Too good to be true: the real price of fake products Published on: 19/04/2013, Last update: 22/04/2013
Counterfeiting activities account for over €200 billion in losses for the world economy and it is estimated that such losses may climb further. They harm the European economy, as they damage legitimate business and starve innovation. And fake goods compete unfairly with genuine products, putting many jobs at risk in Europe.
Counterfeiters are in the market for medicines, fashion goods, food products, automotive brakes, electrical appliances, cosmetics and our children's toys, to name but a few examples. In Europe, the problem can pose health and safety risks and has become a major handicap to growth and employment. To help counter the risks to citizens and businesses posed by counterfeit goods, today Vice President of the European Commission responsible for Industry and Entrepreneurship, Antonio Tajani, and Commissioner Michel Barnier, responsible for internal market and services, called upon European citizens to be aware of the risk of buying fake goods.
The campaign’s objectives are to raise consumer awareness about the dangers of counterfeit goods as well as to promote closer cooperation between the European Commission, national authorities - including law enforcement agencies and customs - and consumers, producers and trade associations to stop the production and circulation of counterfeit goods, calling on all Europeans to make a stand against fake products and buy original products.
Fake products – some impressive figures
The global volume of trade in fake goods stands at over €200 billion per year – a similar magnitude to the market for illegal drugs;
Between 2010 and 2011, the volume of fake articles detained by European customs grew by 11%;
In 2009, the value of the top 10 brands in EU countries amounted to almost 9% of GDP
Fashion and high-end personal products encompass 54% of the total value of goods detained at EU borders;
In 2011 alone, 115 million fake goods were detained at the EU borders, with an overall value of over €1.2 billion
Almost one third of the articles detained by EU customs in 2011 were found to be potentially dangerous to the health and safety of consumers, almost double the proportion in 2010
In 2011, 27 million fake medicines were detained by European authorities
Postal transport is the most common means used to ship fake goods ordered on-line. It was the method used in 63% of cases detected in 2011, followed by air transport (22%) and express courier transport (7%)
Fake goods are bad for citizens’ pockets
Buying fake goods is not a bargain. Fake products are not made to the same standards and typically have to be replaced more often. Original products must pass a number of quality controls to ensure that they are safe. But why should a rogue trader go to all that trouble and expense?
Trade in fake goods also increases citizens’ tax bills. EU residents pay taxes and get public services in exchange, but their honest contribution is increased because of fakes.
And the jobs lost mean higher unemployment and higher welfare bills. Bigger bills and lower state revenues in one area mean higher taxes in another. Trade in fake goods increases the bill for citizens: EU residents end up paying more tax. This hurts even more when budgets are tight.
Fake products can also be dangerous to health
Fake health products are dangerous and can do serious harm. Medicines are tightly regulated for very good reasons: if citizens take a fake product they can do themselves serious damage. Unlike original medicines (including generic medicines), fake medicines can be made out of anything. Medical devices are also subject to forgery. Contact lenses and blood testers are just some of the products that have been imitated and sold on the Internet or even in normal shops.
They may cost less, but they can have serious adverse effects as they can be of poor quality, made of the wrong materials and have questionable effectiveness, if any. The European Commission plans to set up a globally compatible device identification system in the EU to facilitate the recognition of illegal products.
And it’s not just fake medicines that can harm citizen’s health. Fake garments can also be unsafe. Chemicals used in textiles, clothing and footwear in Europe are thoroughly analysed and are prohibited if they are found to be harmful. A comprehensive piece of legislation called REACH insists that all chemicals in the European Union are tested. That is why garments legally sold in Europe very rarely cause allergies and irritations. But fake items can contain chemicals that haven’t been tested.
Fake goods are bad for safety
Products that could be dangerous to the health and safety of consumers accounted for almost one third of the total amount of articles detained by EU customs in 2011, almost double the proportion in 2010. Traders in fake articles are crooks. As they have no reputation to protect, they do not care about consumer safety.
Car parts are among their most popular targets: fake automotive parts cost suppliers between five and ten billion euro every year, while drivers are exposed to substantial risks when tricked into buying fake products. European legislation requires that all parts and components essential for the safety and environmental performance of motor vehicles are subject to controls before they can be placed on the EU market. But dealers in fakes ignore these requirements, and not just in a small way. Brake pads are among the most commonly imitated car parts. Fakes have been found made from wood chips – or even grass! Citizens buying in unfamiliar circumstances should therefore be vigilant.
Dangers can also lie in products where the risk is less obvious. For example toys. They should be the safest goods as they are made for children. But if they don’t conform to safety regulations, they can pose a serious danger. Fake toys are widespread. Fake toys can contain dangerous materials, like paint containing poisonous chemicals. They may be made with detachable small parts, prohibited according to the EU’s toy safety legislation, as they can pose choking hazards to children.
Fake goods undermine trust in Internet shopping
The Internet has opened up vast trading possibilities and allows citizens to have a wider choice of goods and to find the best bargains across the European single market. E-commerce is a boon for consumers and business alike. But a growing market attracts cheats. The internet can also act as a new outlet for suppliers of fakes.
