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$200B Lost To Counterfeiting? Back It Up

kdawson posted about 4 years ago | from the pulled-from-some-orifice dept.

The Media 283

An anonymous reader writes "Over the weekend, the NY Times ran a story about how the recession has impacted product counterfeiters. In it, the reporter regurgitates the oft-repeated claim that counterfeiting 'costs American businesses an estimated $200 billion a year.' Techdirt's Mike Masnick asks the Times reporter to back up that assertion, noting two recent reports (by the GAO and the OECD) that suggest the actual number is much lower, and quoting two reporters who have actually looked at the numbers and found (a) the real number is probably less than $5 billion, and (b) the $200 billion number can be traced back to a totally unsourced (read: made-up) magazine claim from two decades ago."

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Big Business (5, Insightful)

Traze (1167415) | about 4 years ago | (#33118696)

Trying to get more free money from the government?
Gasp!

Oh yeah? (-1, Offtopic)

Anonymous Coward | about 4 years ago | (#33118706)

How many can counterfeit a first post?

Seems to be some confusion (1)

countertrolling (1585477) | about 4 years ago | (#33118716)

Somebody mixed up the books between this and laundered drug money.. And it's way more than 200 billion [bloomberg.com] ...

Can't really hurt many US jobs... (5, Insightful)

Kepesk (1093871) | about 4 years ago | (#33118722)

I don't see how counterfeit products could do much damage to the US job market. Most of the legit products are made overseas too, right?

Re:Can't really hurt many US jobs... (4, Interesting)

feepness (543479) | about 4 years ago | (#33119296)

So all we have left is design and marketing, which is what counterfeiting "takes".

It is killing retail too (2, Interesting)

linzeal (197905) | about 4 years ago | (#33119850)

As well as retail. My ex-gf works in fashion down in LA and to pay the lease she needs to sell at leas a single high-end designer dress every few days. Last year she in the garment district she saw someone selling a fake Dolce Vita skirt for 20 bucks, this skirt retails for over 400. How can she compete with that? Should she start buying the fakes to stay in business, because that is what it comes down to.

Re:It is killing retail too (1)

darth dickinson (169021) | about 4 years ago | (#33119900)

TRWTF is a $400 skirt. I think this is God's way of telling you, you have too much money.

Re:It is killing retail too (5, Interesting)

cpt kangarooski (3773) | about 4 years ago | (#33119964)

Well, did the person selling the fake skirts make it clear that they were fake (or at least, did the customers know)?

If so, then all they wanted was a skirt that looked a particular way; they didn't care who made it. Your ex's store, or the designers who supply her, can only try to compete in three ways, it seems to me.

First, quality; their skirts may be made of better materials than the fakes, or may be made with better techniques. If so, try to differentiate based on this. Of course, some people are satisfied with synthetics instead of natural materials, or poorer materials instead of finer ones, or single stitching instead of double stitching, so it won't always work, and the price difference may remain substantial. (There was an interesting article in the NY Times the other day about the Italian fashion industry and wool quality)

Second, price; how cheaply can the real skirts be made? Maybe it would be more efficient to sell skirts out of a van, instead of out of a store that is expensive to lease. It looks like the fake guys are winning on this front, but there's no reason that they necessarily have to.

Third, brand; there may be some cachet that can be used to make money out of the brand of the manufacturer or the distributor. Some people presented with identical products from different vendors at different prices may prefer the more expensive one as a form of conspicuous consumption. (You can see it elsewhere; a real Picasso is worth a lot, but a forgery, no matter how identical, is worth a lot less to people who care about this sort of thing) It can work, but it has problems. Some people don't care about brands, but just want a nice skirt. If the fake is good enough, they'll probably buy it since it costs less than the same thing from elsewhere. Some people care about brands, but are excluded due to artificially high prices set by the people controlling the brands. They'll deliberately seek out the fake skirts in order to most closely approximate the real thing.

I suspect that the ex et al have been trying to compete only on brand, and perhaps partially on materials (although usually brand justifies more of an increase in price than materials). If it's not working as well as they'd like, perhaps they ought to try a different approach?

