Counterfeits - Wholesale and Retail

By some estimates, counterfeiting may now be more profitable than drug trafficking

By Tatiana Smolyakova
November 14, 2003

Counterfeiting fast-moving consumer goods has become the most profitable business in Russia. Russia has taken the lead of all developed countries in counterfeiting, despite ten years of fighting against counterfeit products.

The fight can hardly be called successful. The only change to be seen is an expansion of the range of products counterfeited. While before it was primarily food products, now literally everything in demand is counterfeited. Hence, security forces are proposing tougher measurers and even imprisonment in order to discourage counterfeiting. Consumer and intellectual property rights advocates also are all for criminal charges being brought against counterfeiters.

This idea resounded at Counterfeit Products - Problems and Solutions, a conference that opened yesterday in Moscow. The conference was organized by the Russian Federation’s Chamber of Commerce and Industry, Ministry of the Interior, and Ministry of Economic Development and Trade. The scale of counterfeiting and illegal use of intellectual property is dramatic. Inspection results from the first half of 2003 revealed that 70 percent of audiovisual products, 40 percent of alcohol beverages, 36 percent of foodstuffs (mostly bread, tea, canned food and confectionery), 22 percent of clothing and footwear, 20 percent of cigarettes, and18 percent of soft drinks on the market are counterfeit. Russia’s federal budget loses up to 3 billion dollars annually from counterfeiting.

Conference participants are confident that it is time to put an end to counterfeiting and are planning to propose recommendations for the federal government to deal with this problem. The key proposal envisages tougher punitive measures. Russian Deputy Prosecutor General Vladimir Kolesnikov has presented the strictest solutions to the problem. According to Mr. Kolesnikov, imposing fines will not give the due effect, and will only trigger bribery and corruption. “If one is caught for counterfeiting the first time, he or she will be sentenced to a one-year imprisonment. Second offense would result in a 5-year imprisonment and confiscation of property,” suggested Mr. Kolesnikov. Then, Mr. Kolesnikov thinks, there may be positive results.

Yet there are serious doubts that such stringency will actually be feared and that the latest campaign against counterfeiting will be a total success. The fundamental reason for the existence of counterfeit products is economic. The availability of relatively inexpensive counterfeited goods is advantageous not only for counterfeiters, but also primarily for consumers. At least fifty percent of the Russian population who live below the poverty line will not shop in boutiques or name-brand stores. They will go to the market where they will buy not necessarily what they want, but what they can afford. No appeal to a poor person’s conscience will make him buy high-priced products.