Intellectual Property |  Feb 16, 2016

Loss of Sales in the Fashion Industry due to Counterfeit Products

The Office for Harmonisation in the Internal Market (OHIM) and the European Patent Office (EPO), have recently published two reports regarding the impact of counterfeit fashion items on the European Union’s economy. The reports state that 13.5% of jewellery and watches and 12.7% of sales of handbags and luggage are not realised in the EU due to counterfeit products. This means that the job market is suffering relentlessly since genuine manufacturers are recruiting less employees.

The sale of counterfeit products does not only affect the job market but also government revenue across all the Member States. To this end the collection of VAT, social security contributions, corporate income taxes, and household income taxes is also distorted. In fact, the Commerce Department in Malta states that the total loss amounts to approximately €1.1 billion.

Furthermore, one of the studies affirms that when considering the spill over effect, other ancillary industries are also tainted by the sales of counterfeit products. At EU level, the loss can be roughly estimated at €3.2 billion. The main contributors to such losses are France, Germany, Spain and Italy. These Member States are responsible for around two third of the total loss of sales. Fashion designers and high end labels are also sceptical about the astounding technological advancements relating to 3D printing, since this might further facilitate the production of counterfeit products.

The European Observatory on infringements of Intellectual Property Rights is currently carrying out a study with the Organisation for Cooperation and Development (OECD). The main purpose behind this study is to assess and provide an estimation of the value of counterfeit products which are currently being circulated on a world-wide basis. The study shall also include products relating to the media sector, such as music and cinematography. Undoubtedly, this study would contribute to the wealth of information which the Observatory has already gathered in relation to counterfeit fashion products and it would definitely prove to be beneficial for legislators when drafting the necessary policies to hinder the functioning of the black market.

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