Of course.
But just for the price argument, that's why we have consumer protection legislation, because a legislator has deemed that consumers merit a special protection.
However, when you look at a retailer, he knows what's going on in the market. He's got a pretty good idea, when he's buying something grossly underpriced, that something's going on. You're right, that is one of the places where a very substantial amount of profit is made, especially if the counterfeit product is being sold at a price that is in keeping with the prices at which legitimate goods are sold.