Palyonka (Russia)

Palyonka 🇷🇺
Location: Russia
Definition: The production, trade and consumption of counterfeit goods
Keywords: Russia – FSU – Counterfeit – Consumption – Authenticity – Entrepreneurship – Fake – Trade – Intellectual property – Money – Opportunity – Payment – Saving – Taxation
Clusters: Market – Creating facades – Functional ambivalence – System made me do it – Resistance
Author: Zoya Kotelnikova
Affiliation: National Research University ‘Higher School of Economics’, Moscow, Russia

By Zoya Kotelnikova, National Research University ‘Higher School of Economics’, Moscow, Russia

In Russia, ‘‘palyonka’’ (from adj. palyonyi, meaning singed, burned) is a colloquial term used by consumers to denote counterfeit goods. It originated in the late socialism, when the term ‘‘palyonka’’ was associated with illegally manufactured vodka. Since the early 2000s, it has been used to refer to a wider range of goods, such as petroleum, documents and clothes, and infringements of intellectual property laws, such as direct copies, imitations, or factory overruns. In the 2010s, ‘‘pal’’, a synonym for ‘‘palyonka’’, entered youth slang to denote counterfeit branded clothes and footwear.

In the late twentieth century counterfeit products emerged as a global challenge: pirated goods were being produced and consumed in virtually all economies. Russia was no exception and was identified by the European Commission a country with a high infringement of intellectual property rights (Devigne 2008). Russians consume more counterfeit goods than they produce; counterfeit goods in Russia tend to be imported, often from Eastern Europe and the Commonwealth of Independent States, but they primarily arrive from Asia, especially China (Radaev et al. 2008).

Consumers understand ‘‘palyonka’’ as something of poor quality, copied and illegally introduced into commerce. They tend not to draw sophisticated or juridical distinctions between the types of infringements of intellectual property rights and state quality standards (e.g. look-alikes, surrogates or pirated goods). Having no reliable knowledge of brands, consumers tend to lack confidence in determining the originality of goods. They often determine whether a commodity is a counterfeit intuitively, relying on their consumer experience and skills, market signals (price, place of purchase, seller’s information) and social ties (Kotelnikova 2017). From the consumer’s perspective, ‘‘palyonka’’ goods are loosely associated with deception. Consumers are not always fooled—more than two-thirds of traders openly admit that they sell fakes (BrandMonitor 2018)—and do not always attempt to deceive people regarding the originality of purchased goods (Crăciun 2012). Moreover, deception in counterfeiting is not black and white but constitutes a spectrum of grey: from ‘highly-deceptive’ where the counterfeit product is virtually identical to its genuine counterpart to ‘non-deceptive’ where the counterfeit product is easily distinguishable from its genuine counterpart. The degree of deceptiveness varies with consumer experience, their awareness, and knowledge (Eisend and Schuchert-Güler 2006).

Since deception and inauthenticity of goods are not necessarily linked, their ambiguous coupling often serves as justification for counterfeit consumption. It was documented that ‘about one-third of consumers would knowingly purchase counterfeit goods’ (Bian and Moutinho 2009: 368), but they only buy them when they belong to categories where the social, financial and physical risks are low (Chapa, Minor, and Maldonado 2006: 83). Consumers are more likely to purchase ‘‘palyonka’’ clothing and footwear than medicines and food (Khramova 2012). Although the purchase of counterfeit products varies across income, education, age, and gender, empirical evidence on how these demographic factors work in different social contexts is contradictory. The literature highlights that younger people are more likely to purchase counterfeit goods, especially clothing, footwear, and digital products. Young consumers have more positive attitudes towards unoriginal goods and consciously purchase them (Khramova 2012). At the same time, there is also some evidence that young people are more concerned about safety (Twenge 2017). This could explain why young Russians are less likely to consume counterfeit alcohol than their elders (Kotelnikova 2017).

Consumer reasons for buying non-deceptive counterfeit goods tend to be different from reasons for choosing deceptive counterfeit goods or authentic goods. Consumers explain their motives for purchasing fakes by strategizing between price, quality, brand attractiveness and availability of goods (see Wehinger 2013). Counterfeits represent opportunities to acquire desired branded goods at lower prices, which compensate for their lower quality. However, since expensive goods do not always entail higher quality, people may dispute the high prices for branded goods (Berdysheva and Romanova 2017) and, thus, be more inclined to obtaining fakes.

Counterfeiting practices are intrinsically ambivalent: more than 80 percent of Russians have negative attitudes towards fakes, but about a third of them report buying them consciously (Khramova 2012). This discrepancy between reported attitudes and observed behaviour demonstrates gaps between legality and social legitimacy. It suggests that consumers develop their competencies to serve their own needs and ignore the legal criteria, which better protect brand owners’ rights rather than consumer rights.

The boundaries between counterfeits and genuine goods are often very blurred. Experts and brand owners confirm that sometimes it is impossible to distinguish counterfeits from their original counterparts without a special laboratory test. Manufacturers are also known to produce unauthorized overruns (McDonald and Roberts 1994). Moreover, the moral basis for counterfeit consumption lays with the consumer perception of branded goods as unfairly high-priced. This legitimises counterfeits while making original branded goods socially illicit (Crăciun 2012). By purchasing counterfeits, consumers may signal cynicism, dissatisfaction and desire to challenge the branding paradigm (see Holt 2002).