Re:Can't really hurt many US jobs... (1)

jonnythan (79727) | about 4 years ago | (#33119328)

The massive profits over the actual relatively low manufacturing costs go to the American designer/brand (assuming it's an American company like, say, Oakley).

Re:Can't really hurt many US jobs... (2, Informative)

cappp (1822388) | about 4 years ago | (#33119528)

Think of your average Hollywood blockbuster, cd release, or Apple product. They ship out the production to the cheapest manufacturers so as to maximize their profit at home. Your $200 Rolex doesn't cost $200 to make, far from it. While it's components cost X and assembly, shipping, advertising, insurance, tax et al cost Y you can be sure that X+Y200 by a fair amount. The difference there goes back to the company of origin and therefore the economy of the company's country of origin. Whenever an Ipod gets sold anywhere in the world Apple takes a large slice. That slice in turn ends up in the American economy - be it as wages, deposits in a bank, investments in the stock market, as liquid funds, office rental, taxes, health, whatever.

That's one of the reasons countries trying to modernise their economies tend to put a focus on IP creation - it leads to a large influx of cash for a long, long time. Same goes for moving away from a primarily extraction-based economy.

Re:Can't really hurt many US jobs... (4, Insightful)

cpt kangarooski (3773) | about 4 years ago | (#33119996)

That's one of the reasons countries trying to modernise their economies tend to put a focus on IP creation - it leads to a large influx of cash for a long, long time. Same goes for moving away from a primarily extraction-based economy.

Well, only so long as other countries respect it. Creation, after all, is expensive but not remunerative on its own; it is publishing that is (or at least can be) where the money is made. It's reasonable to let someone else invest the time and money in creation, and then to copy them cheaply and profitably. Convincing states to not do this is tough, especially if they don't have, and don't expect to have, much local creative effort that could be exploited elsewhere, justifying mutual respect for these rights.

Given that it seems unlikely that two countries would openly go to war over, say, DVD piracy, copyrights, patents, trademarks, etc. just don't seem like a stable, long term basis for an economy. It's just too imaginary. Extraction isn't too good either, but perhaps there's some other way.

Maybe newspaper articles should list references (4, Insightful)

Matt Perry (793115) | about 4 years ago | (#33118726)

Maybe newspaper articles should cite their sources and have a list of references at the end like academic papers do. That way at least readers or other interested parties could independently verify the facts in the article.

Re:Maybe newspaper articles should list references (2, Interesting)

JWSmythe (446288) | about 4 years ago | (#33118748)

    Do you know how long it would take them to verify all their sources. Come on, it'd take several extra hours to get a story up. There's no time for that. If you want for confirmation, you'll get scooped by someone else.

    [sarcastic but unfortunately true soapbox off]

Re:Maybe newspaper articles should list references (4, Insightful)

Matt Perry (793115) | about 4 years ago | (#33118758)

Do you know how long it would take them to verify all their sources.

I didn't say that the author needs to verify their source. They merely need to list them. They got that $200 billion figure from somewhere. Cite it.

Re:Maybe newspaper articles should list references (1)

jd (1658) | about 4 years ago | (#33119010)

Teh intertoobs, where else? (This is also why newspapers often have typos, even in the digital age. It's cut-and-paste from a lolspeak site.)

Re:Maybe newspaper articles should list references (1)

JWSmythe (446288) | about 4 years ago | (#33119062)

  That's the problem though, they frequently aren't verifying them, so they can't cite them. It's embarrassing to say "we found it at another publication, and are just guessing they did their homework."

    I said it sarcastically but true. Hell, if you look at a lot of the crap being published these days, they're frequently full of spelling and syntax errors. It sucks, but it's the way it is. "Get it out" frequently overrides "make sure it's right".

    As the summary said, the number was yanked out of someone's ass to make a deadline and published in a magazine years ago. The author probably just remembered seeing it somewhere, and assumed it was true. It's not exactly polite to go around stealing info from other publications, even though it happens all the time. Attributing that stolen information is just begging for lawsuits between the publications. What if Newspaper X in your town was getting most of their information from Television station WA2Z? Unless they have a contractual agreement saying it's ok to use their info as a source, bad (legal) things will likely happen. Of course, little errors will always show up here and there, which is a great indicator of when someone's using your info, rather than getting their info.

