Opinion of the European Economic and Social Committee on ‘The counterfeit and pirated products industry’ (own-initiative opinion)
Date: 2017-07-05
Institutions: European Economic and Social Committee
Subjects: consumer information, customs inspection, electronic commerce, fight against crime, fraud, illicit trade, industrial counterfeiting, single market








C_2017345EN.01002501.xml










13.10.2017   


EN


Official Journal of the European Union


C 345/25





Opinion of the European Economic and Social Committee on ‘The counterfeit and pirated products industry’
(own-initiative opinion)
(2017/C 345/04)






Rapporteur:



Antonello PEZZINI





Co-rapporteur:



Hannes LEO











Plenary assembly decision


26.1.2017




Legal basis


Rule 29(2) of the Rules of Procedure




 


Own-initiative opinion




Body responsible


Consultative Commission on Industrial Change (CCMI)




Adopted in CCMI


22.6.2017




Adopted at plenary


5.7.2017




Plenary session No


527




Outcome of vote
(for/against/abstentions)


119/0/0




1.   Conclusions and recommendations









1.1.


The European economy is increasingly based on creativity and innovation. Intellectual property rights (IPR) intensive industries in Europe account for 39 % of the EU’s GDP and 26 % of its employment (1). The EESC considers that businesses must enjoy a series of conditions that facilitate innovation, investment and employment.












1.2.


According to estimates from the UN (2) and OECD, counterfeit products represent 5-7 % (UN) or up to 2,5 % (OECD) of world trade. The majority of counterfeit products in Europe are produced outside the EU, but production is also on the rise in Member States. The internet has considerably simplified and massively increased the scope for selling counterfeit products online while the risk of being prosecuted remains very low.












1.3.


The counterfeit industry takes advantage both of differences in the effectiveness of customs controls at key entry points to the single market and of the fragmented and variable nature of the national implementation of EU rules and standards, facilitating the entry into the EU of products that endanger consumers’ health, public safety and security and the competitiveness of businesses.












1.4.


Consequently, a fully-functioning and interoperative Customs Union must ensure the efficient operation of the new system introduced by the customs code, protecting businesses from unfair competition, especially from the global counterfeit and pirated products industry — not only in the interests of business but because it has direct implications for global health, safety and security, as well as economic growth.












1.5.


In the EESC’s view, given that two kinds of counterfeiting must be distinguished — ‘counterfeiting’ as infringement of IPR, i.e. pure unfair competition with no threat to safety and public health, and ‘counterfeiting crime’ as a criminal act, as defined by the Medicrime Convention (3) — stamping out counterfeiting and piracy should be a key EU priority not only with a view to ensuring the healthy growth of free world trade without protectionism, but also in view of the professionalisation of organised crime in the trade in counterfeit and pirated products and the risks posed to consumers. This could involve appropriate criminal proceedings to discourage such ‘counterfeiting crime’ activities.












1.6.


In order to reduce the negative impact of the growing volume of counterfeited and pirated goods on the market, measures must be taken at sectorial, national, European and multilateral level to counter:






—


the failure to build up production and investments;










—


damage to image and quality, including technical non-conformity, fake conformity or compliance certificates and false conformity markings, and the mis-use of such certificates and markings;










—


the risks to health, safety and the environment;










—


the absence of any type of certification, standards and quality checks for counterfeit goods;










—


the loss of jobs and failure to create new businesses;










—


lost fiscal and parafiscal revenue;










—


growing problems in the area of security and tackling organised crime, including terrorism financing.
















1.7.


The EESC is convinced that a joint effort is needed by all public and private actors to identify and implement a joint strategy of coordinated measures aimed at preventing, detecting and combating this phenomenon, supported by an appropriate common technical and legislative framework.












1.8.


The EESC considers however that the initiative is primarily a matter for the EU private sector comprising the industries and service providers who are most concerned — as well as the whole value chain, with the involvement of right holders and SMEs — while the European Commission has to update the regulatory framework for IPRs in order to modernise the existing rules and adapt the criminal law options currently available in the EU and its Member States. Together they should build up a strong joint impetus, from the source through the entire supply chain, identifying interoperative mechanisms for international cooperation and monitoring of suppliers/clients, in order to minimise the risk of counterfeiting in the supply chain.












1.9.


Stronger joint action by the private sector is crucial, in the EESC’s view, to ensuring effective partnerships with the internet site providers, content producers, brand owners, electronic payment operators, advertisers/advertising networks and internet domain registers, and voluntary memorandums of joint action, that are able to generate rapid adjustments to sudden market changes.












1.10.


