EU blames counterfeit cosmetics for billions in lost sales and thousands of job cuts

23 Jan 2024 --- Data from the European Union Intellectual Property Office (EUIPO) suggests the cosmetics industry lost €3 billion (US$3.26 billion) (4.8 % of sales) due to counterfeit products.

The study analyzed data from 2018-2022 and the impact of counterfeits within the clothing, cosmetic and toy industries.

EUIPO says counterfeit goods affect sales and lead to job losses. It believes the cosmetics sector lost about 32,000 jobs, with the clothing and toy sectors losing 160,000 and 3,600 jobs, respectively, due to counterfeit product sales.

João Negrão, executive director of the EUIPO, says: “Counterfeit goods have real costs for consumers, brands and our economies. This latest study shows the very real costs when it comes to lost sales and jobs in the EU.”

Counterfeit cosmetics
The EUIPO believes counterfeiting in the cosmetics and toy sectors poses “significant health and safety risks” to consumers. The “harmful products” represent 15% of counterfeit articles seized at the EU’s borders, according to a 2022 EUIPO threat assessment of intellectual property (IP) crime.

The research focuses on identifying and eliminating fake goods in the EU, emphasizing the interconnectedness of IP crime with other serious criminal activities.

Counterfeit cosmetics costs about €3 billion in the EU.The cosmetics market in the EU is smaller than the clothing market, amounting to about one-third of the size in sales.

Across the three sectors, Germany, France, Italy, Spain and Austria, suffered the most significant losses, with nearly €8 billion (US$8.7 billion) in reduced sales of genuine goods. The French cosmetics industry felt the biggest impact with €800 million (US$870.9 million) in annual lost sales.

In 2022, the Zero Mercury Working Group reported that the legal regulatory system fails to sufficiently safeguard consumers against dangerous, counterfeit and illegal products marketed on the internet in most nations.

One of the main reasons for this failure is that many nations’ national laws allow online platforms to avoid responsibility for the products offered on their sites.

Conducting research
EUIPO conducted the research with the European Union Agency for Law Enforcement Cooperation (EUROPOL), the European Anti-Fraud Office (OLAF), and the European Commission.

“The findings on counterfeiting highlight the valuable work the EUIPO is conducting through the Observatory and the important collaboration we have with EUROPOL, the OLAF and the European Commission to identify and stamp out fake goods in the EU,” explains Negrão.

The first step of the research consisted of analyzing yearly sales in each sector in each EU member state from 2008 to 2021. Based on sales trends since 2008, a forecasting model generated the expected sales in each country from 2018 to 2021 for each sector.

In the second step, the difference between expected and actual sales, or forecasting errors, was explained by a panel data model through counterfeiting-related variables, such as the percentage of respondents who acknowledge having bought fakes in a country, the border detentions of each type of goods in each member state, the declared unlawful drugs and corruption offenses and the perception of increased corruption by citizens.

By Sabine Waldeck

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