Re:Maybe newspaper articles should list references (1)

WillDraven (760005) | about 4 years ago | (#33119334)

So why exactly hasn't Slashdot (and every other blog on the planet) been sued into a smoking crater? I think you've been pulling plays out of the New York Times book here bud...

Re:Maybe newspaper articles should list references (2, Informative)

EETech1 (1179269) | about 4 years ago | (#33119472)

I have a few friends that work for the local paper, and they all have to take turns working the night shift. Part (if not all) of the job dities on the night shift include watching the 9pm and 10pm news on all of the local networks to be sure that there isn't anything on that needs to be added to tomorrows paper quick. Ask them what time they have to work till, and they'll smile and say "right after the 10:00 news"

Re:Maybe newspaper articles should list references (1)

stuckinphp (1598797) | about 4 years ago | (#33119306)

If they actually had sources your claim might be valid.

Re:Maybe newspaper articles should list references (-1, Flamebait)

AK Marc (707885) | about 4 years ago | (#33119092)

Having lived abroad for a while, the US is in desperate need of "infringing on the First Amendment." It'll never happen because people will see it as that and consider their right to lie more important than reduction of fraud.

Many places have advertising rules that state that if you make a claim, you must have proof. It needn't be good proof, but proof none the less. The penis enlargement commercials would end. If they claimed it made you bigger, better, last longer, or whatever, they'd have to have a study that showed that. People have been prosecuted because they claimed common sense things and couldn't back them up. If you are going to claim it to sell a product, then you'd better be able to back it up.

But, for whatever reason, in the US we've gotten to the point where the right to speak is more important than the responsibility of having something worth saying. People lie for a living in the US, and people call them entertainers. News channels run more opinions pieces dressed up like facts when they are notoriously devoid of them. "Debate" is pushed so that the fringe gets equal time for their Flat Earth society or whatever. And the result is the noise exceeds the information, even in the formerly reputable areas like broadcast news and traditional newspapers.

The solution is to prosecute lies for profit as fraud. That includes newspaper stories where they don't check facts because a single disreputable source will give them something that will sell papers, and that's the goal. Or even the for-profit Slashdot running articles with headlines and summaries that are purposefully twisted to give a false impression in order to generate page views. It's a falsehood done for profit. But that's considered good advertising (as long as you don't get caught) and not considered a bad thing. So we put up with it and blame those taken in for not being more discriminating.

Re:Maybe newspaper articles should list references (0)

Anonymous Coward | about 4 years ago | (#33119262)

It is extremely irresponsible of you to suggest that we need to "infringe on the First Amendment" to deal with fraud. The First Amendment does not protect fraud in the first place, so your comments are ill-informed as well as wrong and irrelevant. We already have enough scumbags in power who are hell-bent on doing everything in their power to completely finish off what little remains of the Bill of Rights. We don't need uninformed, uneducated comments like yours suggesting they finish the job, when it has nothing to do with the problem about which you claim to be concerned.

Re:Maybe newspaper articles should list references (1)

pspahn (1175617) | about 4 years ago | (#33119408)

Where exactly do you draw the line of fraud? I think giving this First Amendment consideration is at least worth a moment. These media outlets are often expressing political views with their organizations, aren't they? You know for damn sure that if anyone tried to tell these "news" sources that they had to limit any aspect of what they presented to the public, the ACLU would be all over it claiming First Amendment.

Nobody is looking for censorship, it's just the NOISE! Think of a spam filter for news. The garbage people are bombarded with is astounding, I would think this to be undesirable.

Re:Maybe newspaper articles should list references (2, Interesting)

AK Marc (707885) | about 4 years ago | (#33119864)

That's what I was saying. If you sell "fruit cocktail" in the US without the right number of cherries, it isn't "fruit cocktail" but some other type of mixed fruit food. "Fruit cocktail" has a specific definition and passing anything else off as it is illegal. The same should be true of "news." Define "news" to have certain factual basis and disclaimers about conflicts, opinions, and unverified sources. Ban "news channels" from having opinion content that isn't labeled with a large banner across the top saying "opinion only, no facts included" and from calling themselves a "news channel" if they have more than 20% opinion pieces or something like that.

