This week the Canadian IP Council, the Canadian Chamber of Commerce’s IP lobby arm, issued a release placing Canadian counterfeiting costs at $30 billion per year. That figure is being used to lobby the government to enact new border measure provisions that could lead to the searching of luggage as travellers enter Canada. It is tempting to dismiss the claims on the basis that the policy rationale makes no sense – if counterfeit toothpaste is indeed “coming across the border in droves” as the Chamber claims, searching traveller luggage won’t address that issue. Moreover, it should be noted that even the Anti-Counterfeiting Trade Agreement features an exception for de minimis imports that an individual might carry as it recognizes that addressing counterfeiting concerns does not involve targeting individuals. Yet given the decision to resurrect the bogus $30 billion figure, it is important to again call attention to its origins and how it is simply a fabrication.
[Update: New post with the Chamber’s response and more fake figures]
Several years ago I examined the source of the $30 billion claim, which has been repeated on many occasions over the years. The review started with an Access to Information request with the RCMP for the source of the $30 billion claim, which was found in a 2005 report. The RCMP responded that the figure was based on “open source documents found on the Internet.” What were these documents? The RCMP provided two:
First, a March 2005 CTV news story reported unsubstantiated claims by the International Anti-Counterfeiting Coalition, a global anti-counterfeiting lobby group made up predominantly of brand owners and law firms, that some of its members believe that 20 percent of the Canadian market is “pirate product.” That 20 percent figure – raised without the support of any evidence whatsoever – appears to have been used by IACC to peg the cost of counterfeiting in Canada at $20 billion per year.
Second, a 2005 powerpoint presentation by Jayson Myers, then the Chief Economist for the Canadian Manufacturing and Exporters, included a single bullet point that “estimated direct losses in Canada between $20 billion and $30 billion annually.” The source for this claim? According to Mr. Myers, it is simply 3 to 4 percent of the value of Canada’s two-way trade.
In recent years, the RCMP has backed away from the $30 billion claim. In its August 2010 report on IP crime, it declined to set a figure, acknowledging that the numbers “have been subject to debate in recent years.”
The use of unsubstantiated counterfeiting claims is not limited to Canada. Last year, the U.S. Government Accountability Office was asked by the U.S. Congress to try to quantify the impact of counterfeit and pirated goods (their work followed Felix Salmon’s 2005 comprehensive post on the issue). While concluding that counterfeiting exists and is a problem, the GAO could not find reliable data. The report notes:
Three commonly cited estimates of U.S. industry losses due to counterfeiting have been sourced to U.S. agencies, but cannot be substantiated or traced back to an underlying data source or methodology. First, a number of industry, media, and government publications have cited an FBI estimate that U.S. businesses lose $200-$250 billion to counterfeiting on an annual basis. This estimate was contained in a 2002 FBI press release, but FBI officials told us that it has no record of source data or methodology for generating the estimate and that it cannot be corroborated.
Second, a 2002 CBP press release contained an estimate that U.S. businesses and industries lose $200 billion a year in revenue and 750,000 jobs due to counterfeits of merchandise. However, a CBP official stated that these figures are of uncertain origin, have been discredited, and are no longer used by CBP. A March 2009 CBP internal memo was circulated to inform staff not to use the figures. However, another entity within DHS continues to use them.
Third, the Motor and Equipment Manufacturers Association reported an estimate that the U.S. automotive parts industry has lost $3 billion in sales due to counterfeit goods and attributed the figure to the Federal Trade Commission (FTC). The OECD has also referenced this estimate in its report on counterfeiting and piracy, citing the association report that is sourced to the FTC. However, when we contacted FTC officials to substantiate the estimate, they were unable to locate any record or source of this estimate within its reports or archives, and officials could not recall the agency ever developing or using this estimate. These estimates attributed to FBI, CBP, and FTC continue to be referenced by various industry and government sources as evidence of the significance of the counterfeiting and piracy problem to the U.S. economy.
The most comprehensive review of global piracy is the Canadian-backed report, Media Piracy in Emerging Economies, which debunks many of the false claims on counterfeiting and piracy.
On the issue of counterfeiting numbers, the report notes the mounting skepticism from authorities such as the OECD and GAO and holds out hope that “the golden age of big piracy numbers is past.” Apparently no one at the Canadian Chamber of Commerce has received that message as it is content to peddle discredited numbers that only serve to discredit the organization itself.