Product Piracy Report 2017 1: +236.8% more items seized, 245,712 counterfeits confiscated

In 2017, Austrian customs seized 245,712 counterfeit products worth more than EUR 13.7 million in total, based on original prices. This is confirmed in the Product Piracy Report 2017, which is forwarded to the Austrian National Council each year. Although the number of seizures fell to 1,665 cases, which is down from the 1,947 in 2016, the number of articles seized was increased by +236.8% (2016: 67,535 articles). 

“Intellectual property is a key value creation factor for business,” State Secretary of Finance Hubert Fuchs stated, stressing the importance of combating product piracy. “Trademark and product piracy is a risk to traders, manufacturers and, in addition, to general competitiveness, trade and investment. Customs is tackling this problem at the root by taking counterfeit goods out of circulation before they can be put on the market”. The State Secretary of Finance expressed satisfaction with the Customs Service’s record in dealing with product piracy. 

82 million workers in the EU (about 38% of the total workforce) are either directly or indirectly associated with IP-intensive business sectors. 42% of the EU’s total economic output, or €5.7 trillion, is generated by these sectors. Here, significantly higher wages and salaries are paid than in other sectors; the additional earnings come to 46%. 90% of the EU’s trade with the rest of the world comes from IP-intensive industry sectors.  

The European Union Intellectual Property Office (EUIPO) has done empirical work on the direct and indirect revenue and employment losses caused by counterfeit products. Infringement of intellectual property rights also has direct economic impacts on Austria. According to EUIPO studies, losses of turnover and sales, broken down by sector, are as follows: 

Sector Revenue losses due to counterfeits within the EU Revenue losses due to counterfeits within Austria Income lost in Austria (in EUR millions per year)
Handbags, luggage 12.7% 17.9% 32
Jewellery, watches 13.5% 14.1% 32
Pesticides 13.8% 12.2% 19
Toys, games 12.3% 11.3% 49
Clothing, shoes 9.7% 10.7% 632
Cosmetics, personal hygiene articles 7.8% 7.2% Figure not stated
Tyres 7.5% 6.1% 30
Sporting equipment 6.5% 5.5% 31
Wine 2.3% 5.0% 5
Pharmaceuticals 4.4% 4.6% 109
Audio recordings 5.2% 4.3% 3
Liquor 4.4% 4.1% 8
Batteries 1.8% 1.6% 3
Total     EUR 953 million

According to these figures, in the case of clothing and footwear, jewellery and watches, handbags and suitcases, wine and pharmaceuticals, the impacts of counterfeiting in Austria are above the EU average. “This is also confirmed by our figures on seizures, because almost 91% of our product counterfeiting seizures are in these sectors,” Gerhard Marosi, Product Piracy Expert and the Ministry of Finance, stated, who confirmed these statistics which are drawn from the day-to-day work of the Austrian Customs Service. He specifies: “Counterfeit wine may not have made an appearance in Austria yet, but it has surfaced in other countries. In the other four sectors, we recorded 1,514 seizures in 2017, where the original value of the goods was approx. EUR 10.5 million”.

In 2017, in terms of the countries of origin, i.e. the countries in which the counterfeits were produced, India has surpassed China in terms of the number of cases (60.9%) as compared with last year. This is due mainly to the fact that, of the total 54,895 counterfeit drugs which were taken out of circulation, 54,609 of these were from India alone. More than half of all counterfeit articles seized by the Austrian Customs Service still come from China. Overall, the goods seized in Austria come mainly from Asia or Turkey.

The vast majority of shipments (90% of all cases) were sent by post. Online trading in the sale of counterfeits is flourishing – particularly for counterfeit drugs, but also for clothing, shoes, sunglasses, handbags, watches and mobile phones. This results in a correspondingly high number of very small shipments by mail.  

The 2017 Product Piracy Report (in German), with further figures, data and facts, is published on the website of the Austrian Ministry of Finance in the section on the Customs Service, under Product Piracy, and may be downloaded there (In German): http://bit.ly/Produktpirateriebericht_2017

Photos on the Product Piracy Report may be found here: http://bit.ly/Fotos_Produktpirateriebericht

Record levels of counterfeit drugs

State Secretary of Finance Fuchs: “The most dangerous forms of product piracy are counterfeit drugs”    

In 2017, the Austrian Customs Service removed 54,895 counterfeit drugs in 1,018 shipments, with a total value of EUR 1,097,460, from circulation. “Counterfeit drugs are the most dangerous form of product piracy,” State Secretary of Finance Hubert Fuchs noted, and went on to say, “This is not merely about the overall harm to the economy, but above all the very alarming risk to human health as a result of taking counterfeit drugs!“

After reaching a peak in 2016 with a total of 53,389 counterfeit drugs, the 2017 figures set another sad record. The drug counterfeiting business is run by unscrupulous rogue traders, who work almost entirely underground. The conditions in which the counterfeit drugs are produced, stored and shipped are not even remotely close to the standards applied in the pharmaceutical industry. The result of this is that the counterfeits are usually contaminated with pollutants, are often overdosed or underdosed or are completely ineffective.