"News" used to mean something. Now it's a marketing term for selling opinions dressed up in half-truths and passed as facts. I call the use of deception to sell something (whether an idea/political agenda or a channel or paper or whatever) fraud. Instead people see it as good marketing.

Re:Maybe newspaper articles should list references (1)

Surt (22457) | about 4 years ago | (#33119720)

The penis enlargement commercials make no such claims precisely because they can't get away with it in the US either. Seriously, listen to one again. You will NEVER hear them say that it will make your penis larger. They may imply it, but they will never say it outright.

Re:Maybe newspaper articles should list references (1)

quickgold192 (1014925) | about 4 years ago | (#33119122)

They've already thought about that and devised a clever little way [wikipedia.org] to get out of all that, like, work.

Re:Maybe newspaper articles should list references (2, Funny)

dnahelicase (1594971) | about 4 years ago | (#33119396)

Maybe newspaper articles should cite their sources and have a list of references at the end like academic papers do. That way at least readers or other interested parties could independently verify the facts in the article.

Heck, even wikipedia articles list their references and are conspicuously labeled if they are in need of references. This article says the figure is from "the authorities".......WTF is that???

By the way, I work for a company that sells products that could be counterfeited. I estimate that just my company loses approximately 200 trillion dollars a year just from people selling products in our name. Why didn't she report that?

Re:Maybe newspaper articles should list references (1)

kwbauer (1677400) | about 4 years ago | (#33119700)

This whole discussion reminds me of the newspaper articles back in the late 70s / early 80s ranting about how many acres of rain forest we were losing to farming every day. The numbers were regurgitated again and again and they were so easily verified to be unrealistic. As in x acres per day times 365 days per year divide by surface area of the earth and we found that those evil farmers in the Amazon region were denuding the entire planet (including the surface of the oceans) every year. I was able to use these numbers a couple of times to "prove" that the rain forests are very resilient because they regenerated themselves multiple times per day. Since most environmentalist types are numerically challenged, they had trouble seeing the problem.

I also had a college professor that walked the class through how many Cat D-9 bulldozers would be required to perform all this clearing and it was more than Caterpillar had produced to date (assuming Cat was not underreporting their production by orders of magnitude) and the amount of fuel required to run all those bulldozers was somwehere in the neighborhood of all US fuel consumption for diesel, gasoline and heating oil combined.

Anyway, where did these numbers come from?... The newspapers were simply quoting a respected professor who was also an environmental activist from testimony he gave before the US Congress. When somebody finally decided to try to end the idiocy, he finally had to admit to that he had simply made the numbers up because he was put on the spot when someone asked him for an actual number of how many acres were being lost.

My point is that greedy, evil big business is not the only group to just make numbers up. The environmental movement has been doing it for decades.

Ever been to Brazil? (2, Insightful)

Anonymous Coward | about 4 years ago | (#33118744)

It's the counterfeiting capital of the universe. Because of Brazil's 60% duty on imported goods, an a very unfavorable exchange rate, a pair of Nike sneakers made in Singapore for $5 in materials and $0.30 in slave labor costs about R$600, which is a month's wages (or more) for a lot of people there. So, there's a huge demand, and therefore supply, of counterfeit goods.

Re:Ever been to Brazil? (4, Insightful)

Anonymous Coward | about 4 years ago | (#33119034)

This is largely not due to high import duties but due to corrupt customs officials. Fucking hell hole, I'm longing to get out of it.

