained on the ticket, a ticket’s serial number was linked to a database detailing information about the ticket holder.
Although not foolproof – a high power FIFA official was sent home after passing tickets onto family members – these initiatives have been hailed a success.
Indeed, they could help to tackle the global secondary ticket market, which is estimated to be worth between $2 and $25 billion annually.
In 2006, World Cup tickets for sale on e-bay reached a reported $3,000 (average ticket prices were only $180) with no assurance the buyer would be able to enter the stadium. Long-term, contactless smart cards which are already being used by some Premier League football clubs could well replace paper tickets.
End game
The increasingly sophisticated brand protection systems being embraced by sporting brands today create a ‘win-win’ for everyone but the counterfeiters. It’s a lesson in vigilance that’s applicable to all brands and products the world over.
For FIFA, other major sporting events, leagues and major clubs, it’s an essential way of protecting brand equity, preserving quality standards and protecting royalties. These are vital to securing investment and sponsorship for future events and developing their product.
For licensees, effective brand protection preserves the value of a substantial investment in a licence, product manufacture and marketing. It also protects against the potential damage to reputation and profits caused by counterfeit goods.
And, ultimately, it’s the customer at the end of the supply chain who benefits quite considerably. For football fans – who number billions the world over – whether it’s a serial number, a label, tag or hologram, it’s the guarantee that what is paid for is genuine. Ultimately, this should be a quality branded product, with a little genuine World Cup or Olympic magic built in.
Success at the last World Cup
The success of these authentication technologies and strategies in combating the counterfeiters is illustrated clearly by the three million-plus good seized and the 2,500 IP infringements reported during the last World Cup. This must be reinforced, and many sports retailers will certainly be reviewing their authentication and anti-counterfeiting ahead of the 2010 World Cup.
Alongside this, however, efforts must still be made to influence consumer attitudes. One of the intractable problems in tackling counterfeiting and piracy is the attitude of consumers. Many people are still willing to purchase goods they know are not official or unauthorised.
In spite of all the authentication and anti-counterfeiting technologies available, educating consumers about the problems of fakes remains paramount.
It’s up to brand managers, manufacturers and users of these technologies to explain the benefits and the dangers of turning a blind eye. Without this commitment, the battle is difficult to win and brand protection is less effective.
