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Canadian Chamber of Commerce Floats Fake $30 Billion Counterfeiting Claim

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Wednesday June 08, 2011
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.
Comments (21)add comment

Ninja said:

O rly?
Yet legislators insist in making laws based on bogus or unsustainable figures. MAFIAA is an expert at that (1 download = 1 lost sale any1?).
June 08, 2011

Crockett said:

Incompetent or incontinent?
I don't think anyone with at least a drab of critical thinking skills takes these number seriously anymore, which is why it is so disconcerting that professional institutions keep using them. Of course in the case of the Canadian Chamber of Commerce we have already seen their lack of oversight when they plagiarized their IP report last year.

You would think that would give them pause in once again quoting unsubstantiated numbers but alas that does not seem to be the case. Of course it could just be that accuracy and honesty is less of a concern than ideology. So once again we have to ask are the minds at the CCC so easily fooled or are they content to just freely pass along the fodder.
June 08, 2011

end user said:

...
Maam what do you have on your laptops HD? We need to search it for counterfeit software. Oh what about whats on your USB drive?

Yes ripe for abuse by overzealous customs officers. I"ve had to deal with them, even had a senior office come in and give the younger inexperienced power tripping office a reality check when he was giving my wife attitude a few years back. If the senior office didn't notice it I'm pretty sure my wife would have punched the guy in the face.
June 08, 2011

crade said:

...
I wouldn't say they only serve to discredit the organization itself.. They serve to mislead and deceive. It doesn't much matter that the numbers were debunked if they can just ignore it whenever they are debunked and knowingly lie just to fool everyone who takes their word for it and doesn't look to close.
June 08, 2011

IamME said:

Desperate!!
It's a desperate attempt to impose control where no control is required. Is there counterfeiting and piracy? Sure and there will always be that element. $30B worth...probably not. Globalization, more than anything, is more likely to blame for lost sales claimed by the Canadian Chamber of Commerce.

Think about it...especially in the last couple years. Internet commerce + digital media surpassing physical media (Movies, TV, Music, Books) + the strength of the Canadian dollars. When you buy it on-line, it doesn't matter where it comes from, it's just a download. Now throw in physical items brought from Web stores such as Amazon. Before Amazon.com implemented the "Import tax", even with the added shipping cost, it was substantially cheaper to but stuff from Amazon.com than it was Amazon.ca. This trend isn't exclusive to Amazon though. Computer equipment is vastly cheaper if bought in the US. Even now, with the dollar at or near par, mountain bike parts average 40% cheaper in the US than in Canada, even after shipping and duty, even for Canadian-made stuff like Race face and Rocky Mountain. How's that for mark-up?

A lot of people I know, with the strength of our dollar, have switched almost exclusively to buying stuff on-line from US-based stores and eBay. This includes everything from Apple accessories, to audio/visual equipment and cabling, to networking and computer equipment to just about anything one could imagine. This is all over the table and legal, not counterfeited or pirated. It's all due to the strength of our dollar.

That's just one facet. We're seeing less US vacationers because Canada is not the "cheap" destination it used to be. We're seeing less foreign investment and buying for the same reason. Again, this has nothing to do with counterfeiting or piracy.

Like the **AAs, much of the loss the Canadian Chamber of Commerce feels is much more to blame on the failure to adapt to changing consumer needs than it is anything else. Counterfeiting and/or piracy is just an easy en-vogue excuse which is only a small part of the equation.
June 08, 2011

IamME said:

@end user
"Yes ripe for abuse by overzealous customs officers. I"ve had to deal with them, even had a senior office come in and give the younger inexperienced power tripping office a reality check when he was giving my wife attitude a few years back. If the senior office didn't notice it I'm pretty sure my wife would have punched the guy in the face."