Re:Ever been to Brazil? (1, Insightful)

Anonymous Coward | about 4 years ago | (#33119648)

Of course it is due to high import duties. It creates the necessary market for conterfeiting. I mean I've been to Brazil and I've seen iPads selling for R$3900, which is equivalent to about US$2100. Well... they weren't selling, obviously, but were available for purchase. While we're talking about overpriced Apple products (I know, it's redundant, amirite?), an Iphone costs about US$1100 there. All my friends told me an iPad could be gotten for about US$850 downtown. When you have that kind of disparity and you're that close to Paraguay, it's pretty obvious that you're going to have a huge market not only for counterfeited but also for stolen goods. Clarifying: when you get rid of regulation and fiscalization, you have no way to know if you're supporting criminal activities with your purchase (see the perennial debate about the legalization of drugs). The smart unauthurized retailer knows that and will try to maximize its profits. So yes, a hellhole, but kept that way by insane, counterproductive taxation.

Re:Ever been to Brazil? (-1, Troll)

Anonymous Coward | about 4 years ago | (#33119222)

You can't make handful of dirt in Singapore for $5, you third-world trash.

Re:Ever been to Brazil? (1)

7-Vodka (195504) | about 4 years ago | (#33119568)

Because of Brazil's 60% duty on imported goods, an a very unfavorable exchange rate, a pair of Nike sneakers made in Singapore for $5 in materials and $0.30 in slave labor costs about R$600

Think about what you said again.
$5.30 to make the shoe + 60% import tax = $8.48.
At the current exchange rate this is R$14.8

If it's not the import tax, then where is the added charge coming from?
I'm sure you can figure it out, it's not a trick question.

Re:Ever been to Brazil? (1)

rockout (1039072) | about 4 years ago | (#33119666)

He said it costs Nike $5.30 to make it, not that Nike charges $5.30 + tax when they sell it. Do you see Air Jordans going for $5.30 in the US?

His point was that because of the high import tax, the exchange rate, and low income of the average citizen, it costs much much more in real money in Brazil to buy a Nike sneaker than it does in the USA.

Old media sucks (5, Insightful)

GNUALMAFUERTE (697061) | about 4 years ago | (#33118750)

On one hand, they are trying to salvage old media, and on the other hand they are trying to kill efforts like Wikileaks.

It seems pretty obvious.

CNN can just say anything they want, even if it's completely inaccurate and has no sources to back it up. They can just say their source is secret, and nobody is even going to ask.

Wikileaks, OTOH, shows you the actual docs. That's why they are being persecuted as criminals.

Encyclopedia Britannica is written by an unknown number of employees under unknown circumstances, and they cite no sources clearly (In the best case, they just cite a bunch of sources that might or might not back up their claims, and there's no direct way to check them easily).

Wikipedia is edited by the general public, each edit can be easily identified and accredited to a single author, and all sources are directly linked to in most cases.

And yet, Encyclopedia Britannica is considered more credible than Wikipedia, even when it's been shown that it's far more inaccurate, not to mention outdated.

Old media has to die, but the almighty economic powers that run this world won't let it go without a fight.

Re:Old media sucks (1, Insightful)

EmagGeek (574360) | about 4 years ago | (#33118760)

Wikipedia will not be credible unless/until the editors stop allowing/encouraging the obvious and rampant political bias in the articles.

Re:Old media sucks (2, Funny)

Volante3192 (953645) | about 4 years ago | (#33118860)

Get over it. Truman defeated Dewey already.

Re:Old media sucks (1)

Hognoxious (631665) | about 4 years ago | (#33118904)

Nonsense. Ask any librarian.

Re:Old media sucks (4, Funny)

belthize (990217) | about 4 years ago | (#33119218)

Citation needed.

Re:Old media sucks (5, Insightful)

copponex (13876) | about 4 years ago | (#33119000)

Just because you disagree with the facts doesn't make the facts political. It makes you wrong.

Re:Old media sucks (1)

Nemyst (1383049) | about 4 years ago | (#33119366)

I'm more bothered by Wikipedia's near-tribalism when it comes to editors. It doesn't really feel "open" anymore.

Regardless, I still favor the information I gather there from the one I find in many places. It's just that it would be better for Wikipedia to go back to its roots and encourage the public to edit.

