6th June 2018

Crime networks forge ahead in fakes

A new EUIPO report shows counterfeiting incentives for criminal gangs

By JTS Staff
Journal of Trading Standards' in-house team
The EUIPO report clearly shows that organised crime networks are getting stronger and more professional in their use of counterfeit and pirated goods

The growing value and breadth of products being counterfeited, lenient sentences and high returns on investment have become strong incentives for criminal gangs to become more and more involved in counterfeiting, according to a new “synthesis” report produced by The European Intellectual Property Office (EUIPO), which brings together findings of research carried out since 2013, on the scope, scale and consequences of intellectual property rights (IPR) infringements in the EU.

The report highlights criminal business models and identifies how organised crime networks are using a broader range of complex international supply chains. These include the use of the internet to promote and distribute physical goods and illegal digital content across the globe.

Internet sites and social media are being increasingly used to provide additional benefits to criminals, from advertising revenue. This adds to the dilemma facing genuine brands and legitimate websites, which find their reputations and credibility being extensively damaged.

The report ties together substantial work carried out by the EUIPO’s EU Observatory, in conjunction with the Organisation for Economic Co-operation and Development (OECD), to provide an up-to-date and coherent view of the state of intellectual property (IP) rights and IP infringements. To do this it includes; data on the value of IP to EU economies, the overall level of infringements in the EU, public perceptions and actual actions being taken to combat counterfeiting and piracy.

Key findings are that the total contribution of IPR-intensive industries to the EU economy accounts for approximately 42% of GDP (EUR 5.7trn) and 38% of employment. IP sectors also pay higher scales of salaries and generate a trade surplus of approximately EUR 96bn.

The report estimates that every year this success is being hugely challenged by IP infringements. In a series of sectoral studies EUIPO has estimated that counterfeiting alone, has led to lost sales of EUR 100bn per year in just 13 business sectors.

In addition to analysing the supply of counterfeit goods and pirated products, the EUIPO has also studied the demand side. This work has included an in-depth study on the attitudes of EU consumers and their willingness to engage and purchase fake goods and content. The results reveal that key reasons for citizens to buy and access infringing products are; lower prices of counterfeit goods and a perception that illicit online content is more available and easy to access.

The report highlights key actions being taken to protect and enforce IP rights. This underlines work being carried out by a huge range of rights owners and the EUIPO’s growing partnership with Europol, to provide wider responses to IP crime. It also outlines wider policy work being carried out by the European Commission to “follow the money” being accumulated by criminals, and its continuing efforts to address the supply of counterfeit goods in third countries.

Alison Statham, ACG Director General 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% 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.”

The full report can be downloaded here.

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