Robust promotion by the private sector should be flanked by public measures such as:






—


the development of new para-judicial techniques to curtail the growing trade in counterfeit products, allowing for private/public collaboration to optimise customs intervention by means of marking and traceability,










—


interoperative detection systems that communicate with automatic risk management systems based on suitable technologies, enabling e-commerce owners and right holders to identify and prevent infringements,










—


introduction of a new 2018-2021 strategic plan with a renewed and better-coordinated framework for action, relying on appropriate financial resources, with greater transparency and forward-looking capacity, more fine-tuned intelligence techniques, an ‘EU Notorious Countries List’, the implementation of strengthened onsite IPR desks, including efforts to combat counterfeiting crime, and more advanced market surveillance instruments (interactive database) with an effectively common customs service, in line with the proposal for a Directive on the Union legal framework for customs infringements and sanctions (4);










—


initiatives to provide better statistics and analysis on the scale and impact of counterfeiting.
















1.11.


The EESC considers that a European anti-counterfeiting campaign should be financed, including a European Anti-Counterfeiting Day and a special telephone hotline, highlighting:






—


the serious loss that the entry onto the market of counterfeited and pirated products and their purchase causes for entire sectors of the economy, for health, the environment, European innovation and creativity, and for employment, public revenues and economic growth as a whole;










—


the need for substantial efforts to improve the database on counterfeit products and in the assessment of related production and jobs losses in order to design appropriate policies. At present, the statistical basis and econometric estimates need to be more accurate, reliable and comparable.
















1.12.


The EESC views closer coordination of the various European Commission services with the European agencies involved in the issue with their counterparts in Member States to be essential. This can be achieved by supplying sufficient resources for cooperation across Europe and efforts to establish a true culture of cooperation. Setting up a central counterfeiting task force for an adequate period of time should help to effectively achieve this objective.












1.13.


The EESC urges the Council and the EP, as a matter of urgency, to prevail upon the European Commission to:






—


follow through rapidly with the technological and structural measures and the new 2018-2021 Action plan against counterfeited and pirated products;










—


support more robust joint action by the private sector, with rules and structures that ensure that free international trade develops on a fair and proactive basis.








2.   Introduction: nature and quantitative and qualitative characteristics of the phenomenon









2.1.


To define the subject of the present opinion, reference is made to the counterfeiting concepts set out in Regulation (EU) No 608/2013. ‘Electronic and digital piracy’, trade and the dissemination of IT software or illegal files, in violation of the relevant intellectual property laws, do not fall within the scope of this opinion, since they are closely linked with the Digital Agenda, for which the EESC has set up a dedicated Permanent Study Group.












2.2.


Quantifying the counterfeiting phenomenon is a complex task, since, as in all spheres of illegal activity, the data available are too heavily based on estimates and approximations, given that counterfeiting channels are for the most part controlled by criminal organisations, which have shrewdly identified the huge potential of this type of illegal activity, with minimal risks of being caught.












2.3.


In recent years, the types of goods targeted by counterfeiting have multiplied to the extent that no products now exist which cannot be imitated and sold: everything is copied, from clothing accessories, to mechanical spare parts and tools, building materials and equipment, jewellery, footwear, design objects, toys, cosmetics, and medicines, and fake goods would now appear to constitute a parallel sector in their own right, a real competitor which businesses must pit themselves up against and from which they must defend their market share.












2.4.


Ease of purchase often means that consumers choose counterfeit products, with serious repercussions on businesses, particularly SMEs; poorly regulated and difficult to control, e-commerce and online auctions represent an effective and secure way of establishing a wide customer base and trading in low-cost counterfeit goods.












2.5.


Counterfeiting has become one of the main facilitators and financers of organised crime. The involvement of criminal organisations has resulted in a drastic increase in the level of professionalism in the counterfeiting industry: organised criminals have developed the networks necessary to enable them to optimise their results on a global scale.












2.6.


The production of counterfeit goods is generally considered an external phenomenon: customs statistics clearly show that the majority of countries from which counterfeit products originate are not members of the EU. China, although having made the greatest commitment to stamping out counterfeiting, remains one of the industry’s key players.












2.7.


The rise of the internet has created new distribution channels for counterfeit products involving a low risk for the seller due to the difficulties in prosecuting intermediaries in the value chain. Greater cooperation is needed along the whole value chain to effectively tackle trade in counterfeit goods online.












2.8.


IPR-intensive industries in Europe account for 39 % of the EU’s GDP and 26 % of its employment (5). According to recent studies (6), counterfeit goods represent between 5 and 7 % of world trade, which amounts to roughly EUR 600 billion per year, while the OECD (7) put the value of imported fake goods at 2,5 % of international trade in 2013, equivalent to EUR 338 billion, and estimates that up to 5 %, or EUR 85 billion of goods imported into the EU are counterfeit or pirated, excluding those produced and sold within a single Member State, and those bought on the internet and through indirect economic activity.












2.9.


