ECONOMY

Commission call to fight counterfeiting

«Product counterfeiting and piracy have become more attractive activities than the drug trade, because significant profits can be made without an excessive fear of sanctions,» says the European Commission in a recent document, a directive proposal that would impose bigger penalties on counterfeiting and increase copyright protection. The Commission also points out that these activities have moved from the small-scale to the large-scale stage and that they are a major conduit for the laundering of money earned in other illegal activities. Counterfeiting and piracy hit both enterprises, which lose turnover and profits, and states, which see their official GDP decline, lose tax revenues and find their borrowing requirements increase. These activities keep expanding into new sectors. How much money is lost, or rather drained, from official channels? The best guide is a study made a couple of years ago on behalf of the Global Anti-Counterfeiting Group (GACG), a Paris-based agency set up by individual companies, industry federations, chambers of commerce and local anti-counterfeiting associations. According to the study, the EU’s clothing and footwear sector loses each year, on average, 1.27 billion euros in profits alone, the cosmetics sector 555 million, the toys and sports equipment sector 627 million euros and the pharmaceuticals sector, 292 million. The same study also estimates that at least 17,000 jobs are lost each year in the EU because of counterfeiting activities. Member states lose billions of euros in forfeited taxes; 7.6 billion euros annually from clothing and footwear products, 3 billion euros from cosmetics and 100 million euros in photographic equipment, to give a few examples. Another study, undertaken in 2000, showed that software piracy cost EU companies $3 billion annually and that the music and other audiovisual industries were losing another $4.5 billion. A 1999 UK government study concluded that the country’s GDP was reduced by 143 million pounds sterling per year as a result of counterfeiting and that public sector borrowing requirements rose by 77 million pounds. All these numbers are certainly much higher now. Material losses are just part of the problem, the Commission says. Piracy and counterfeiting are also detrimental to firms’ reputation and «dissuades creators and inventors and endangers innovation and creativity.»