Action against counterfeit watches
Online purchases by consumers

Contents
1.

Introduction ................................................................................................................................. 22.

The counterfeiting phenomenon ................................................................................................... 2

3.

2.1.

General........................................................................................................................................... 2

2.2.

Losses for the watchmaking sector ............................................................................................... 4

2.3.

Action against counterfeit watches ............................................................................................... 5

2.4.

Links between counterfeiting and other criminal activities .......................................................... 7

2.5.

Dangers from counterfeit goods.................................................................................................... 9Counterfeit watches online ........................................................................................................... 9
3.1.

4.

5.

6.

The FH Internet Unit .................................................................................................................... 11

Raising consumers’ awareness .................................................................................................... 18
4.1.

Destruction .................................................................................................................................. 18

4.2.

Awareness-raising campaigns ...................................................................................................... 19

Consumers’ role in counterfeiting................................................................................................ 20
5.1.

The act of purchase...................................................................................................................... 20

5.2.

From purchaser to seller of counterfeit goods ............................................................................ 22

Conclusion .................................................................................................................................. 22-1-

1. Introduction
The Federation of the Swiss Watch Industry FH (FH) is the umbrella association for the Swiss watch
industry, one of the most important sectors of the Swiss economy with exports worth 21.2 billion Swiss
francs, over 3% of Swiss GDP, in 2018. The FH has close to 430 members, including over 90% of Swiss
watch manufacturers. Watchmaking accounts directly for over 57,800 jobs in Switzerland, and probably as
many again indirectly.
Both foreign and Swiss consumers are very much alive to the values of know-how, innovation and tradition
with which the Swiss industry is imbued and which are symbolised by the highly coveted "Swiss Made”
label. Moreover, the Swiss manufacturing industry was generally considered one of the main drivers ofgrowth in the Swiss economy in 2018.
Finally, most of the brands represented by the FH have a strong identity, with iconic models which can berecognised at a glance. These are responsible for the success of the industry, currently a market leader.
While this reputation and success represent one side of the coin, the counterfeiting phenomenon
unfortunately represents the other. The FH is working actively against this scourge of the sector, in every
corner of the globe as well as in Switzerland.

2. The counterfeiting phenomenon
2.1. General
Counterfeiting is a global phenomenon. Barely any product or any country is spared.

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According to numerous reports, including in particular US 1 and European2 customs statistics, China(including Hong Kong) has for many years been the main source of counterfeit products.

All sorts of goods are manufactured there, often in dubious conditions, then sent out throughout the world.
This state of affairs has long been reported in the media, including in Switzerland, and is very well known. 3
According to estimates in the report "Trends in Trade in Counterfeit and Pirated Goods", 4 based on 2016
data, the value of international trade in counterfeit and pirated goods could be as high as 509 billion US
dollars or 3.3% of world trade.
Moreover, according to the joint EUIPO and EUROPOL "INTELLECTUAL PROPERTY CRIME THREATASSESSMENT 2019 " counterfeit and pirated products account for up to 6.8% of imports to the European
Union, with a total value of 121 billion euros. This estimate dates from 2016, with the level risingcontinually in recent years. 5 The same report highlights that luxury goods and accessories are generally
among the categories of products most affected by counterfeiting and that they are always among thearticles most likely to be seized by customs officials. This is due mainly to the large number of smallpurchases ordered online and delivered by post. This aspect will be considered in section 3 below.

1 www.cbp.gov/trade/priority-issues/ipr

2 ec.europa.eu/taxation_customs/sites/taxation/files/report_on_eu_customs_enforcement_of_ipr_2017_en.pdf
3 The terms "contrefaçon chine” [China counterfeit] generate 923,000 results on google.com

4 euipo.europa.eu/ohimportal/fr/web/observatory/trends-in-trade-in-counterfeit-and-pirated-goods
5 euipo.europa.eu/ohimportal/fr/web/observatory/observatory-publications-3-

Furthermore, Switzerland is the country 4th worst affected by counterfeiting, following the United States,
France and Italy.

