Existing quantitative analysis of illicit trade in counterfeit and pirated goods indicates that the range of products that are subject of counterfeiting is very broad and keeps widening (OECD/EUIPO, 2021b[1]). Any product for which intellectual property (IP) adds economic value to rights holders becomes a target for counterfeiters; the counterfeiting thus affects not only luxury goods, but also intermediate products and a wide range of common consumer products. For all these goods counterfeits cause economic damage by destroying jobs, stealing profits and lowering innovation incentives.
At the same time, for some products, counterfeits are often of low quality, which creates significant risks for consumers. These include health risks (e.g. fake pharmaceuticals, toys or food products), safety risks (e.g. fake automotive spare parts, fake batteries) and environmental risks (e.g. fake chemicals or pesticides). For all these products, legitimate suppliers must comply with health, safety or environmental regulations to make sure their products will cause no harm or damage. Counterfeiters are not bound by these regulations and consequently, the fake goods that they offer can pose significant health, safety and environmental risks.
In addition to damaging health and safety risks, counterfeiting has wide-ranging damaging economic effects. The OECD and EUIPO have already carried out a study on counterfeiting and piracy in the pharmaceutical sector which documents the damaging effects on economies. This study complements the work that has been done, with follow up analysis that looks at the health, safety and environmental risks posed by fakes in a number of sectors including food products and personal protective equipment, where fakes are often substandard and are stored and transported in poor conditions, which can pose serious health risks to consumers. The study also looks at toys and batteries, where fakes are sometimes produced without observing any safety norms, and hence can pose significant hazards. Lastly, it looks at chemicals and pesticides, where fake products which are not in accordance with environmental regulations can lead to significant environmental damage.
Measuring the magnitude and scope of counterfeiting is in general difficult due to the clandestine nature of this phenomenon. While major progress has been made on measuring its prevalence in international trade, as the result of the econometric work carried out by the OECD and EUIPO, work on the dangers posed by counterfeit products is lacking, relying predominantly on anecdotal information.
This study carries out an in-depth analysis of counterfeiting and piracy for a range of goods with elevated health safety or environmental risks. It provides detailed information on the value of counterfeit trade in such goods, including analysis of the volumes and composition of these products. The report maps the key trade routes used to distribute the fake products and also examines the different types of health and safety risks caused by counterfeits.
The analysis is carried out in two steps.
The first step determines the types of products which are most prone to causing health, safety and environmental risks. It i) describes the methodologies employed by governments to assess the potential risks a product can pose to consumers (i.e. whether or not they are counterfeit), ii) examines the harm that substandard counterfeit products has actually caused to consumers across a broad range of products, iii) describes how adulterated counterfeit products, in particular software, can seriously undermine personal security, iv) assesses the damaging effects that counterfeit products have on the environment and v) reviews the types of genuine products that have been subject to recalls and safety alerts, as revealed in public databases, as those products which are most frequently subject to recalls may also be those for which counterfeit products pose particular risks.
The second step relies on the GTRIC methodology (see Annex A) developed for previous EUIPO/OECD studies. This methodology is applied to develop an estimation of total value of counterfeit trade in fakes that pose health, safety or environmental risks, and is then used to develop a mapping of key trade routes of these products, from production points to the destination markets (including modes of transports and intermediary points). Evidence of the modes of transport abused in trade of such goods is also explored.
The quantitative analysis is based on the period before the COVID‑19 pandemic. The pandemic has significantly reshaped both licit trade and trade in counterfeit goods, however given the fast pace of changes, a precise quantitative analysis of these effects has not yet been possible.
In summary, this study sheds light on trade in unsafe fake goods posing health, safety or environmental risks. Individual concerns about possible negative health and safety risks related to consumption of counterfeits can affect demand for counterfeits. In fact, existing studies suggest that individual health and safety concerns are very effective deterrents for consumers who consider purchasing counterfeit products. However, as shown in EUIPO’s study “European Citizens and Intellectual Property: Perception, Awareness and Behaviour”, very often consumers are unaware that they are buying a counterfeit. Hence, robust, and complete information about the health and safety risks posed by counterfeits could feed into effective awareness campaigns, and consequently reduce demand for fakes. Consequently, the study could be used by policymakers in developing awareness campaigns, and could enhance understanding of the need for including anti-counterfeiting elements in shaping health policies, environmental policies.