The ‘Fakes’ Industry Is Worth $461 Billion: Global Trade In Counterfeit, Pirated Goods Booms

Andrew Galbreath - Author

Apr. 20 2016, Updated 9:07 p.m. ET

Trade in “fakes” and counterfeit goods has become a global industry worth $461 billion, according to a new report from the Organisation for Economic Co-operation and Development published on Monday.

The OECD report, entitled “Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact,” says that counterfeit and pirated products are now worth almost half a trillion dollars a year. To put this astounding figure in perspective, that is 2.5 percent of all global trade in 2013 according to CNN Money, up from an estimated 1.9 percent in 2008, a sum about the size of the economy of Austria. Products with fake brand names, particularly luxury items like shoes, leather accessories, and electronics, were particularly popular in the “fakes” industry, according to CNN.

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“Global data on customs seizures shows Rolex, Nike (NKE), Ray Ban and Louis Vuitton were the brands with the most knockoffs. Footwear is the product counterfeited the most, followed by clothing, leather goods and gadgets, according to the report, which was created in partnership with the European Union’s Intellectual Property Office.”

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The alarming $461 billion figure for import of counterfeit goods is compared to $17.9 trillion in total imports in worldwide trade. American, Italian, and French brands were the hardest hit by fakes, with brands and patents from the United States affected by 20 percent of the knock-offs. Italy came in second at 15 percent, while France and Switzerland had 12 percent each. Japan and Germany both stood at 8 percent.

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The OECD reports analyzed nearly half a million customs seizures from around the world from the years 2011 to 2013. The goal was to estimate the scale of the bootleg trade. Notably, the “fakes industry” has undergone a recent boom.

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“It points to a larger volume than a 2008 OECD study which estimated fake goods accounted for up to 1.9% of global imports, though the 2008 study used more limited data and methodology.”

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The study covered all types of fake goods which infringe on trademarks, brand names, designs, or patents. It did not cover online piracy. China emerged as the single largest producer of fakes, with most coming from middle income or developing countries. Up to 5 percent of goods imported into the European Union are counterfeit.

Counterfeiting not only includes luxury items like footwear, watches, and handbags, but also electronics, food and drink, auto parts, medical equipment, pharmaceuticals, and children’s toys.

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These statistics raise grave safety and health concerns for all the countries of the world, as false products can endanger lives. OECD mentioned cases of “auto parts that fail, pharmaceuticals that make people sick, toys that harm children, baby formula that provides no nourishment and medical instruments that deliver false readings.” Many of the profits also go to fund organized crime.

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“The findings of this new report contradict the image that counterfeiters only hurt big companies and luxury goods manufacturers,” said OECD Deputy Secretary-General Doug Frantz. “They take advantage of our trust in trademarks and brand names to undermine economies and endanger lives.”

Online commerce has emerged as enormously important to the fake goods trade. Postal packages were the most popular method of shipping counterfeit goods, accounting for 62 percent of the seizures over 2011-13. Traffic usually went through complex routes through countries with large amounts of trade such as Hong Kong or Singapore, and free trade zones in countries like the UAE. Organized crime in troubled countries like Afghanistan and Syria were also instrumental in the trade, though the report emphasized that smuggling routes change year by year as counterfeiters spot new market and weak points.

Ultimately, the report warns that bootleg products can also undermine economic growth by ripping off intellectual property and diluting the market.

The data from the OECD study is available for download in Excel on their website.

[Photo by Mario Tama/Getty Images]


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