Counterfeits shaving billions off Italian economy

The equivalent of up to 2 per cent of Italy’s Gross Domestic Product is being siphoned off in the illicit trade of counterfeit luxury Italian goods, a new report reveals.

According to the report Trade in Counterfeit Goods and the Italian Economy, by the Organisation for Economic Co-operation and Development (OECD), fakes of Italian products such as luxury handbags, watches, foodstuffs, clothing, perfumes and cosmetics generated an estimated global market worth more than €35bn in 2013, equivalent to 4.9 per cent of global Italian manufacturing sales.

This resulted in more than €25bn in lost sales by Italian companies, taking a bite out of Italy’s economy equivalent to around 1-2 per cent of GDP. In 2013, Italy’s GDP was €1.6trn.  

The OECD described Italy’s high-quality goods as “especially vulnerable” to the threat from counterfeits.

“The Italian economy is innovative and rich in intellectual property, with nearly every industry either producing or using IP [and] Italian IP-intensive industries are very well integrated in the global economy, through active participation in global value chains,” the OECD said. “At the same time, the threats of counterfeiting and piracy are growing… US, Italian and French brands are among the hardest hit, and with an economy that thrives on producing high-value products, protected by intellectual property rights and trademarks, Italy is especially vulnerable.”

According to the report – which measures the economic effects of counterfeiting on Italy’s consumers, retail and manufacturing industry and government – the knock-offs infringing Italian IP are mainly manufactured in Turkey, China and Hong Kong.

More than half of the Italian fakes traded worldwide were sold to unsuspecting consumers who believed they were buying genuine goods, the report noted. For food this reached 85 per cent.

Besides looking at the scale and effects of global trade in counterfeit goods that infringe on Italian IP, the report also examined the impact of fake good imports on the country.

The report found that in 2013, fakes imported to Italy were worth more than €10bn, accounting for 3 per cent of imports into the country, which resulted in foregone domestic sales by Italian wholesalers and retail outlets of around €7bn.

Information and communications technology (ICT), in absolute terms, were the most counterfeited type of goods smuggled into the country, with an estimated value of €2.3bn. Although handbags, toys, games and clothing were most targeted by counterfeiters, with fakes accounting for 15.3 per cent, 14.3 per cent and 13.4 per cent, respectively, of Italian imports from these product categories.

In terms of market share, the biggest losses due to fake imports were in the watch and jewellery sector, where the counterfeit market caused a 7.5 per cent loss in sales, the report said.

The fake items were found to be imported mainly from China (50 per cent) and Hong Kong (29 per cent), followed by Greece (6 per cent), Singapore (4 per cent) and Turkey (2 per cent).

The analysis also found that around half of imported counterfeit and pirated goods in Italy in 2013 were sold to consumers who actually knew they were buying fake products, with the remaining share purchased unwittingly. However, the share of fakes bought knowingly in Italy varied significantly by product, ranging from 15 per cent for foodstuff to 60 per cent for watches and ICT devices.

The report also considered the broader impact on the government and economy of counterfeit trade and found that the combination of trade in fake Italian products and imports of counterfeit goods resulted in a loss of public revenues in the country of almost €10bn.

In addition, counterfeiting and piracy led to the loss of at least 87,000 jobs in Italy in 2013, which represents 2 per cent of the country’s full-time equivalent employees.

The report looking at the two aspects of Italian IP infringement and the import of counterfeits into the country was based primarily on a quantitative assessment of global trade in counterfeit products within and outside the Italian economy, using a database on seizures of counterfeit products, compiled from various sources.

The OECD said: “The findings can help both public and private sector decision makers better understand the nature and scale of the problem for the Italian economy, and develop appropriate, cohesive and evidence-based policy responses.”

The organisation added that it was working with governments to address gaps in regulation and poor law enforcement that enabled the illicit trade to flourish.