According to other international statistics from 2017 (8) the global trade in counterfeit and pirated goods is estimated to generate between USD 923 billion and USD 1,13 trillion annually.












2.10.


The production of counterfeit goods, including on a large scale, is on the rise in Member States as counterfeiters attempt to circumvent customs controls at the EU’s external borders.












2.11.


The placing on the market of counterfeit and pirated products causes enormous damage to the economy, facilitating the development of an ‘underground economy’, which deprives (9) of the revenue required for essential public services and places a heavier tax burden on taxpayers, with regular job losses.












2.12.


In the EU, counterfeiting is responsible for roughly 800 000 job losses per year and roughly EUR 14,3 billion in annual tax revenue losses, including VAT and excise duties (10).












2.13.


The EP has adopted a series of resolutions on the subject, in particular its Resolution of 9 June 2015 (11), in which it recommended pursuing an approach which brings together all actors in the fight against counterfeiting, raising awareness among consumers and providing them with more information, developing new trade models, improving defence mechanisms for SMEs, promoting a convergence of interests between Member States and third countries and making greater use of data collected by the European Union Intellectual Property Office (EUIPO).












2.14.


On 19 March 2013, the Council adopted a Resolution on the EU Customs Action Plan to combat intellectual property rights infringements (2013 to 2017), setting out clear objectives, earmarking appropriate resources and defining result and performance indicators according to a clearly defined road map on:






—


the implementation and monitoring of new legislation to enforce intellectual property rights;










—


measures to tackle the infringement of intellectual property rights in the trade of goods and services;










—


cooperation with the key source, transit and destination countries so as to combat illegal trade along the entire international supply chain;










—


increased cooperation with EUIPO and law enforcement authorities.
















2.15.


On 18 May 2017, the Council conclusions on setting the EU’s priorities for the fight against organised and serious international crime 2018-2021 underline that ‘the criminal markets are increasingly complex and dynamic[…]. […] Special attention should therefore be given to the online trade in illicit goods and services, including counterfeit goods[…]’.




3.   International overview









3.1.


Customs statistics clearly show that the majority of countries from which counterfeit products originate are not members of the EU, given that key players in the counterfeiting industry include not only China and Hong Kong, but also other Asian countries specialised in specific sectors: India in pharmaceuticals, Egypt in food products and Turkey in perfumes, cosmetics and footwear, along with Malaysia, Belarus, the United Arab Emirates, Indonesia, Thailand and the Philippines.












3.2.


In 2014 EU Customs statistics revealed that more than 66 % of textile and clothing counterfeit products came from outside the EU.












3.3.


Transit points for the transport of goods from Asia to Europe play a particularly important role, since they act as central zones for the transport of goods containers in a network of 3 000 free zones located in 135 different countries. These areas are used as a place to exchange, document and relabel the contents of containers.












3.4.


Another factor to take into account is the considerable rise in the domestic production of counterfeit and pirated goods in the EU, an activity which, according to Europol, is becoming more and more profitable for organised criminals and which carries much lower risks and is linked with other types of crime, such as fraud, document forgery, tax evasion and human trafficking.












3.5.


With the relocation of counterfeit and pirated goods production facilities to within the EU, the resulting lower transport costs and reduced risks of interception, and the development of well-organised criminal networks with adequate resources, a new model appears to be emerging: the expected expansion of the Tanger Med free zone in Morocco, only 15 km away from the EU, could offer criminal networks further opportunities to place larger quantities of counterfeit goods on the European market.












3.6.


The countries whose businesses were most affected by counterfeiting activities between 2011 and 2013 are the US at 20 %, Italy at 15 %, France and Switzerland at 12 %, Japan and Germany at 8 %, the UK and Luxembourg. Indirect losses and additional costs incurred for new design/innovation solutions due to counterfeiting activities should also not be underestimated.




4.   Combating counterfeiting and piracy in the single market









4.1.


The EESC strongly calls on the Member States to introduce measures aimed at:






—


strengthening national anti-counterfeiting measures and legislation, promoting the harmonisation of legislation at EU level, developing efficient frameworks for administrative inspection of counterfeit goods and adapting the criminal law options available in the Member States;










—


ensuring common high levels of implementation of European legislation at national level through the exchange of best practices;










—


tasking the competent authorities with collecting comparable statistical data, including on the links between counterfeit products and deaths or accidents, e.g. by groups of products;










—


devising policies to monitor, control and prevent more effectively the risks posed by counterfeit products to public health;










—


empowering consumers, via smartphone technology, to make their own judgement as to the authenticity of their goods and to be able to verify and check the features and the value and safety of what they buy;










—


improving communication with consumers, warning them of the risks of counterfeit products and showing them how to use new methods to recognise fake goods with ease: consumer awareness should be raised, and national information and education campaigns should be pursued;










—


involving local actors, intersectoral groups and consumer associations more actively in the fight against counterfeiting at national level, in particular by means of information campaigns;










—


giving customs officers sufficient means and resources and appropriate training in methods and policies for detecting counterfeit products;










—


facilitating the registration of trademarks, models and other intellectual property rights for SMEs, while maintaining a high level of technical standards and of IRP.
