Re:Old media sucks (1)

hairyfeet (841228) | about 4 years ago | (#33119014)

Not just that, but rampant fanboi mods as well. Just look up how many articles they have there for something like Buffy the Vampire Slayer. And Deity forbid you find they actually got something wrong on one of those pages, they will drop the banhammer on you. That is why I only use Wikipedia for boring facts like chip designs or WW II military craft, because anything really popular will most likely have a fanboi mod watching it like a hawk. And then you have those with an agenda like the Scientology mod awhile back. Too little QA and background checking once someone becomes a mod there.

As for TFA? I almost feel sorry for them. The amount of stress someone working at a paper nowadays must be under is incredible with the Internet nearly always making them a day late and a dollar short. Frankly I wouldn't be surprised if someone does manage to come out with cheap e-Ink pads that newspapers will just die out like 8-tracks. Hell I would be surprised in any event if newspapers by and large survive another 2 years. As we saw with the Iranian election folks on the ground with cell phones can often get a story out quicker and do a better job than the reporters in hotspots, and sites like wikileaks are a lot harder to apply pressure to than some reporter trying to protect a source.

I have a feeling newspapers have just had their time, and the price of paper, ink, staff, delivery people, etc will simply kill them off that much faster. After all, the price of everything is going nowhere but up, and the Internet needs no paper and creates no waste.

Re:Old media sucks (3, Funny)

Anonymous Coward | about 4 years ago | (#33119368)

For an online encyclopedia with no political bias, see: http://www.conservapedia.com/ [conservapedia.com]

Re:Old media sucks (1)

balsy2001 (941953) | about 4 years ago | (#33118882)

Because what we all need is more news from independent bloggers. Then we can be sure that what is in the news is true.

Re:Old media sucks (1)

east coast (590680) | about 4 years ago | (#33118918)

And yet, Encyclopedia Britannica is considered more credible than Wikipedia, even when it's been shown that it's far more inaccurate, not to mention outdated.

yet, EB is a perfectly fine cite to use in your Wikipedia article. Thus Wikipedia can never be considered more reliable than EB.

Not to say that EB is the word of God but I find the source normally more reliable than those who cite the source. Of course, there are also no absolutes in this case.

Old comment style sucks (1)

Gazoogleheimer (1466831) | about 4 years ago | (#33118956)

Desire to back up your assertions with sources?

Not surprising (3, Informative)

lyinhart (1352173) | about 4 years ago | (#33118762)

Oft quoted as the "paper of record", the Times has a history of faking it [wikipedia.org] .

Seriously though, estimating losses due to piracy/counterfeiting is always dodgy since it assumes that a certain number of people would have bought the real deal had the fake stuff not been available.

Re:Not surprising (1, Insightful)

Anonymous Coward | about 4 years ago | (#33118888)

The assumption that some number of people would have bought the real deal isn't a bad one and most reasonable people wouldn't dispute it. Where the dispute generally lies is what the number would be. 1% of people? 90% of people? The "lost sales" numbers companies claim often are based on 100% of people buying the more expensive real product (which most of us would agree is a completely bogus number). I certainly don't know enough to come up with a reasonable counter number though? 20% maybe?

Re:Not surprising (4, Interesting)

Teun (17872) | about 4 years ago | (#33119246)

The "lost sales" numbers companies claim often are based on 100% of people buying the more expensive real product (which most of us would agree is a completely bogus number).

Indeed, I recently bought a fake Breitling watch for $100.-.

Even though I have to take it off in the shower (yes I bathe) I would never buy the +$4000.- real deal that's water proof to -500 meters.

Yet some lawyers would tally this as a $4000.- lost sale.

Re:Not surprising (1)

slick7 (1703596) | about 4 years ago | (#33120002)

The "lost sales" numbers companies claim often are based on 100% of people buying the more expensive real product (which most of us would agree is a completely bogus number).

And all the world bankers are laughing at all the fools.
Who are all the fools? Anyone not a world banker.

Re:Not surprising (1)

arnott (789715) | about 4 years ago | (#33118910)

Oft quoted as the "paper of record", the Times has a history of faking it [wikipedia.org] .

Jayson Blair ? how about making stuff [nymag.com] up for the Iraq war [wikipedia.org] ?

Re:Not surprising (1)

NoPantsJim (1149003) | about 4 years ago | (#33118912)

I can't fathom the idea that counterfeit goods compete with authentic ones.

