Enter the Twilight Zone
Counterfeiters share the same economic market as the rest of us, but the 'weirdness' of the situations counterfeiting creates are amazing. Because they share the same market they are not above the laws of profit and loss. As if in a parallel reality, counterfeiters feel their own market pressures. They do market research, market testing, quality control, and have distribution systems the real manufacturers may envy. Counterfeiters are also sensitive to the same trends as regular businesses and are currently experiencing things like outsourcing, offshore manufacturing, and the benefits of free trade.

Counterfeiters do business in direct competition with the authentic products they are counterfeiting, but they are also in competition with other counterfeiters of the same brand, substitute authentic brands, and substitute brand counterfeits. They also have their own brand problems. Counterfeits enjoy their own market standing, with successful ones enjoying a better 'brand image' than others, therefore allowing a higher market price. In a case of poetic justice, there are commonly instances where a counterfeiter may find others counterfeiting his counterfeits. The fact that this situation exists means that the vast majority of customers that purchase fakes are doing so with their eyes wide open - they are discriminating among fakes.

A counterfeiter who counterfeits Pharmaceutical Fake A is in competition with other Fake As, as well as the Real A, Real B, Real C, Fake Bs, and Fake Cs. This situation is eye opening since it means that authentic product makers may not even be taking into account who their actual competition is. Removal of counterfeits sometimes raises marketshare numbers for the authentic producer, and can even raise marketshare for everyone in the segment. Law enforcement bagging of a large counterfeiter is equivalent to having a large competitor exit the market. While Real A may have top market share in the country, Fake A may be number two. This means that Maker B might be willing to work to rid the market of Fake A, since it is Fake A that is the real competition of Real B, not just Real A. This further means that no one company should be standing alone in combatting counterfeiting. Removal of any one company's counterfeit products benefits the whole segment.

Further down the rabbit hole, there are instances where some companies don't want to rid the market of counterfeits of their product, but where their competitors may be willing to do it for them. This is true when Real A is not even available in the market. The producer of Real B is now competing against a phantom incarnation, Fake A, of a competitor that hasn't even committed any resources to the market. Furthermore, the counterfeiter of A has committed himself to launching an unproven brand in the marketplace, thus serving as a volunteer market tester for the producer of Real A. Usually, a company falls victim to counterfeiters when it has proven the desirability of its brand in the marketplace, but there are cases where proof in another market is enough. If the counterfeit A products do well enough, it could be just the proof needed for the producer of Real A to enter the market directly. Stranger still, the counterfeiter of A may hope Real A never does enter, and at the very least he will be miffed that Real A is piggybacking on his 'trailblazing' work.

Why They Are Not Easily Beat
As counterfeiters are so organized it would seem like eradicating counterfeiting should be easy. Just like everyone else, they must make money or move on. However, while the laws of profit and loss still exist for counterfeiters just like for everyone else, the sad fact is that it is almost impossible to rid the marketplace of them. Unfortunately for the companies being victimized by counterfeiting, there are many parallels between the market for counterfeit products and that for illegal drugs. And we have all seen how successfully law enforcement has been at ridding the streets of drugs.

For some products, counterfeiting is even more profitable than illicit drugs. Just like with illegal narcotics, some counterfeiters can lose 95% of their product shipments to law enforcement and still make money. This amazing profitability comes from the fact that many costs normally associated with bringing a product to market are born by the real producer, rather than by the counterfeiters. Counterfeiters have no R&D costs, no marketing costs, no insurance costs, no taxes, little overhead, lower labor costs, and very low distribution costs. Of course, raw materials costs are always less than at the real company.

Just like with drugs, the market for counterfeits is very demand driven. While most efforts to eradicate counterfeit production focus on finding large factories or key distributors, retail sites selling counterfeits play an especially important role in the process. Counterfeiters don't innovate, so they needn't ever take expensive market risks. They create 'only' what the market is already asking for and have no burden of guessing what next season's fashions are going to look like. In determining what to make it is the retail point of sale that has the most advantageous position to determine market demand, and it is the retail point of sale that pushes that information up the counterfeit production chain. While the retail sites may not manufacture any fakes themselves, they definitely know what they want to sell and ask for specifically that from the manufacturers.

Unlike illegal drugs, counterfeits come in thousands of flavors. Counterfeit products from fashion accessories to pharmaceuticals to airplane parts exist freely in the marketplace largely due to their diversity. These counterfeit products enjoy obscurity provided by the sheer numbers of different products available. It is virtually impossible for law enforcement to directly attack a counterfeiting problem when they have to be on the lookout simultaneously for thousands of counterfeits of thousands of different products. Furthermore, in many cases law enforcement officials can't tell what is a counterfeit and what is a real product. Education about the specific details of a company's products for law enforcement to use as a guide helps, but doesn't eradicate the numbers problem. Each time something new comes out in the market, a new 'drug' is sure to follow. Hundreds of law enforcement officers would need to be thrown at the problem, educated on and focused on a few specific products each. The costs in money and time are not easy to come by, especially when the issue is sometimes viewed as spending public money solely for the aid of rich corporations. Of course, the expense issue is further magnified when the producer in question is foreign.