The economic and social impact of counterfeiting

Trademarks

Written by Marlous Stal-Hilders

Counterfeiting – or fraudulent imitation – creates many problems. But how extensive are these problems and where do they occur? A recent research report for the INTA and the BASCAP sheds light on the situation. The damage to industry is astronomical and increasing. However, that’s not the end of the story. The social impact of counterfeiting is equally damaging.

Let’s start with some figures: according to the report published in February 2017, the total value of counterfeit products and digital piracy (films, music and software) worldwide in 2013 was an eye watering USD 1.13 billion. The report did not provide a positive prognosis for the future: in 2022 this sum is expected to have risen to USD 2.3 billion. An enormous figure.

Impact on industry

However, it should be mentioned that not all counterfeit products will have a directly damaging effect on industry. For example, very few people who buy a counterfeit Chanel bag costing 30 euros would actually have bought an original costing a hundred times more. Clearly counterfeiting involves huge sums of money worldwide.

Fewer jobs and dangerous working conditions

Something that is not always considered is the huge social impact of counterfeiting. Counterfeiting leads to dangerous working conditions. Counterfeit goods are illegal and are often produced in hidden production facilities, away from the prying eyes of labour inspectors. The working conditions in factories or workshops manufacturing counterfeit goods are therefore often shocking and out of sight. Child labour is also often involved. In short, it may be easy and cheap to buy counterfeit goods, but it is not socially responsible.

Thus the report claims that the wider socio-economic damage in 2013 amounted to nearly USD 900 billion. In the same year, counterfeiting cost between 2.0 and 2.6 million jobs. According to the prognoses in the report, these figures will rise in 2022 to maximum USD 1.87 billion and 5.4 million jobs respectively.

Counterfeiting reduces innovation and creativity, because counterfeiting is ultimately a question of simple and often poor product imitation.

Marlous Stal-Hilders -

Health risks

In financial terms, counterfeiting has a massive social impact. However, these sums hide some very significant consequences. Think of counterfeit medicines, for which there is no or insufficient monitoring, or counterfeit cigarettes containing large amounts of lead and cadmium. The health risks involved are huge and can cause enormous human suffering.

IP not just for industry

Counterfeiting also reduces innovation and creativity, because counterfeiting is ultimately a question of simple and often poor product imitation. As a result, many developments will take longer to get off the ground. The legal protection offered by intellectual property is not just for businesses; it has a wide scope, covering many social themes. Hopefully the research results from the report will find their way to policy makers and legislators and help them develop better and more specific legislation aimed at improving how counterfeiting is tackled in the future.

Tackling counterfeiting

This puts the actions of businesses against counterfeiting in another light too. In the first instance, they obviously benefit themselves. But taking action to prevent violation of their Intellectual Property rights also makes a wider, more positive social contribution. The research report of the INTA and the BASCAP has again made that even clearer.

Involvement

Several parties are involved in preventing and tackling counterfeiting, including the INTA. The INTA is, among others, the founder of a project group to make young people aware of the disadvantages and dangers of counterfeit goods. Its current Unreal campaign specifically targets this group. NLO Shieldmark’s involvement is reflected in its support for this initiative. By visiting schools and posting on social media, we want to make young people aware of the social impact of counterfeit products.

[1] The Economic Impacts of Counterfeiting and Piracy, research report by Frontier Economics, 6 February 2017, commissioned by the International Trademark Association (INTA) and the ICC Business Action to Stop Counterfeiting and Piracy (BASCAP).