When I was in my teens, I could find counterfeit Movado watches for ~$30 that were indistinguishable from the real deal. Would I have bought real ones for $1500+? No.

Of course now that I want a real one, there's no chance in hell I'm going to settle for a fake.

Re:Not surprising (2, Interesting)

MBGMorden (803437) | about 4 years ago | (#33119124)

Not that I give a lot of credence to that $200 billion figure, but I think part of their claims are that people might be buying counterfeit goods thinking that they're legit. For example, it was a while back on a forum that I saw some people that had gotten fake Seymour Duncan guitar pickups off ebay. They were sold for a price nearing authentic ones, and were sold as authentic, but after scrutiny it was discovered that they were knockoffs.

That said, while it DOES happen, I think it's a lot rarer than most companies would have you believe.

Re:Not surprising (1)

NoPantsJim (1149003) | about 4 years ago | (#33119148)

Good point, which is why I'd never buy anything "counterfeitable" off of Ebay or any other source I didn't 100% trust.

*illions lost to piracy, counterfeit goods... (4, Insightful)

Sheetrock (152993) | about 4 years ago | (#33118772)

The missing element in these claims is the citation of some sort of study that combines an examination of buying power and psychology to determine when piracy or the purchase of a counterfeit good represents a lost sale to the afflicted rights holder and when it does not. You can't just multiply retail cost of original good by estimated number of IP violations; that very likely surpasses the upper bound of the "damage" that has been caused. It's faulty journalism to ignore this fact or pass the responsibility for the veracity of this information to somebody else, but that doesn't seem to stop anybody from breathlessly regurgitating these sky-high numbers.

Re:*illions lost to piracy, counterfeit goods... (2, Interesting)

jd (1658) | about 4 years ago | (#33119144)

You also have to consider that the market price is artificially inflated to "cover the damage" of piracy. Thus, if there was no piracy, the prices would (hypothetically) be lower. So not only do you have to consider the sales lost rather than the total pirated, but you also have to use the "real market value" not the inflated market value. Further, you would have to subtract from this total the amount lost per sale due to the devaluation.

If the value ends up negative, then the industry is actually making money from there being pirates, as counter-intuitive as this would seem. If they were unable to sustain a higher value per item, through a lack of justification, they would end up making less money even though they sold more products.

(This justification thing featured big time when the US and UK governments investigated the music business when it was discovered that prices for producing CDs had dropped dramatically, research had all been paid for, but consumers were actually spending more per disk. Before then, the main argument for the high prices for CDs was that it cost more to make them than it did vinyl. After the showdown with Congress and Parliament, it was all about piracy.)

I'm not saying that anyone IS making money from there being piracy, but it is something that has to be considered as a possibility.

Even after all that, there are still two more factors. The first is who is doing the pirating. Competitor A may well try pirating a product of Competitor B's, particularly on those occasions when you've a sales volume war going on. That is certainly money lost to piracy, but it is the industry itself doing it and you can't blame outsiders for that. Well, you can, as clearly they do.

The second factor to consider is unpaid royalties. We have no idea how much any given company is making in profit that it is NOT entitled to. However, this value has to be estimated, because you have to subtract not only the total illicit profit from a company from the damage caused by counterfeiting, but you THEN have to subtract the total illicit profit the company WOULD have earned had the sale happened through them. That is not money they should ever have counted.

I cannot see how any figure that exists today (or any other day) could even begin to take all this into account.

Re:*illions lost to piracy, counterfeit goods... (2, Insightful)

Kongzilla (892890) | about 4 years ago | (#33119732)

"You also have to consider that the market price is artificially inflated to "cover the damage" of piracy. Thus, if there was no piracy, the prices would (hypothetically) be lower. " This isn't necessarily true if a competitive market isn't in place. Goods sold under a monopoly regime are typically more highly priced. In this case, piracy and counterfeiting introduce competition into the market, so hypothetically, if there was no piracy, prices would be higher. Your argument holds well enough for fake Gucci bags or Rolex watches, but not so well for creative works, which are monopolies in the economic sense due to their treatment under copyright and patent law.