Source: Statista

2.2. Losses for the watchmaking sector
The counterfeiting phenomenon has not spared the Swiss watchmaking industry. The total number of Swiss
watches exported in 2018, at 23.7 million, remains far below the number of counterfeit watches
manufactured in China. This is estimated as nearly double the figure for Swiss exports, or around 40 million
items.
The watchmaking sector is therefore particularly badly affected by this problem, as confirmed by the 2017
European customs report, which shows that watches are fifth in the list of categories of products seized atborders and that in terms of value they are in fact at the top of the rankings. 6
In addition, a report on “The economic cost of IPR infringement in the jewellery and watches sector" 7 by
the European Observatory on Infringements of Intellectual Property Rights found that:••

The legitimate watchmaking and jewellery industry loses around 1.9 billion euros in annual revenue
as a result of the presence of counterfeit watches and jewellery on the EU market, corresponding
to 13.5% of sales in the sector. (Total sales are estimated at 14.6 billion euros.)
Counterfeiting in this sector causes a loss of sales worth around 3.5 billion euros to the EU
economy, leading to the loss of 28,500 jobs and 600 million euros in government revenues.

6 Op. cit. 2

7 euipo.europa.eu/ohimportal/fr/web/observatory/ipr_infringement_jewellery_and_watches-4-As a substantial majority of watches sold in the European Union are made in Switzerland (8 million items,with a total export value of 6 billion francs), 8 it is reasonable to believe that a large proportion of the losses
have a direct impact on the profits of the Swiss watch export sector and an indirect impact on the revenuesof the cantons and federal government.

Industries worst affected by counterfeiting
Source: Statista

Finally, according to the EUIPO 2019 STATUS REPORT ON IPR INFRINGEMENTS, 9 the total contribution to
the EU economy of sectors which make intensive use of intellectual property rights is equal toapproximately 42% of GDP (5,700 billion euros) and 38% of direct and indirect employment. These sectors,
which include the Swiss watchmaking industry, are therefore essential to the overall economy and should
be protected.

2.3. Action against counterfeit watches
The FH is required under its articles of association to work actively against infringements of intellectual
property rights and acts of unfair competition such as slavish imitations. For this purpose, it has set up an
Anti-Counterfeiting Group, bringing together some fifty brands most affected by counterfeiting. All these

8 www.fhs.swiss/pdf/regions_180112_f.pdf

9 euipo.europa.eu/ohimportal/fr/web/observatory/status-reports-on-ip-infringement-5-companies spend considerable amounts every year, 10 both directly and working with the FH, to protect
their intellectual property rights and particularly to combat counterfeit goods imitating their trademarks.
In pictures: some of the actions we have taken with the help of local public authorities: 11

The FH oversees several thousand police and customs actions in total each year, with the help of partners
and public authorities locally, leading to the confiscation and destruction of over a million counterfeit Swiss
watches on average every year.
These actions are also taken in Switzerland, mainly working with the customs authorities, to which the FH
has submitted applications for intervention on behalf of 25 of its members.
According to our statistics on the brands we represent in Switzerland, the number of seizures at the Swissborders increased until 2016, at the same rate as the growth of e-commerce. The adoption by the Swiss
Federal Council of an austerity programme for customs in 2017 led to a number of job cuts including in thefield of defence of intellectual property rights, leading to a steep decline in the number of seizures.

10 www.valeursactuelles.com/clubvaleurs/economie/exclusif-lvmh-consacre-40-millions-deuros-la-lutte-contre-la-contrefacon-

10786911 Seizures in China, South America and the United Arab Emirates-6-

These figures, which nevertheless remain high for such a small country, show that there is a real demand in
Switzerland for counterfeit watchmaking products and that (as there the Customs check on average only
2% of goods traffic) it is evident from the statistics that many fake watches slip through the net on a daily
basis.

2.4. Links between counterfeiting and other criminal activities
Many reputable studies have recently established that there are links between counterfeiting andorganised crime, 12 and even with terrorist organisations. 13 There are two reasons for this. Counterfeiting
enables rapid generation of profits, estimated as generally increasing sums invested by a factor of 10. The
profit margins are therefore often better than those achieved through drug trafficking, prostitution orother criminal activities. In addition, counterfeiting is considered to be a minor offence in many countries,
with convictions leading only to fines. In consequence, the risks run by counterfeiters are very low incomparison with the profits which can be generated. Counterfeiting has therefore already played a role in
the financing of terrorist activities and is likely to have supported other types of criminal activities, as
highlighted by EUROPOL in its prevention campaigns.

