Counterfeit goods get boost from pandemic, new report confirms

The latest Intellectual Property Crime Threat Assessment, produced jointly between Europol and the European Union Intellectual Property Office (EUIPO), on March 7 reveals that the distribution of counterfeit goods has been thriving during the COVID-19 pandemic. The health crisis has presented new opportunities for trade in counterfeit and pirated products, and criminals have adjusted their business models to the meet the new global demand.

The report, based on EU-wide data and Europol’s operational information, confirms that counterfeiting and piracy continue to pose a serious threat to the health and safety of consumers, as well as to the European economy. Imports of counterfeit and pirated goods reached EUR 119 billion in 2019, representing 5.8 % of all goods entering the EU, according to the latest data from OECD and EUIPO. 

In addition to the categories of counterfeited clothes and luxury products seized, there is a growing trade in fake products which have the potential to damage human health, such as counterfeit medicines, food and beverages, cosmetics and toys.

Counterfeit pharmaceutical products, ranging from a variety of medicines to personal protective equipment or face masks, have been increasingly identified in recent years. Distribution has shifted almost entirely from physical to online markets, raising public health concerns. 

These illicit products largely continue to originate from outside the EU, but they may also be produced in illegal laboratories within the EU, which are difficult to detect and can be set up with relatively few resources.

The production of illicit food products, and especially drinks, has become more professional and sophisticated, with some counterfeiters covering the whole supply and distribution chain. Violations of protected geographical indications continue to be widely reported too.

Clothes, accessories and luxury goods remain among the most popular product categories for counterfeit goods, sold both online and in physical marketplaces. They are one of the top categories of the approximatively 66 million counterfeit items seized by authorities in the EU in 2020.

Mobile phones, their accessories and components are also among the top categories of fake goods seized, and are sold in great numbers during sales events such as Black Friday and Cyber Monday. Counterfeiters have recently been exploiting the global supply shortage in semiconductor chips. 

In the case of perfumes and cosmetics, the illicit production relates to everyday goods, such as shampoo, toothpaste, or detergents. 

The trade in illicit pesticides remains a low-risk, high-profit activity, sustained by a high demand and low sanctions for the offenders.

The COVID-19 pandemic also led to an increased offer of illicit digital content, which is often linked to other cybercriminal activities. Piracy is now mostly a digital crime, and websites illegally distributing audio-visual content are hosted on servers across Europe, Asia and the Middle East.

How criminal networks operate

The threat assessment highlights that the distribution of counterfeit products mostly relies on digital platforms, a trend which has been reinforced by the pandemic and widespread online consumption. 

Counterfeit goods are offered on online marketplaces, via live-streaming, videos and advertising on social media platforms, and instant messaging services, usually targeting customers with misleading discounts or low-price branded products.

Counterfeiting is a highly lucrative activity for the criminal networks involved, which reap large profits while running relatively few risks. 

IP crime has been included as one of the EU’s priorities in the fight against serious and organised crime from 2022 to 2025 as part of the European Multidisciplinary Platform Against Criminal Threats (EMPACT).

The assessment underlines that, although the majority of counterfeits in the EU market are produced outside Europe, mainly in China and other parts in Asia, domestic manufacturing within the EU is an increasing trend. 

The increasing importation of counterfeit packaging materials and semi-finished products into the EU clearly points to the presence of illegal manufacturing facilities in the EU. 

Criminal networks based in Europe involved in IP crime carry out the distribution of imported counterfeits and, in some cases, operate modern production facilities that assemble semi-finished products.

Europol’s Executive Director, Catherine De Bolle, said: “The COVID-19 pandemic has presented new business opportunities for criminals to distribute counterfeit and substandard goods.  At best, these products will not perform as well as authentic ones. At worst, they can fail catastrophically. 

“Law enforcement seizures indicate that the production of these goods is increasingly taking place within the EU, while the COVID-19 pandemic has further entrenched the criminals’ reliance on the digital domain to source and distribute their illegal goods. 

“This report shines a light on the extent of this criminal phenomenon and calls for concerted, cross-border action in response as we enter the post-COVID economic recovery. The unscrupulous counterfeiters should be the only ones paying a steep price.

Photo credit: iStock/ Bepsimage

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