Wednesday, 19 January, 2022

Counterfeiting: the Court of Auditors deplores the lack of voluntarism of the public authorities


Faced with billions of euros in lost public revenue and thousands of jobs destroyed by counterfeiting, the Court of Auditors calls for “more proactive action” from the public authorities. Some recommendations made in 2014 have gone unheeded.

Counterfeiting has grown with trade liberalization, if not at an even faster pace.

Every year, billions of euros of counterfeit products are imported into Europe, without the consumer being aware of it. This unfair competition would lead to the destruction of 40,000 jobs in France and the loss of tax revenue of 2 to 10 billion per year, according to estimates, not to mention the threat to consumer safety and the environment. “Counterfeiting is often considered a victimless fraud, which does not promote a fair understanding of its scale and its multiple damaging effects”, alert the Court of Auditors in a report presented Tuesday evening to the National Assembly.

Seized by its president Richard Ferrand, the Court calls for “More proactive actions at international and European level” and to “Develop a global and coordinated strategy” on the national territory.

The phenomenon has accelerated

The report drawn up by the magistrates is clear: counterfeiting has developed with the liberalization of trade, even at an even faster pace. Estimated at more than 500 billion dollars in the world in 2016, the trade in counterfeit products would have more than doubled in ten years, and would represent 6.8% of the imports of goods in the EU, according to the last study of the ‘OECD.

The phenomenon has accelerated with the expansion of electronic commerce, whose players are exempt, since a directive adopted in 2000, from controlling the content they market. It is still likely to grow with the rise of the “Silk Road”, while customs in Europe are still poorly equipped to control rail freight.

The Court of Auditors even notes that fraud comes more and more from the assembly of counterfeits on European soil. Some workshops import anonymous products on one side, logos and labels on the other, which makes it easier to escape the vigilance of customs.

Levers to activate

In their report, the magistrates insist on the many levers to be activated at the international level. The new European Commission, the French presidency of the EU (in the first half of 2022) and the prospect of a reform of the WTO are all opportunities to better protect intellectual protection. As with VAT fraud, the liability of digital platforms could be increased to encourage them “Enhanced due diligence in the fight against counterfeits”.

According to this report, much remains to be done on the national territory, if only by applying the recommendations made by the Court of Auditors in 2014 and which have remained a dead letter. At the time, the auditors suggested creating a steering body for the fight against counterfeiting at the interministerial level, so as to urge the Customs, the DGCCRF and the national gendarmerie to cooperate more. They insisted on the need to specialize certain magistrates, knowing that the penal response could be intensified.

In all cases, better monitoring of data on counterfeiting, by strengthening the role of the National Institute of Industrial Property (Inpi), appears to be a necessity. In this report, the Court cites a few foreign initiatives, such as Canada, which has established a “chargeback” system. If a consumer feels wronged during a purchase of a counterfeit on the Internet, he can report it and be reimbursed by the bank of the fraudster.

Faced with billions of euros in lost public revenue and thousands of jobs destroyed by counterfeiting, the Court of Auditors calls for “more proactive action” from the public authorities. Some recommendations made in 2014 have gone unheeded.

Counterfeiting has grown with trade liberalization, if not at an even faster pace.

Every year, billions of euros of counterfeit products are imported into Europe, without the consumer being aware of it. This unfair competition would lead to the destruction of 40,000 jobs in France and the loss of tax revenue of 2 to 10 billion per year, according to estimates, not to mention the threat to consumer safety and the environment. “Counterfeiting is often considered a victimless fraud, which does not promote a fair understanding of its scale and its multiple damaging effects”, alert the Court of Auditors in a report presented Tuesday evening to the National Assembly.

Seized by its president Richard Ferrand, the Court calls for “More proactive actions at international and European level” and to “Develop a global and coordinated strategy” on the national territory.

The phenomenon has accelerated

The report drawn up by the magistrates is clear: counterfeiting has developed with the liberalization of trade, even at an even faster pace. Estimated at more than 500 billion dollars in the world in 2016, the trade in counterfeit products would have more than doubled in ten years, and would represent 6.8% of the imports of goods in the EU, according to the last study of the ‘OECD.

The phenomenon has accelerated with the expansion of electronic commerce, whose players are exempt, since a directive adopted in 2000, from controlling the content they market. It is still likely to grow with the rise of the “Silk Road”, while customs in Europe are still poorly equipped to control rail freight.

The Court of Auditors even notes that fraud comes more and more from the assembly of counterfeits on European soil. Some workshops import anonymous products on one side, logos and labels on the other, which makes it easier to escape the vigilance of customs.

Levers to activate

In their report, the magistrates insist on the many levers to be activated at the international level. The new European Commission, the French presidency of the EU (in the first half of 2022) and the prospect of a reform of the WTO are all opportunities to better protect intellectual protection. As with VAT fraud, the liability of digital platforms could be increased to encourage them “Enhanced due diligence in the fight against counterfeits”.

According to this report, much remains to be done on the national territory, if only by applying the recommendations made by the Court of Auditors in 2014 and which have remained a dead letter. At the time, the auditors suggested creating a steering body for the fight against counterfeiting at the interministerial level, so as to urge the Customs, the DGCCRF and the national gendarmerie to cooperate more. They insisted on the need to specialize certain magistrates, knowing that the penal response could be intensified.

In all cases, better monitoring of data on counterfeiting, by strengthening the role of the National Institute of Industrial Property (Inpi), appears to be a necessity. In this report, the Court cites a few foreign initiatives, such as Canada, which has established a “chargeback” system. If a consumer feels wronged during a purchase of a counterfeit on the Internet, he can report it and be reimbursed by the bank of the fraudster.