Counterfeiting is widely referred to a series of illicit activities that are associated with intellectual property rights (IPRs) infringement and is now becoming a common incident affecting a variety of industries and products. What adds to this growing concern is, other than the concern of intellectual property (IP) theft and consumer safety, there are apprehensions that the counterfeit sales directly fund terrorist organisations.
In spite of taking strong steps forward by the concerned stakeholders, including the governments and industry on a variety of fronts to curb this illegal activity, the scope and scale of the counterfeiting problem remains critical. Currently, it is hard to find a single market in almost all economies where counterfeit products are not easily available. Though this proportion tends to be greatest in poor and developing economies, developed countries too are not far behind.
This growing menace does point out a fact that this practice is not only pervasive but also highly networked, causing damage not only to the business and investment opportunities but also creating a downbeat impact on the society and global economy.
The World Intellectual Property Organisation (WIPO), which is responsible for the promotion of the protection of intellectual property throughout the world, estimates counterfeiting is costing the global economy more than US$100bn a year.
According to the World Customs Organisation (WCO), whose mission is to improve the administration of customs, pirated and counterfeit goods account for roughly seven to nine percent of global trade. It estimates that the value of counterfeit trade exceeds US$540bn.
In India, even as the Federation of Indian Chambers of Commerce and Industry’s (FICCI) Brand Protection Committee estimates a loss of Indian Rs 200 billion per annum, the media reports assess the damage to the Indian industry at around Indian Rs 300 billion per annum.
Meanwhile, a 2007 study conducted by the Associated Chambers of Commerce and Industry of
India (ASSOCHAM) estimates that the annual loss of revenue to the Indian government is Rs 150 billion and the loss to the industry is Rs 300 billion.
Moreover, in the country, one of the biggest losers is the Fast Moving Consumer Goods (FMCG) sector, which is losing about Rs 17 billion of revenue annually as a result of counterfeits. The government alone from the FMCG sector is losing about Rs 6 billion by way of unpaid taxes and duties. Likewise, the National Council of Applied Economic Research (NCAER) study, established by the Automotive Component Manufacturers Association of India (ACMA), highlighted that counterfeit auto parts constitute over 37 percent of the total market size of Indian aftermarket parts.
Impact of Counterfeiting Till recently, counterfeiting was by and large considered by most developing economies, due to their sheer ignorance, as a victimless crime that provides the market with a cheap alternative product of a little lesser quality. They were little aware about the fact that such widespread abuse of IP creates health and safety dangers for their consumers, loss of jobs, loss of profit to the genuine manufacturers and, worst of all, largely affects their growing economy. Also, on a long term, the sale of fake goods does considerable financial and reputation damage to manufacturers, traders and trademark owners and undermines consumer confidence in the legitimate products.
Below highlighted are the major impacts that relevant stakeholders face due to counterfeiting.
Consumers generally go for purchasing counterfeit products for variety of reasons like value for price, opportunity to use relatively much cheaper products without worrying about it being damaged, a way to remain trendy, benefit from social status associated with brand, etc. But, hardly does he realise that once a counterfeit product which is lower in quality is purchased, he is more likely endangering his own and his dependents’ health and safety, as many of these products are made with unsafe, untested or sub-standard ingredients and components.
Every year, thousands of consumers suffer accidents and injuries as a result of unregulated counterfeit products.
Further, through such careless illegal purchase, he restricts himself in future to new advanced products as his purchase of fake goods takes away the legitimate profits for the legitimate producers, thus forcing these producers to refrain from any new product research and development.
Of course, it cannot be denied that the consumers do have some initial monetary benefits through such purchases, but the long term negative impacts generally outweigh the limited beneficial impact of counterfeiting.
As said, the prime victims of counterfeiting are largely the genuine business concerns that make and distribute original products. For them, the losses are doubly damaging, particularly in terms of reduced sales and profits. There are also other long term concerns, including loss of sales from consumers in future, who buy the low quality counterfeit products and associate the genuine product too with such poor quality. Moreover, it creates a negative impact on the company’s brand image and the value of the business, thus increasing their marketing expenses for brand protection. The gravity of this crime on industries was clearly highlighted in a recent study ‘The Effects of Counterfeiting and Piracy on India’s Entertainment Industry’, prepared for the US-India Business Council (USIBC) by Ernst & Young India, which estimates that the Indian entertainment industry loses some 820,000 jobs and about US$4bn each year to counterfeiting and piracy.
Another adverse consequence of counterfeiting is on the economy as a whole. The easy availability and production of counterfeit products in a particular country would alert vigilant consumers throughout the world about the product quality of that particular product and similar such products manufactured in that country. This would gradually affect the business and trading environment of the economy. For instance, most of the countries, both developed and developing, are now putting a strict vigil on products imported from China, since many counterfeit products are made in China.
Also, counterfeiting does create a big impact on the employment across the economies. Studies suggest that yearly millions of jobs have been destroyed by counterfeiting and piracy. Instead, if counterfeiting and piracy could be eradicated, or seriously curbed, then the same number of jobs could be created all around the globe.