12 www.unicri.it/in_focus/on/2013212_Counterfeitingwww.legalexecutiveinstitute.com/counterfeit-goods-money-laundering-part-1
a-capp.msu.edu/a-capp-center-product-counterfeiting-database-insights-into-converging-crimes
www.oecd.org/publications/charting-illicit-trade-9789264251847-en.htm
www.unodc.org/documents/counterfeit/FocusSheet/Counterfeit_focussheet_EN_HIRES.pdf
iipcic.org/documents/LD_INTERACTIVE_INTERPOL_CASEBOOK_EN_FINALE_pages.pdf
www.mll-news.com/wp-content/uploads/2016/10/3-Musumeci-unicri.pdf
13 www.unifab.com/wp-content/uploads/2016/06/Rapport-A-Terrorisme-2015_FR_42.pdf
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2.5. Dangers from counterfeit goods
According to the most recent EUIPO report, "Qualitative study on risks posed by counterfeits to
consumers", 14 there is evidence that enterprises involved in the production of goods which deliberately
infringe intellectual property rights are not concerned about the quality, or even more important, thesafety of their products. The study shows that these products may contain substances or components that
do not meet European safety requirements and therefore present potential risks to the health and safety of
consumers, thus going against the requirement that only safe products can be placed on the EU market.
These concerns were confirmed by research carried out by Ms Sarah Hochholdinger, at that time a
postgraduate student at the University of Lausanne School of Criminal Sciences. Her report is titled"Elemental analysis for profiling counterfeit watches". 15 Analysis of the chemical composition of a firstbatch of 97 watch bracelets demonstrated the presence of substances such as DBP (dibutyl phthalate), DEP(diethyl phthalate) and BHT (butylhydroxytoluene). These constituents, used as plastifiers, are considered
as dangerous to human health (carcinogenic, allergenic and/or r). Analysis of a second batch, this time of 35
casebands, brought to light levels of lead and nickel significantly above the thresholds provided in Swiss
and European legislation. The most direct effects include the triggering of severe allergies.

3. Counterfeit watches online
The increase in e-commerce means that it is easier for consumers to make purchases online, and they areconsequently more inclined to buy counterfeit goods over the internet. In response to the increased online
demand for counterfeit goods, the supply is also increasing and becoming more varied.
Infringements of intellectual property online are a low-risk crime for fraudsters and the anonymity of the
web benefits them, both by reducing the risks and through the range and diversity of possible sales
channels. We should note that the internet reduces obstacles, with low costs and minimal risk. Use of theinternet for sale of products opens up borders and gives counterfeiters direct access to customers
throughout the world.
Online sales of counterfeit products have long been of mass market proportions. Some counterfeiters earnenormous profits and incomes from this trafficking, and are even proud of their flourishing business (seebelow).

14 euipo.europa.eu/ohimportal/fr/web/observatory/observatory-publications
15 Forensic Science International, Volume 298, May 2019, Pages 177-185-9-

Small parcels, each containing counterfeit watches ready for despatch,
published by a counterfeiter, 2019
Counterfeit goods are increasingly often sold online and the goods are sent abroad using postal services or
express couriers, often in small quantities which are more difficult to detect.
In addition, in most developed countries there are few “open markets” where counterfeit goods can be
freely bought. Buyers therefore tend to make their purchases online from virtual marketplaces or
specialised websites.

- 10 -Example of documentation in a case of a small parcel (Swiss Customs)
The problem of small parcels is therefore making detection at customs, checks and seizures of goods
increasingly difficult. According to research by EUIPO and the OECD, 16 during the period of study close to
63% of customs seizures of counterfeit and pirated goods were of small parcels. According to the European
Commission, 76% of counterfeit goods intercepted in the EU in 2017 were in small parcels sent through thepost and by courier. 17

Examples of counterfeit goods hidden in reconditioned items to avoid detection at the border.

3.1. The FH Internet Unit
The FH responded to these developments as early as 2004 by establishing an Internet Unit which isprincipally concerned with action against counterfeit goods on the internet. In response to the scale of the
problem, the Internet Unit has had to obtain new tools, aiming to develop a comprehensive and effective
approach to tackling counterfeit goods online.
The Internet Unit works to reduce the visibility of counterfeit goods, detect offers of counterfeit goods,
ensure that adverts are withdrawn, close down counterfeiting websites by sending them formal notices todesist, and monitor social media, blogs, forums etc. At the strategic level, it is possible to detect counterfeit
goods automatically, leading to improved detection of networks. To refine action against counterfeit goods,
contacts are required with technical intermediaries at all levels, including web hosts, registrars, financial
intermediaries, sales platforms etc. Contacts have also been established with enforcement agencies, andwith groups involved in prevention of counterfeiting.
Recognising the size of the counterfeiting problem, the FH Internet Unit employs a range of methods totackle it worldwide:- Development of analytical and monitoring tools.
- Seizure of domain names against strong and highly-ranked websites.
- Websites to raise consumer awareness.

