Counterfeit goods account for 6.5 per cent of total ICT trade, finds OECD

Share of fake goods in ICT imports well above 2.5 per cent industry average, report finds

The ICT market is particularly susceptible to counterfeiting, with fake goods accounting for 6.5 per cent of all ICT products shipped, a report from the OECD has found.

According to estimates in the report, entitled Trade in Counterfeit ICT Goods, world trade in counterfeit ICT goods accounted for $143bn in 2013, and 6.5 per cent of ICT products traded worldwide were fake.

China and Hong Kong were picked out as the main sources of counterfeit product.

The number and range of affected products is also growing, the OECD said, adding that the share of fakes in ICT imports is well above the average share of counterfeit goods in total trade (2.5 per cent).

This reflects the highly globalised nature of the ICT industry, while the strong growth in demand for ICT goods, coupled with their IP dependence, also makes it a natural target for counterfeiters, the OECD added.

"ICT products are highly knowledge-intensive and protected with intellectual property, and therefore vulnerable to copy," said the report, which was published earlier this year.

The total number of seizures of counterfeit ICT goods exceeded 60,000 between 2011 and 2013 - equivalent to the value of $805m - according to data the report sourced from the World Customs Organisation and other bodies.

These seizures of fake ICT products accounted for 14.1 per cent of all customs seizures worldwide during the period, and 11.3 per cent of the value, the OECD said. The value of counterfeit ICT seizures also rose over the three years examined, from $263m in 2011 to $272m in 2012, and $309m in 2013.

The most frequently seized counterfeit ICT goods category during the period was communications, making up 34 per cent of the total value and 20 per cent of the total number of seized products. This was followed by consumer electronics, which accounted for 25 per cent of the value and 40 per cent of the volume of seized goods.

Memory cards and sticks, cards with magnetic strips, SSDs, sound apparatus and video game consoles and controllers were found to be among the goods most frequently targeted by counterfeiters.

Some 42.5 per cent of the total seized value of fake ICT goods infringed the IP rights of firms registered in the US, ahead of Finland (24.7 per cent), Japan (12.2 per cent), Korea (5.4 per cent) and Germany (3.6 per cent).

An analysis of products seized showed that counterfeiters are hawking fake goods for wildly varying sums. For instance, counterfeit Beats Electronics headphones had an item value of between $25 and $350 and counterfeit Kingston Technology memory cards a value of between $1 and $150.

"Some of these infringing ICT products with higher values were very likely going to be offered in primary sub-markets where consumers are deceived and prices are equal or close to those of genuine ICT products," the report stated.

"The values can also sometimes be slightly lower if, for instance, counterfeit deceiving ICT device is offered as a special deal."

Trade in fake ICT goods gives rise to "significant challenges" to effective governance and efficient business, as well as the well-being of consumers, the report argued.

"ICT counterfeiting preys on consumers' trust in established brands and poses dangers to their health, safety and privacy," it stated. "ICT manufacturers and authorised ICT vendors have experienced revenue losses and erosion in brand value as a result of trademark infringements. Fake components cause network operators to contend with low quality of service, network disruptions and failure in electromagnetic compatibility. Governments forecast tax revenues and incur greater expenses in ensuring compliance with national anti-counterfeiting legislation and reacting to threats to public safety and distortions in labour markets. Counterfeiting activities can also be a source of revenue for organised crime."