A threat assessment report by Europol and the European Union Intellectual Property Office (EUIPO) released in 2019 reviews the impact of intellectual property (IP) crime in the EU and analyzes emerging threats. The growth in IP crime, around the world and in the EU, is evident in almost every product sector. This increase in IP infringements is linked to the growing influence of e-commerce in counterfeit goods and piracy, in marketplaces, on websites and social media. This deprives brands and businesses of revenue, and often also damages reputation.
When we think of counterfeit goods, we usually think about the economic cost of the sale of illegal products. According to the report, counterfeit and pirated goods could make up as much as 6.8 % of EU imports, amounting to EUR 121 billion. But not only brands suffer from this illegal activity. Increasingly, consumers are becoming aware of the effects fake goods have on their health and safety. This is especially evident in pharmaceuticals, cosmetics and food.
Counterfeit Goods and Organized Crime
Counterfeit products are highly profitable and relatively low risk, attracting criminal activity. Organized crime groups have become experts in fakes. For example, alcoholic beverages are targeted by organized groups in different ways, such as putting cheap wine in wine bottles bearing fake labels of expensive wine.
Expertise in fakes has resulted in organized activity to the point of operating illegal production lines, as well as packaging and labeling. According to the Europol and EUIPO report, organized crime groups sometimes even use legitimate production lines once a week or few times a month for the production of counterfeits.
Counterfeit Manufacture and Distribution
Most counterfeit items are still made in China. To get them into the EU, counterfeiters often use complex routes. Shipments of counterfeit goods to the EU usually come in bulk, by sea but also by rail from China to the EU. However, there is an increase in small parcels of counterfeit goods arriving as a result of consumer purchases on online marketplaces and other platforms, such as social media, that made it easier for sellers of all types and sizes to access consumers.
Key Types of Counterfeit Goods in the EU
The most common counterfeit items are luxury goods, such as watches, apparel and handbags. Luxury fakes are easier to sell directly to consumers and ship in individual packages. This does not mean that other sectors and everyday goods are not targeted. According to the Europol and EUIPO report, counterfeiters now also sell fake cosmetics, electronic components, food and drinks, pesticides, pharmaceuticals, tobacco products, toys and vehicle parts.
Electronics – Electronics is a key product sector targeted by counterfeiters, and electronics detected in the EU come almost exclusively from China and Hong Kong. Among the most counterfeited electronic products are fake mobile phones, chargers and computer equipment. These are often sold online and shipped directly to consumers. The report warns from counterfeit semiconductors that are used in hospital equipment and may constitute a threat to patient health.
Food and drinks – Food and beverages are another counterfeited category. Examples found in the EU are baby milk powder, cheese, coffee, and pasta. Fake food and drinks pose a risk to consumers as they may be produced in unhygienic environments and maybe even contain dangerous ingredients. Fake alcoholic beverages may also pose risks to consumers.
Clothing, footwear and accessories – Counterfeit clothes, shoes and accessories are common in the EU, with clothing and shoes being the most commonly detected counterfeits in terms of number of customs’ seizures at the external borders of the EU. Organized crime groups now work more within the EU. By attaching fake labels to unbranded items upon arrival, they are mitigating the risk of detection when entering the EU. This sector of counterfeited goods mostly originates in China, Hong Kong and Turkey, but there are also other source countries such as Albania, Singapore and Vietnam. Some of the shipments arrive into the EU on buses or trucks, like goods that travel from Turkey to Greece.
Pesticides – Highly regulated pesticides have shown an increase in seizures in recent years. Unregulated pesticides can be less effective or they can contain hazardous ingredients that may affect the health of consumers. According to the report, organized crime groups involved in counterfeiting pesticides place false brand labels on products, while others are abusing parallel import.
Pharmaceuticals – It’s clear that fake pharmaceuticals can harm consumers. The growing problem of fake pharmaceuticals includes the number of fakes on the market, but also the range of counterfeited medicines. Counterfeit pharmaceuticals may be produced in illegal facilities in the EU or imported into the EU. It’s believed that in practice, most fake drugs within the EU are manufactured outside of the EU and bought online, in e-pharmacies that are not strictly legal. As a result of e-commerce of pharmaceuticals, there is an unlimited number of unregulated product entry and exit points. [see https://www.wisermarket.com/post/eu-grey-market-in-pharmaceuticals]
Besides fake medicines, there is also sale of illicit medical devices, such as dental implants, syringes, medical testing strips and more.
Piracy – Piracy is the illicit reproduction and distribution of copyrighted content, like games, books, movies and music. Digital piracy takes different forms, such as video piracy involving illegal streaming and sharing of video content; premium text piracy which includes the illegal use of e-books, digital magazines and other protected texts; and software piracy which refers to unlicensed use of software. Piracy is highly complicated for authorities to enforce.
Tobacco products – According to the report, the production of counterfeit cigarettes in the EU has seen a considerable increase.
Vehicle parts – The increase in counterfeit car parts such as brake pads and filters is the result of the growth in consumers purchasing via e-commerce. Generally, counterfeit car parts do not comply with EU safety standards.
Law enforcements authorities are responsible for fighting illegal counterfeits and piracy, but the flood of counterfeits make it difficult to eliminate the problem. In addition, as the report states, “often perceived as a victimless crime, for many law enforcement authorities in the EU, IP crime is not among their top priorities.”
Online counterfeiting has made it easier to sell counterfeited goods and ship them directly to consumers, even in bulk. Online marketplaces are the main distribution channels for counterfeits in the EU, with increasing presence of social media platforms.
When it comes to online marketplaces, monitoring and reporting counterfeits and other IP infringements lie mainly with the authentic brands. This is a heavy burden, especially with the need for continuous monitoring across multiple channels.
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