At work, we have a policy in place that all laptops must be encrypted. If we're traveling and customs insists on view the contents of our drive, the policy states that we refuse to comply and leave the laptop.
June 08, 2011

Invalid User said:

...
If they keep repeating the same thing over and over eventually the general populace will start to believe it to be true. Remember not everyone has the time or willingness to learn the truth.
June 08, 2011

Purple said:

@IamME
> At work, we have a policy in place that all laptops must be encrypted. If we're traveling and customs insists on view the contents of our drive, the policy states that we refuse to comply and leave the laptop.

Until they make it illegal to refuse to provide the encryption key (like in England).
June 08, 2011

Anon-K said:

@Invalid User
Agreed. In particular with your "willingness" comment, in this I would include those who believe the statement because it reinforces their view. I hate to use the word "truth", since in some ways it is subject to perception and is therefore to some degree subjective. I personally prefer to use the word facts.
June 08, 2011

AlB said:

Do the math
The number translates to almost $1000/yr for every Canadian. And most don't travel every year. Are they saying that travelers on average are bring in thousands every year on counterfeit goods.

Absolutely ludicrous.
June 08, 2011

JH said:

why should it be limited to 1?
"Yet legislators insist in making laws based on bogus or unsustainable figures. MAFIAA is an expert at that (1 download = 1 lost sale any1?). "

Why make the claim that 1 download = 1 lost sale, when you could claim that 1 download = 10 lost sales, the downloader and part of their extended families they share them to... heh

Think how big the numbers could be then! Trillions of dollars lost to piracy! Every DAY!
June 08, 2011

Bobzibub said:

If the claims are overblown then how do they benefit by making them?
I'm not disputing the falseness of their claim, but trying to understand their motivations.
June 09, 2011

Jeol said:

England and such
If it becomes illegal to not hand over the encryption key, what happens to individuals with work laptops who themselves may not even have full admin rights or full encryption keys?

As for the 30b$ claim. Meh, that's pretty much waht I expect from the chamber of commerce. At least they made it easy on MG and used a number he had alrady resarched instead of bringing up a new number. So much for supporting orginal research eh?
June 09, 2011

end user said:

...
@Bobzibub said: If the claims are overblown then how do they benefit by making them?
I'm not disputing the falseness of their claim, but trying to understand their motivations.

If a corporation repeats something enough times, politicians in their pockets will start to believe in those numbers as will a big chuck of the Canadian populations that can't think for themselves or take the responsibility to think for themselves.
June 09, 2011

Curmudgeon55 said:

older definition
Can't remember exactly where but there was an old email that came out in which the MPAA stated that if you bought a tape and watched it that was fine but if you asked a friend over to watch it with you that was an unpaid viewing. They're going to have to realize that people are paying for the viewing anymore and start making their money of licensed tangible derivative products; toys, t-shirts, posters, ties, all that stuff that you just cannot copy and send over an internet connection.
June 10, 2011

bjrichardson said:

I spend more now...
...on digital goods than I did 10 years ago. If it's offered for sale at a good price and is convenient to get, people will buy it. I wish the people in charge would understand that simple fact.
June 10, 2011

Curmudgeon55 said:

dang
meant to say "people are NOT paying for the viewing"
June 10, 2011

FastTadpole said:

FBI, CBP, MPAA, RIAA, OECD and FTC Piracy Estimates are Totally Bogus Concludes GAO
Just like all the other loss 'estimates'.

US government finally admits most piracy estimates are bogus
http://arstechnica.com/tech-policy/news/2010/04/us-government-finally-admits-most-piracy-estimates-are-bogus.ars
June 10, 2011

Doug Webb said:

Hey you!
Here are some facts for you:
Canadians are so nice that when they pirate something they feel so guilty they go back and pay for the pirated media. This adds $20 billion per year to the Canadian economy that wouldn't be there if not for piracy and the guilt it generates. So now we can all go out and say "Nooooooo! Piracy actually adds money to the economy!" and point to my new 'facts' as proof!


June 10, 2011

phayes said:

...
Swivel-eyed IP extremists fail to persuade on rational evidence based grounds, resort to lying. In other news...
June 10, 2011

Blackbeard the Pirate said:

anti-piracy lobby fabricates data
you couldn't make it up...
wait...
June 11, 2011

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