16 OECD/EUIPO (2018), Misuse of Small Parcels for Trade in Counterfeit Goods: Facts and Trends, OECD Publishing, Paris,doi.org/10.1787/9789264307858-en

17 euipo.europa.eu/ohimportal/fr/web/observatory/trade-in-fakes-in-small-parcels#- 11 -

1'400'000
1'263'217
1'226'642

1'300'000
1'200'000
1'100'000

Number of withdrawals

1'000'000
900'000
800'000
700'000

603'945600'000
500'000
400'000

306'600
264'609

300'000

179'000

200'000
100'000
0

5'100 10'300

35'000357'825
279'186

156'161

71'0002005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Changes in number of adverts withdrawn
In 2018, the Internet Unit also used its tools to achieve the withdrawal of over a million adverts forcounterfeit goods 18 (see the chart above). The increasing number of withdrawals can be seen to follow asimilar pattern to the increase in the use of the internet for the sale of counterfeit goods.
The Internet Unit works on all the sales channels and approaches available online, including specialised
websites, online e-commerce sales platforms and of course mobile applications and social media.
It has noticed that, since it was set up, there has been a reduction in the use of specialised websites, whilesocial media now play an important role in the sale of counterfeit goods online. As each distribution
channel has its own features, the strategy for action has to be individually adapted to each of them.

18 To be exact, 1.19 million adverts were withdrawn in 2018.

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Some examples:

Example of a specialised website: www.choosereplicawatches.com

Example of an e-commerce platform: www.sahibinden.com- 13 -Example of an e-commerce platform: www.dhgate.com

Example of social media: www.facebook.com- 14 -Example of a mobile application: Wish local (only available as an app)

Example of virtual dials available for smartwatches: facerepo.com/app- 15 -

The Internet Unit finds itself faced increasingly often with new issues that make notification to platforms
more difficult: logos are blurred or hidden by emoticons, or there is no trademark.

Advert on DHGate, with no visible logo
However, the adverts often include coded language enabling the consumer to identify the article ascounterfeit (e.g. "famous brand", "luxury men’s watch"). The description sometimes also specifies that
articles received will be engraved, even though there are no engravings shown on the photos advertising
the articles in question.

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Logo hidden on a Facebook advert

Logo hidden by an emoticon, on a Facebook Marketplace advert
In this type of case, some platforms are however willing to cooperate and offer to withdraw notified
adverts. Others are even trying to implement a proactive approach. There are nevertheless also some
platforms with which it is very difficult to act in this type of case and, although customers may be tricked
into believing that they are buying an unbranded watch, it is very often clear that the purchase implies thepresence of the infringed trademark on the product in question.

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4. Raising consumers’ awareness4.1. Destruction
From time to time, the FH, working with STOP PIRACY, 19 organises the destruction of fake watches seizedby the Swiss customs, with the aim of attracting media attention and raising awareness of the issues
around the counterfeiting of watches.

19 www.stop-piracy.ch- 18 -

4.2. Awareness-raising campaigns
The FH and STOP PIRACY organised Swiss Anti-Counterfeiting Day, an awareness-raising event held at ECAL
in 2013. A number of Swiss artists and filmmakers were rewarded for creations related to action against
counterfeiting.

This is a poster from STOP PIRACY’s 2014 national advertising campaign.

STOP PIRACY also has an anti-counterfeiting stand, and was present in particular at Zurich airport to takeprevention action with holidaymakers 20 and at the Jura careers fair to raise awareness of the problem
among the younger generation. These two groups of people are known to be priority targets forcounterfeiters.

20 www.stop-piracy.ch/StopPiracy/media/_content/PDF/Medienmitteilung-Flughafenaktion-ZRH-2018-FR.pdf- 19 -

The dozens of programmes and reports broadcast by Swiss TV on the subject of counterfeiting, 21
particularly of watches, and the many articles in the press reflect both a certain level of interest from thepublic and the efforts made by the FH and STOP PIRACY to make the issue more widely known.
There have also been many articles in the press in recent years about the dangers of buying watches
online. 22 The press have also informed the general public about the increased use by counterfeiters ofphotographs of products without trademarks or with blurred logos. 23

5. Consumers’ role in counterfeiting
5.1. The act of purchase
The EUIPO survey of "EUROPEAN CITIZENS AND INTELLECTUAL PROPERTY: PERCEPTION, AWARENESS AND
BEHAVIOUR" published in 2017 24 (graphic), conducted with more than 26,000 people, found that, taking allages together, the average percentage who had deliberately bought counterfeit products rose from 4% in2013 to 7% in 2017, and that the level had more than doubled among those aged 15-24, rising from 6% to
15% over the same period.

