Effects of Counterfeiting / Piracy:

• Increase of Market Share: The actual market share of the original product increase with no profit as the market is captured by placement of the counterfeit product. In other words counterfeit product occupies the place of the original product. The additional demand and the market area of the original product is covered by the counterfeit product. Sometimes even drives the original product out of market area creating artificial barriers through trade channels.
• Creating: Entry Barrier for Original Product in market: The counterfeit product is sold occupying the actual demand of the original product. The market is flooded with cheap counterfeit products and artificial shortage of demand is created by creating price competition with the original product. 
• Loss of Revenue to government: Increase in counterfeiting activities results in free moment of the counterfeit products in market avoiding the tax levies. Most of the goods manufactured are unaccounted and without obtaining licenses. The government looses huge amount of the revenue by way of excise and sales tax.
• Reduction of Sales: The existence of the counterfeit product in the market causes reduction of the sales of the original products there by causing loss of revenue to the government.
• Reduction of Profit: The profit on the sale of the original is reduced due to poor sales involving heavy expenditure on advertising, sales promotion, research and on litigating with the counterfeiters.
  
• No efforts for product improvement: As most of the market share is eaten up by the counterfeiters the original manufacturers earn no profit to be invested on the additional product improvement and research. Even if he incurs expenditure the counterfeiter imitates the product and reaps the benefits of the research with no cost or may some times create substandard product if they are unable to develop the product to match with the original product.
  
• Increase in product liability: The consumers who are deceived by purchase of the fake article for the genuine one blame the manufacturer of the genuine product when it fails, creating a loss of goodwill and product liability to the Original manufacturer.
  
• Maintenance of Standard and Quality: The counterfeiters manufacture the product for the sake of earning profits they may not comply with the norms and regulations to maintain the standard and quality of the product. This may create vulnerable situation for the reputation of the original manufacturer.
  
• Loss of Goodwill: The goodwill of the Original manufacturer may be lost due to existence of the substandard quality of the counterfeit products which may cause harm or loss to the immediate customers.
  
• Reduction of Brand loyalty: If the products are found to be defective and of the substandard quality. The original manufacturer may loose the market credit, loyalty and trust of actual and his actual and potential customers.
  
• Diminishing Brand Value: The counterfeit products may diminish the brand value in the market due to loss of sales, customers, trade channels and reputation of the corporate entity.
  
• Undervaluation of IP: The brand and the trademarks are valued based on its estimated average potential sale and the market coverage and reputation. The counterfeit product reduces sale, customers, reputation and standing of the product in the market and thereby its valuation as IP assets.
  
• Failure as Assets: The trademark/brand may loose its value to be recognised as assets for acquiring financial funds by securitising it, due to loss of goodwill, market standing and its potential value.
  
• Dilution of Brand: If no timely legal actions are initiated against the counterfeiters the original trademark may loose it distinctiveness and its identity as an indication of trade connection of the original manufacturer thereby becoming generic and vulnerable.
  
• Increase of Market Competitions: The concentration of the counterfeit product not only increases competition to the original brand but also to the competing other brands in the market that are forced to reduced their prices in conformity with that of the counterfeit products.
  
• Benefits the Competitor: The Competitor may be benefited if there is reduction of the sale of the original products indirectly. The customers may switch on to the other similar products of the competitors which has good market standing and provides assurance of quality.
  
• Increase in Legal Cost: The legal cost to fight against the counterfeiters may increase due to increase in the number of the counterfeiters. The original manufacturer may be sometimes held liable for the adverse consequences which may ensue due to the use of the substandard counterfeit product by the customer for no fault.
  
• Treats to Multinationals: The multinationals may feel hesitant to invest or launch products due to threat of Counterfeiting. It may drive away the foreign investment from MC.
  
• Financially Strengthens the Counterfeiter to defend himself against the action brought by the Right holder.
  
• Rise in Corruption: The Counterfeiters offers bribe to the government officers to secure their ill gains and inculcate the habit of asking for brief for the act or omission and there by corrupts the officers. The officers become so use to it that they simply refuse to work if no bribe is tendered.