Vertical Markets

Fakes report

by Mark Rowe

Some 60 billion euros is lost each year due to counterfeiting, according to the European Union Intellectual Property Office (EUIPO). That’s due to fake products in the market in 13 sectors studied: cosmetics and personal care; clothing, footwear and accessories; sports goods; toys and games; jewellery and watches; handbags and luggage, recorded music; spirits and wine; pharmaceuticals; pesticides; smartphones; batteries and tyres.

Counterfeiters use the internet to distribute their products and to promote the distribution and consumption of illegal digital content. Internet sites selling counterfeit goods benefit from advertising revenues from ‘high risk’ ads (adult, gaming, and malware) and, paradoxically, from legitimate brands, which then suffer in two ways from advertising on such sites (damage to their own brand, and giving credibility to the hosting website).

Fakes were once luxury and branded goods, but now are also pharmaceutical products, car parts, and pesticides, shampoo and toothpaste; and pirate copies of films, television shows, music, books and computer games. The report says: “In essence, every product with a brand that has value can be and is counterfeited, even mundane, low-cost items such as laundry detergents.” And traditionally counterfeit goods have been transported by sea, being cost-effective when moving large quantities. Customs seizures at EU borders indicate that the seized counterfeits are increasingly small shipments, such as screens or batteries for mobile phones. Another point raised by the report is that smuggling of labels and packaging may be separate from the actual goods, with final assembly and other production (or repackaging of cheap wine and champagne in expensive bottles) inside the EU. Country of origin matters because the authorities may use that as a key risk indicator in detecting counterfeit goods.

According to the study, the value of fake goods, lenient sentences if the criminals are caught and high returns on investment, are the incentives for gangs to engage in counterfeiting. The modus operandi of such gangs is becoming increasingly complex as technology and distribution channels evolve, as does the breadth of products being counterfeited, the report says. Gangs may seek to corrupt brokers and falsify documents, re-labelling items as factory over-runs for example, to cover their tracks. And gangs may also do fraud, tax evasion and human trafficking.

As for the attitudes of EU citizens towards such crime and their willingness to buy fakes, the report says the incentives for consumers to purchase counterfeit goods include lower prices, easy accessibility and a low degree of social stigma. For the full report visit the EUIPO website.

A ‘Synthesis Report’, also released, brings together research on the contribution of intellectual property to the EU economy and the cost of counterfeiting and piracy to international trade. It also synthesises action to combat intellectual property rights. For the report in full visit https://euipo.europa.eu/ohimportal/en/web/observatory/synthesis-report.

June 6 was World Anti-Counterfeiting Day; see also the website of the International Chamber of Commerce’s anti-counterfeiting arm, Business Action to Stop Counterfeiting and Piracy (BASCAP).

Comment

Alison Statham, Director General of the Anti-Counterfeiting Group (ACG) welcomed the report. She said: “The damage being done to our local and national economies is huge. Massive amounts of money, which could be used for vital public services, are being diverted into criminal hands and much of this is being used to support and promote other forms of exploitative crimes such as; child labour and the trafficking of human beings, drugs and weapons. In addition, fakes are becoming ever more dangerous and consumers need to be in no doubt that buying cheap does not mean buying safe. EU Customs have confirmed that over 30 per cent of fakes coming to the EU have the potential to damage health and safety.

“The EUIPO report clearly shows that organised crime networks are getting stronger and more professional in their use of counterfeit and pirated goods. Using independent reports such as this, ACG will continue to bring the escalating dangers associated with counterfeiting and piracy to the attention of business leaders and policy-makers as they prepare to develop new trade deals. However, the vital information on criminal business models will also help to develop enforcement related strategies and we will use this to provide added information and support to our precious enforcement resources to ensure the UK economy, businesses and consumers are more safe and secure.”

About the EUIPO

It’s an agency of the EU, based in Alicante, Spain. Visit https://euipo.europa.eu.

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