21 www.rts.ch/play/recherche?query=contrfa%C3%A7on

pages.rts.ch/emissions/abe/9759510-a-bon-entendeur.html#timeline-anchor-segment-9853508

22 www.arcinfo.ch/articles/horlogerie/contrefacons-la-federation-horlogere-met-en-cause-des-pubs-de-facebook-475191

www.arcinfo.ch/articles/horlogerie/contrefacons-horlogeres-nombre-record-d-annonces-retirees-sur-internet-551596
www.tdg.ch/suisse/gare-aux-achats-de-contrefacons-sur-internet/story/16761696
www.bilan.ch/economie/un_milliard_de_francs_perdus_a_cause_des_contrefacons_de_montres_suisses
www.stop-piracy.ch/StopPiracy/media/_content/PDF/LeTemps-21-06-2018.pdf
www.lematin.ch/suisse/Gare-aux-achats-de-contrefacons-sur-Internet/story/16761696
23 www.20min.ch/finance/news/story/Faelscher-hebeln-Schweizer-Uhrenbranche-aus-17895091
24 euipo.europa.eu/ohimportal/fr/web/observatory/ip-perception-2017- 20 -

Another survey conducted by EUIPO "INTELLECTUAL PROPERTY AND YOUTH: SCOREBOARD 2016" 25 also
shows that the four main reasons which might convince a young person not to buy counterfeit goods are
personal, not to say selfish (see below).

These studies show that some consumers willingly and specifically seek to buy counterfeit goods. In
addition, consumers are generally guided mainly by pecuniary motives when they decide to buy forgeries
and it appears that only direct consequences for their rights or their assets could dissuade them.

25 euipo.europa.eu/ohimportal/fr/web/observatory/ip-youth-scoreboard- 21 -

5.2. From purchaser to seller of counterfeit goods
Nowadays there is only a single step between being a purchaser and a reseller, a step which it is becoming
easier and easier to take. There is evidence for this in the ease with which adverts can be placed online withsites such as Ricardo.ch or Anibis.ch in Switzerland and the number of ephemeral online shops created very
easily via e-commerce stores such as Shopify.com. One practice permitted by Shopify is "drop shipping", 26
which is becoming increasingly popular, as it avoids the need for sellers to maintain significant stocks. An
investigation by the Zurich police in 2018 showed that unfortunately Switzerland has not avoided thisdevelopment and private individuals are organising sales of counterfeit goods from Swiss territory. 27

6. Conclusion
In developed countries, the internet has become the principal conduit for orders for fake watches.
Counterfeiters fully understand this and have substantially increased the numbers of offers of counterfeit
products available through internet channels. They have begun to adapt their operating methods in
response to the vigilance of some internet sales platforms, effacing unlawfully used trademarks in photos

26 "Drop shipping" is a three way arrangement in which a customer places an order on the retailer’s website, the retailer thenpasses it to the supplier, and the supplier arranges delivery and manages the stock (source: Wikipedia)

27 www.20min.ch/ro/news/suisse/story/Contrefa-ons-en-ligne--dix-vendeurs-arr-tes-19357996- 22 -

and product descriptions and making more use of coded messages which enable consumers to identify
products as counterfeit.
The explosion of counterfeit products on offer on the internet has also led to a spectacular increase inimports of these products by private individuals. To combat this trend, manufacturers of authentic
products, rights holders, honest consumers and indeed the Swiss economy in general need appropriate
legislation to provide effective legal means to tackle counterfeiting. In recognition of this need, the Swissfederal assembly decided in 2005 to strengthen the various legal provisions on intellectual property rights.
It introduced the new article 13 (2bis) of the Trade mark Protection Act (TmPA) and article 9 (1bis) of the
Designs Act (DesA) specifically addressing the issue of individual imports for private purposes. By excluding
exclusively and solely the possibility of criminal proceedings under article 65a of the TmPA, the Swiss
legislation thereby allows victims access to all the other, civil, measures provided by the TmPA, even in thecase of individual imports for private purposes. Swiss law therefore now offers appropriate and fairsolutions, enabling more effective action to be taken against counterfeiting in Switzerland.

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