When shopping online, buyers’ choices are heavily influenced by brand and reputation. Fraudulent websites are increasingly sophisticated, making it difficult to distinguish them from genuine sites. They try to trick citizens by using domain names that closely resemble the names of well-known high-end brands and companies. Currently, there is little that firms can do to protect themselves and their clients against tricks like this. It is harder to crack down on rogue traders on the internet, especially when they operate from outside the EU’s jurisdiction.
But EU customs officials and law enforcement agencies have ways to tackle this illegal trade. They pay more and more attention to parcels sent by post, the usual way to receive goods bought on the Internet. Developing tailor-made approaches to monitor parcel and postal traffic is one of the priorities of the European Union Customs Action Plan for the period 2013-2017.
Citizens should be aware of the risk of buying fake goods on Internet. The widespread availability of such goods there should make them particularly vigilant.
Keeping fakes at bay: a responsible choice
In Europe, workers are protected from exploitation and children are not forced to work. Reputable companies that manufacture abroad respect these standards even if local law enforcement doesn’t require them to. When leading sportswear manufacturers were accused of using child labour, they took vigorous action. But dealers in fake goods don’t have reputations to protect and can mistreat workers – even children, forced to work in sweatshops – as much as they like.
The exploitation linked to fake goods starts with the manufacturer and continues up to the end of the supply chain. Street vendors selling fakes work in wholly unprotected conditions. Illegal and vulnerable, constantly having to run from the police – theirs is the lifestyle supported when fakes are purchased. Such vendors are usually victims of organised crime. Most of the money buyers hand over goes straight into the coffers of criminal organisations. It began as a way of diversifying traditional criminal activities, such as drugs, arms trafficking or prostitution. But it has become so lucrative that it is now a core activity of criminal organisations. Criminals receive about as much money from selling fakes goods as they do from selling illegal drugs: over €200 billion every year, according to United Nations figures.
Fakes are bad for jobs
Sales of genuine articles are the basis of employment. When original products are purchased, jobs are created and maintained in Europe. But fake goods create unfair competition for European artisans and businesses, harming legitimate enterprises and increasing unemployment. The impact on jobs is particularly severe for fashion and high-end products, such as textiles, garments, leather ware, shoes, watches and jewellery. These represent over half the total value of imitation goods detained by customs.
The 21st century has seen steady growth in the market for fakes. In just a couple of years from 2009 to 2011, the number of cases detected by customs in Europe more than doubled to over 91,000. According to available figures, in 2011 almost 115 million suspect articles were stopped by customs at the EU’s borders. The estimated value of the equivalent genuine products is over €1.2 billion.
The European Commission has been working to prevent this illegal trade for nearly a decade. In 2004 it adopted a Strategy for the Enforcement of Intellectual Property Rights in Third Countries. And to fight this menace, we must better understand it: the recently established European observatory on infringements of intellectual property rights is collecting more detailed data which will shed further light on this sprawling illegal business.
Fake goods may tarnish holiday memories
Everyone goes on holiday to relax, but that can make consumers more vulnerable. But fake goods under sunny skies are still fake. Luxury goods for sale on a street stall in a quaint market are a temptation, but let’s not fool ourselves. They are cheap because they are fake. Many imitations are sold in apparently harmless street stalls in popular holiday resorts.
If a traveller is checked by the authorities on their way home and found to be carrying fake goods for commercial purposes, they risk very heavy penalties in some countries. Holders of fake goods intended for commercial purposes can face heavy fines and, in cases of repeated purchases of such goods, even prison sentences.
National governments, producers, trade and consumers associations, the EU Commission, and of course EU citizens, can all help fight against counterfeiting
National law enforcement authorities play a key role in preventing the entry of counterfeit goods to the EU, with the support and the cooperation of EU bodies such as EUROPOL and OLAF. The European Commission (which incorporates the European Observatory on Counterfeiting and Piracy) and EU Member States, together with producers, trade and consumers associations are working hard to better enforce the rules which protect citizens and business against goods and products which do not meet safety standards. This anti-counterfeiting campaign is promoted by the European Commission, and notably by Vice-President Tajani and Commissioner Barnier, in collaboration and with the support of national authorities. Today, Vice President Tajani is in Rome to present the campaign to the public and next week the campaign will be presented to the press officers of Customs and Police Authorities of the 27 Members States, during the 12th OLAF Anti-Fraud Communicators Network (OAFCN) seminar in Rome.
Already in February 2013 the Commission further strengthened market surveillance through a multi-annual plan and a single legislative instrument that will reinforce the controls on products in the internal market, allowing authorities to withdraw non-compliant and dangerous products immediately from the market. Authorities in Member States now have stronger powers to take non-compliant and dangerous products off the market immediately. Unsafe fake products will get caught in the net and kept away from consumers. To raise the effectiveness of this across the EU, the Commission has set out a plan which involves greater resource sharing, better IT tools, tougher and more targeted external controls at the Union borders and harsher penalties.