Contradictions in supply policies also reinforce the ambivalence of counterfeit goods. Criminal entrepreneurs involved in providing counterfeits infringe on the intellectual property rights of economic actors and parasitise on popular brands. At the same time, counterfeiters democratize fashion by giving budget-conscious consumers the illusion of success and resolving common market failures such as goods shortages, poor distribution systems and unfair business practices. Evidence exists that the co-existence of brand manufacture and counterfeit production is beneficial for both parties (Saviano 2008). Brand holders whose intellectual property rights are violated do not always fight against fakes for two reasons (Saviano 2008): fear that consumers who learn that fakes are circulating in the markets will stop buying their goods; and, more importantly, opportunity to gain the advantage of market penetration. Counterfeits may introduce a commodity or brand to a new market, form consumer preferences, and develop consumer loyalty. In some companies, the local management was found colluding with criminal dealers by making informal agreements and profiting from illegal activity (Kotelnikova 2008).

After the liberalization of foreign trade in 1992, fake goods flooded into Russia. The proliferation of counterfeits was also fostered by economic crises, an abundance of cheap labour, the global diffusion of manufacturing technologies, the absence of restrictive legislation and poor law enforcement regarding intellectual property rights. Since the 2000s, the quantity of counterfeits and enhanced product segmentation decreased (Radaev et al. 2008). In 2005, 53 percent of respondents had purchased counterfeit goods (FOM 2006). In 2011, the number had dropped to 30 percent (Khramova 2012). Consumer bottom-up attitudes regarding the illegality of counterfeits have changed the counterfeit market much more slowly than the top-down attitudes of brand holders, legal experts, and state regulators.

References

Bian, X. and Moutinho, L. 2009. ‘An Investigation of Determinants of Counterfeit Purchase Consideration’, Journal of Business Research, 62: 368-378

Berdysheva, E. and Romanova, R. 2017. ‘Rethinking Prices During an Economic Crisis: Calculation as a New Mode of Consumer Behaviour in Russia’, International Journal of Consumer Studies, 41(4): 397–403.

BrandMonitor. 2018. ‘Up to 70% counterfeit dealers in Russia admit to selling fakes’, 8 November, https://brandmonitor.ru/en/materials/torgovlya-kontrafaktom-s-tochki-zreniya-prodavtsov/

Chapa, S., Minor, M. S. and Maldonado, C. 2006. ‘Product Category and Original Effects on Consumer Responses to Counterfeits: Comparing Mexico and the US’, Journal of International Consumer Marketing, 18(4): 79-99

Crăciun, M. 2012. ‘Rethinking Fakes, Authenticating Selves’, The Journal of the Royal Anthropological Institute, 18(4): 846-863

Devigne, L. 2008. An Urgent Need to Better Respond to the Global Problem of Counterfeiting and Piracy: The EU Answer. 4th Global Congress: Combating Counterfeiting and Piracy, Dubai, 3 February.

Eisend M. and Schuchert-Güler P. 2006. ‘Explaining Counterfeit Purchases: A Review and Preview’, Academy of Marketing Science Review, 12, http://www.amsreview.org/articles/eisend12- 2006.pdf

FOM. 2006. ‘Falsifitsirovannye tovary na segodnyashnem rossiyskom rynke’, 10 October, http://bd.fom.ru/report/cat/ec_trade/dd064226

Holt, D. 2002. ‘Why Do Brands Cause Trouble? A Dialectical Theory of Consumer Culture and Branding’, Journal of Consumer Research, 29(1): 70–90.

Khramova, Ye. 2012. ‘Ambivalentnost’ otnosheniya potrebiteley k kontrafaktnoy productsii,’ Journal of Economic Sociology = Ekonomicheskaya sotsiologiya, 13(4): 116-154

Kotelnikova, Z. 2017. ‘Explaining Counterfeit Alcohol Purchases in Russia’, Alcoholism: Clinical and Experimental Research, 41(4): 810-819

Kotelnikova, Z. 2008. ‘Tovar s chuzhim litsom, ili Pochemu pravoobladateli torgovykh marok popustitelstvuyut kontrafaktu,’ Journal of Economic Sociology = Ekonomicheskaya sotsiologiya, 9(4): 30–48

McDonald, G. and Roberts, C. 1994. ‘Product Piracy: The Problem that Will not Go Away’, Journal of Product and Brand Management, 3(4): 55–65.

Radaev, V. et al. 2008. ‘Rynki kontrafaktnykh tovarov v Rossii’, Seriya ‘Analytica LESI’. 2. Moscow: Higher School of Economics Publishing

Radaev, V. V. 2017. ‘Crooked Mirror: The Evolution of Illegal Alcohol Markets in Russia since the Late Socialist Period’, in J. Beckert and M. Dewey (eds.) The Architecture of Illegal Markets. Towards an Economic Sociology of Illegality in the Economy. Oxford: Oxford University Press: 218-241

Saviano, R. 2008. Gomorrah: A Personal Journey into the Violent International Empire of Naples’ Organized Crime System. New York: Picador.

Twenge, J. 2017. iGen: Why Today’s Super-Connected Kids are Growing Up Less Rebellious, More Tolerant, Less Happy: and Completely Unprepared for Adulthood (And What that Means for the Rest of Us). New York: ATRIA Books

Wehinger, F. 2013. ‘Fake Qualities: Assessing the Value of Counterfeit Goods’, in J. Beckert and C. Musselin (eds.), Constructing Quality: The Classification of Goods in Markets. Oxford: Oxford University Press: 268-287.