4.2.


The EESC calls for a new EU framework 2018-2021, including a fully financed and coordinated Action Plan with a view to strengthening anti-counterfeiting legislation and initiatives at EU level, through measures such as:






—


accelerating the establishment of a single European customs system, through shared procedures, instruments and unified databases which can be consulted immediately;










—


adopting common criteria for collecting statistics, while emphasising sectoral initiatives as there are no ‘one size fits all’ solutions;










—


promoting innovative tracking and monitoring applications;










—


implementing more robust European coordination, in order to bring standards in the fight against counterfeiting up to the same levels in all Member States;










—


stepping up intelligence activity and bilateral law enforcement agreements along the entire supply chain, including with the help of an expanded EU-IPR desk on location;










—


taking immediate steps to promote the simplified EU framework for support and assistance to European SMEs;










—


including anti-counterfeiting clauses in new FTAs;










—


implementing and coordinating preventative measures at international level to monitor the 3 000 free zones and the entire supply chain;










—


tasking the competent EU authorities with collecting fully comparable statistical data on the links between counterfeit products and deaths or accidents;










—


establishing common EU measures to control and prevent more effectively the risks posed by counterfeit products to public health;










—


improving EU communication with consumers and alerting and teaching them how to identify these products (JRC model);










—


encouraging the EU business community to pool information more effectively on problems linked to counterfeiting and to step up measures designed to combat counterfeiting, such as special telephone hotlines for consumers and improved data management systems;










—


taking coordinated action on e-commerce (payment methods and advertising) and adopting common specific rules to monitor the sale of medicines and other sensitive products online involving operators, interprofessional groups and consumer associations;










—


developing the counterfeiting-crime approach against criminal organisations and their impact on safety, public health and security, taking established legal principles connected with the Medicrime Convention and extending them to industrial counterfeit products associated with safety and public health risks;










—


together with EMA, Europol, EFSA and ENISA, drawing up specific rules for monitoring sales of medicines, foodstuffs and other sensitive products on the internet;










—


assessing the role intermediaries can play in the protection of IPRs, including in relation to counterfeit goods, and considering amending the specific EU legal framework for enforcement (12);










—


developing and supporting a strong European anti-counterfeiting campaign inside and outside the internal market in parallel with the national ones;










—


promoting a joint technological initiative (JTI) on counterfeiting, under Horizon 2020;










—


allocating appropriate funding to the measures adopted within this New Action Plan 2018-2021.








5.   Ensuring optimum governance









5.1.


It is essential, in the EESC’s view, to ensure closer coordination of the various Commission services and the European agencies involved in the issue. This can be achieved by setting up a task force reporting directly to the Commission president, able to interact with the relevant private sector segments, international bodies and the competent Member State authorities.












5.2.


This counterfeiting task force should present an all-embracing annual report on progress made in technological, structural and regulatory spheres, especially at international level.












5.3.


The European Commission and the European agencies, especially the EUIPO, Europol and OLAF, as well as NGOs involved in stamping out counterfeiting, need to step up their international coordination, by holding annual international conferences.





Brussels, 5 July 2017.


The President of the European Economic and Social Committee

Georges DASSIS




(1)  Joint EPO-OHIM report on IPR-intensive industries in the EU, September 2013.

(2)  http://www.springer.com/978-1-4614-5567-7 United Nations Office on Drugs and Crime (UNODC).

(3)  http://www.coe.int/en/web/conventions/full-list/-/conventions/treaty/211

(4)  http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.C_.2016.487.01.0057.01.ENG&toc=OJ:C:2016:487:TOC

(5)  Joint EPO-OHIM report on IPR-intensive industries in the EU, September 2013.

(6)  UNODC, The Globalisation of Crime. A Transnational Crime Threat Assessment.


(7)  OECD/EUIPO (2016), Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact.


(8)  Global Financial Integrity, Transnational Crime and the Developing World, March 2017 (statistics confirmed by WAITO — April 2017).

(9)  In 2013, an estimated EUR 90 to 120 billion in lost tax revenue — Frontier Economics — 2016.

(10)  Sectoral studies on nine sectors affected by counterfeiting: cosmetics and personal care; clothing, shoes and accessories; sports products, toys and games; jewellery and watches; bags; recorded music; wine and alcohol; pharmaceuticals.

(11)  Europarl P8_TA(2015)0219 — 09/06/2015 — http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-2015-0219&language=EN&ring=A8-2015-0161

(12)  See COM(2016) 288 final.