In spite of taking strong steps forward by the concerned stakeholders, including the governments and industry on a variety of fronts to curb this illegal activity, the scope and scale of the counterfeiting problem remains critical. Currently, it is hard to find a single market in almost all economies where counterfeit products are not easily available. Though this proportion tends to be greatest in poor and developing economies, developed countries too are not far behind.
This growing menace does point out a fact that this practice is not only pervasive but also highly networked, causing damage not only to the business and investment opportunities but also creating a downbeat impact on the society and global economy.
The World Intellectual Property Organisation (WIPO), which is responsible for the promotion of the protection of intellectual property throughout the world, estimates counterfeiting is costing the global economy more than US$100bn a year.
According to the World Customs Organisation (WCO), whose mission is to improve the administration of customs, pirated and counterfeit goods account for roughly seven to nine percent of global trade. It estimates that the value of counterfeit trade exceeds US$540bn.
In India, even as the Federation of Indian Chambers of Commerce and Industry’s (FICCI) Brand Protection Committee estimates a loss of Indian Rs 200 billion per annum, the media reports assess the damage to the Indian industry at around Indian Rs 300 billion per annum.
Meanwhile, a 2007 study conducted by the Associated Chambers of Commerce and Industry of
India (ASSOCHAM) estimates that the annual loss of revenue to the Indian government is Rs 150 billion and the loss to the industry is Rs 300 billion.
Moreover, in the country, one of the biggest losers is the Fast Moving Consumer Goods (FMCG) sector, which is losing about Rs 17 billion of revenue annually as a result of counterfeits. The government alone from the FMCG sector is losing about Rs 6 billion by way of unpaid taxes and duties. Likewise, the National Council of Applied Economic Research (NCAER) study, established by the Automotive Component Manufacturers Association of India (ACMA), highlighted that counterfeit auto parts constitute over 37 percent of the total market size of Indian aftermarket parts.
Impact of Counterfeiting Till recently, counterfeiting was by and large considered by most developing economies, due to their sheer ignorance, as a victimless crime that provides the market with a cheap alternative product of a little lesser quality. They were little aware about the fact that such widespread abuse of IP creates health and safety dangers for their consumers, loss of jobs, loss of profit to the genuine manufacturers and, worst of all, largely affects their growing economy. Also, on a long term, the sale of fake goods does considerable financial and reputation damage to manufacturers, traders and trademark owners and undermines consumer confidence in the legitimate products.
Below highlighted are the major impacts that relevant stakeholders face due to counterfeiting.
Consumers generally go for purchasing counterfeit products for variety of reasons like value for price, opportunity to use relatively much cheaper products without worrying about it being damaged, a way to remain trendy, benefit from social status associated with brand, etc. But, hardly does he realise that once a counterfeit product which is lower in quality is purchased, he is more likely endangering his own and his dependents’ health and safety, as many of these products are made with unsafe, untested or sub-standard ingredients and components.
Every year, thousands of consumers suffer accidents and injuries as a result of unregulated counterfeit products.
Further, through such careless illegal purchase, he restricts himself in future to new advanced products as his purchase of fake goods takes away the legitimate profits for the legitimate producers, thus forcing these producers to refrain from any new product research and development.
Of course, it cannot be denied that the consumers do have some initial monetary benefits through such purchases, but the long term negative impacts generally outweigh the limited beneficial impact of counterfeiting.
As said, the prime victims of counterfeiting are largely the genuine business concerns that make and distribute original products. For them, the losses are doubly damaging, particularly in terms of reduced sales and profits. There are also other long term concerns, including loss of sales from consumers in future, who buy the low quality counterfeit products and associate the genuine product too with such poor quality. Moreover, it creates a negative impact on the company’s brand image and the value of the business, thus increasing their marketing expenses for brand protection. The gravity of this crime on industries was clearly highlighted in a recent study ‘The Effects of Counterfeiting and Piracy on India’s Entertainment Industry’, prepared for the US-India Business Council (USIBC) by Ernst & Young India, which estimates that the Indian entertainment industry loses some 820,000 jobs and about US$4bn each year to counterfeiting and piracy.
Another adverse consequence of counterfeiting is on the economy as a whole. The easy availability and production of counterfeit products in a particular country would alert vigilant consumers throughout the world about the product quality of that particular product and similar such products manufactured in that country. This would gradually affect the business and trading environment of the economy. For instance, most of the countries, both developed and developing, are now putting a strict vigil on products imported from China, since many counterfeit products are made in China.
Also, counterfeiting does create a big impact on the employment across the economies. Studies suggest that yearly millions of jobs have been destroyed by counterfeiting and piracy. Instead, if counterfeiting and piracy could be eradicated, or seriously curbed, then the same number of jobs could be created all around the globe.
Freelance Financial Consultant
kisorejeetrk@rediffmail.com
kisorejeetrk@rediffmail.com