According to studies by the European Intellectual Property Office (EURIPO), the economic costs of infringements on IP rights in Austria comes to approx. €109 million per year in the area of pharmaceuticals – this figure relates to manufacturing and wholesaling but not retail trade.

“The dark forces behind counterfeit drugs are organised crime – these racketeers have no concerns about the health impacts or financial harm suffered by deceived customers, because their only focus is on their own profits,” Gerhard Marosi, Product Piracy Expert at the Ministry of Finance, stated, warning: “The risks of buying drugs on the internet should not be underestimated!”

98.78% of the drug counterfeits seized in 2017 came from India. For the most part, counterfeit products are distributed via online portals that feign authenticity and seriousness to customers. Frequently, counterfeit medicines are also advertised on such websites, indicating that delivery is from Germany. In this regard, many drug counterfeiters make use of so-called “Fulfilment Centres” to disguise the true origin of their products. Of all of the counterfeit drugs seized in 2017, around 43% of the shipments were handled via “Fulfilment Centres” of this kind. By closely cooperating with German Customs authorities, the Austrian Customs Administration succeeded in achieving good results for both countries – since mid-2017, this distribution channel has scarcely seen any more use.

Gerhard Marosi stated: “This clearly shows how counterfeiters react to official action”. If there is a functioning sales network within Europe, then the counterfeit drugs will be distributed from there. If there are no options for distributing the drugs within Europe, the counterfeit medicines will again be delivered by mail from the Far East. “That is why the ongoing, tenacious battle against counterfeit drugs is all the more important – the ingenuity of smugglers in pursuing their criminal machinations is practically limitless!”

As in the past, customs seizures in 2017 focused primarily on impotence remedies. These also account for considerable portion of the non-branded or patent counterfeit medicines in the customs service’s drug seizures. In 2017, the Austrian Customs Service, in addition to making product piracy seizures, managed to stop and withdraw from circulation 1,479 shipments containing more than 111,000 illegal drugs. In total, the Austrian Customs Authorities dealt with 2,497 cases of drug smuggling, seizing a total of 165,895 articles, either because they were counterfeits or they had been brought into the country illegally.

In April 2017, for example, customs officers from the Eisenstadt Customs Office, Vienna Airport, were able to identify a suspicious consignment in the cargo area of the airport by means of the customs service’s own x-ray vehicle. In doing so, the Customs Authorities discovered 5,280 packs containing a total of 1,013,760 suspected counterfeit potency pills. However, the shipment, which was destined for Hungary, was not stopped but kept under surveillance by customs until it reached the Hungarian border. Upon arriving there, the Hungarian customs authorities took over further surveillance. As a result of this procedure, the authorities ultimately succeeded in identifying and arresting four of the masterminds behind the counterfeiting operation in Hungary.

One day later, the customs officers at Vienna Airport struck again. In a check of a consignment which was declared as a dietary supplement, 23,712 illegal potency pills were discovered. In this case, the Public Prosecutor’s investigation for violation of the Pharmaceuticals Act is continuing.

At the beginning of December, an x-ray machine check of the luggage of a passenger from Cairo showed an odd image. Various packages of coffee were found in the suitcase, but they contained no coffee but rather 6,720 potency pills. Here, the smuggler probably assumed that the male enhancement remedies would be invisible to an x-ray inspection if they were concealed behind the aluminium foil in the coffee packaging, so as to deceive the customs officers, a gambit which quite obviously failed.

A further seizure in August 2017 shows just how dramatically smugglers exploit the cares and worries of those affected. In cooperation with the Austrian Agency for Health and Food Safety (AGES) and the Federal Criminal Police Office, more than 1,600 packs of a drug which is not licensed in Austria for the treatment of cancer were seized, having a value of more than EUR 750,000. The investigations of the law enforcement agencies in that case are still ongoing.

“Serious illnesses after taking counterfeit, ineffective drugs or fake drugs contaminated with pollutants – these consequences of product piracy clearly show that this is by no means a trivial offence,” State Secretary of Finance Fuchs stated in respect of the serious health threat of counterfeit drugs, adding: “In the interests of consumer safety, Austrian Customs will continue to pursue these offences vigorously!”