Counterfeiting represents a significant and growing challenge to supply chain sustainability, with negative impacts on both business and the environment. On the one hand, counterfeit products can erode trust in the brand supply chain and reduce demand for authentic products, ultimately harming the economic sustainability of the supply chain [1]. On the other hand, counterfeit goods are often manufactured with cheaper, lower-quality materials. This can result in increased waste and pollution, which can harm the long-term sustainability of the supply chain [2]. In 2019, counterfeit goods accounted for approximately 3.3% of world trade and more than $500 billion in value per year [3]. Counterfeiting disproportionately affects luxury markets, such as LV and Chanel, particularly in the online channel. Over 50% of counterfeit luxury goods detected at the EU border originate from e-commerce, and more than 75% of these goods are from China [4].

To mitigate the adverse effects of counterfeiting on supply chain sustainability, luxury companies rely on their in-house anti-counterfeiting teams. For example, Richemont employs approximately 30 full-time staff dedicated to combating counterfeiting, while LVMH has twice that number. Versace allocates 2% of its annual operating expenses (€140 million) to its internal anti-counterfeiting team. Although some retail platforms have established procedures to assist manufacturers in removing counterfeit goods, such as Alibaba’s “Integrity Mechanism Program” or Amazon’s “Project Zero”, they are also directly taking up the fight against counterfeiting. For example, since 2010, Alibaba has employed more than 2000 full-time staff and an additional 2700 volunteers to combat counterfeiting. Recently, through big data analysis and modeling, Alibaba has been able to detect and address counterfeit-related behavior for luxury brands. Similarly, Amazon uses machine learning to automatically scan its stores for suspicious items [5].

2. Anti-Counterfeiting in the Supply Chain

Fake products have emerged as competitors to genuine products in the market, leading to the need for research on how brand companies can crack down on counterfeit products. Firstly, under the framework of game theory, most scholars discuss anti-counterfeiting strategies from pricing and quality determination. Cho et al. [6] have proposed different counterfeit strategies based on the type of counterfeit products. They suggest improving quality and lowering prices to combat non-deceptive counterfeit products, while lowering quality and raising prices can be an effective strategy against deceptive counterfeit products. Qian et al. ^[7][8] have divided product quality into searchable quality (e.g., appearance) and experiential quality (e.g., function). They recommend investing in searchable quality when there are many counterfeit products, and investing in experiential quality when there are fewer counterfeit products. Zhang et al. ^[8][22] found that manufacturers in monopolistic environments tend to improve product quality rather than reduce counterfeit products directly, while small brand companies in competitive environments are more inclined to take a direct attack approach. Cui [9] has studied the effect of OEM investment strategies in quality improvement on preventing imitation and encroachment by contract manufacturers. Gao et al. ^[10][7] found that non-deceptive counterfeit products can reduce the price of branded products, benefiting consumers and improving their welfare. Secondly, the threat of counterfeiting is a major concern for enterprises, and several studies have explored the ways in which businesses can deal with this problem from the perspective of channel structure. Qian ^[11][23] conducted an empirical study using macro-level panel data and found that vertical integration and other strategies can effectively reduce counterfeiting. Zhang and Zhang [12] investigated the optimal supply chain structure in the presence of counterfeit products and concluded that when reselling channels are infiltrated by counterfeit products, branded businesses may need to restructure their product reselling to rely on reliable channels such as certified manufacturer-owned stores to ensure 100% authenticity. Ghamat et al. ^[13][24] found that it is not always optimal for manufacturers to vertically integrate their supply chains, even when the investment in vertical integration is zero. Manufacturers may prefer to outsource production of their products rather than sign intellectual property agreements. Bian et al. ^[14][13] analyzed the strategic implications of vertical integration for nondeceptive counterfeiting and found that, for non-deceptive products, branded companies could benefit from consolidation, but that it might also benefit counterfeiters. However, vertical integration always improves consumer and social welfare. A limited body of literature explores the impact of counterfeiting on sustainability with respect to social welfare, economics, intellectual property and other related fields. Tsai and Chiou ^[15][25] suggested that strict government enforcement against counterfeiting may have varying effects on benefits, which could either increase or decrease. Furthermore, the benefits of strict enforcement are not necessarily superior to those of non-enforcement when fraudulent activities occur. Yao ^[16][26] utilized China as an example to examine the economic ramifications of counterfeiting within the context of market equilibrium and failure. They believe that counterfeiting as a market behavior will continue as long as the satisfaction of consumption and the exorbitant profits of production endure. Based on the intellectual property theoretical model, imitation poses a threat to innovators as it deprives them of temporary monopoly gains, ultimately resulting in reduced incentives for innovation ^[17][18][27,28]. Fear of imitation can also dissuade companies from investing in new technologies, partnerships and innovation, ultimately impeding their growth and competitiveness ^[19][20][29,30]. However, Chen et al. ^[21][31] explored the impact of infringement and counterfeiting on firms’ innovation performance. They found that firms operating in industries with a high risk of IP infringement or copycat behavior by competitors significantly increased the number of patents and citations, particularly financially robust and risk-taking firms.

3. Consumer Psychology in Luxury

The impact of emotions on luxury consumption has been a topic of great interest. Luxury goods are primarily associated with satisfying psychological and social needs, such as uniqueness, self-expression and social signaling ^[22][32]. Zhan and He ^[23][33] examined three psychological traits that make Chinese consumers unique compared to their global peers: value consciousness (VC), susceptibility to normative influence (SNI) and the need for uniqueness (NFU). Srisomthavil and Assarut ^[24][34] found that a proliferation of counterfeit luxury brands cannot be viewed in the same way as authentic luxury brand proliferation, which tends to have negative impacts on other brand values apart from uniqueness value. Kastanakis and Balabanis’s study ^[25][35] showed that the self-concept of consumers’ interdependence is the basis of bandwagon luxury consumption. This relationship is mediated by consumers’ tendency to seek status, sensitivity to normative influences, and need for uniqueness. As an important factor affecting the purchase of counterfeit products, moral issue has been considered by many scholars. Consumers tend to believe that buying counterfeit products is unethical ^[26][27][36,37]. de Lucio and Valero ^[28][38] analyzed the impact of collective and individual moral judgments on access to counterfeit goods. The results showed that, for both acquaintances and consumers, more severe moral judgment reduced purchase intention and actual purchase when buying fake and shoddy goods. Martinez and Jaeger ^[29][39] explored the impact of moral feelings, moral awareness and moral judgment on the consumption of counterfeit goods. Wilcox et al. ^[30][40] found that only when the consumers’ attitude towards luxury brands has the function of value expression will the consumers’ moral beliefs on counterfeit consumption affect their preference for counterfeit brands. Elsantil and Bedair ^[31][41] investigated counterfeiting in the Arab world and found that consumers’ unethical beliefs and perceived risk had a negative impact on their willingness to buy counterfeit goods, while identity consumption had a positive impact on their willingness to buy counterfeit goods.