Re:*illions lost to piracy, counterfeit goods... (0)

Anonymous Coward | about 4 years ago | (#33119734)

I suspect that a lot of "fakes" on the market aren't even coming from competitors, but from the original manufacturers themselves. For example, Brand A contracts a Chinese manufacturer to make 1,000,000 copies of Product A for $50 each that Brand A then sells to the public at $800 each (this is not abnormal markup). Chinese manufacturer sees the success of Product A in the marketplace and already has their factory tooled-up to produce Product A, so they make another 1,000,000 copies, tweak the badge to mis-spell the name slightly, and sell their version to the public at $200 each. They undercut Brand A by a large margin, but make 4 times as much money by selling direct.

Not all NYT coverage of counterfeiting is the same (1)

langelgjm (860756) | about 4 years ago | (#33119264)

Recently I was doing some research for a paper and ended up looking up a bunch of news stories about counterfeiting. Not all of the Times' coverage of counterfeiting has been so negative. This one in particular [nytimes.com] is worth a read.

Counterfeiting is Ok. (3, Insightful)

Icegryphon (715550) | about 4 years ago | (#33118776)

We all know that the Federal Reserve prints more money all the time
without anything producing any goods for it.
Let me introduce a little friend I call Hayek. [wikipedia.org]

Re:Counterfeiting is Ok. (0)

Anonymous Coward | about 4 years ago | (#33118886)

They miss you on Digg. Please go home.

Re:Counterfeiting is Ok. (3, Insightful)

copponex (13876) | about 4 years ago | (#33118976)

It is not enough to recognize that 'social justice' is an empty phrase without determinable content. It has become a powerful incantation which serves to support deep-seated emotions that are threatening to destroy the Great Society. Unfortunately it is not true that if something cannot be achieved, it can do no harm to strive for it. Like chasing any mirage it is likely to produce results which one would have done much to avoid if one had foreseen them. Many desirable aims will be sacrificed in the vain hope of making possible what must forever elude our grasp.

-Friedrich Hayek
"Law, Legislation and Liberty"

Hayek: the unoriginal "too hard; don't try" philosopher.

Re:Counterfeiting is Ok. (2, Informative)

Minwee (522556) | about 4 years ago | (#33119074)

It is not enough to recognize that 'social justice' is an empty phrase without determinable content. It has become a powerful incantation which serves to support deep-seated emotions that are threatening to destroy the Great Society. Unfortunately it is not true that if something cannot be achieved, it can do no harm to strive for it. Like chasing any mirage it is likely to produce results which one would have done much to avoid if one had foreseen them. Many desirable aims will be sacrificed in the vain hope of making possible what must forever elude our grasp.

-Friedrich Hayek
"Law, Legislation and Liberty"

"Kids, you tried your best, and you failed miserably. The lesson is, never try."

-Homer Simpson
"Burns' Heir" [1F16]

Re:Counterfeiting is Ok. (1)

internettoughguy (1478741) | about 4 years ago | (#33119258)

It is not enough to recognize that 'social justice' is an empty phrase without determinable content. It has become a powerful incantation which serves to support deep-seated emotions that are threatening to destroy the Great Society. Unfortunately it is not true that if something cannot be achieved, it can do no harm to strive for it. Like chasing any mirage it is likely to produce results which one would have done much to avoid if one had foreseen them. Many desirable aims will be sacrificed in the vain hope of making possible what must forever elude our grasp.

-Friedrich Hayek
"Law, Legislation and Liberty"

Hayek: the unoriginal "too hard; don't try" philosopher.

Hayek strikes me as a bit of crackpot, to illustrate; a quote from Wikipedia: Hayek was prepared to tolerate 'some provision for those threatened by the extremes of indigence or starvation, be it only in the interest of those who require protection against acts of desperation on the part of the needy.' , but then in another instance has voiced support for a basic income, essentially just a non means tested form of welfare: "I have always said that I am in favor of a minimum income for every person in the country.", again from Wikipedia, cited to "Hayek on Hayek: An Autobiographical Dialogue". I suppose everyone can have a change of heart, but to flat out deny it seems unscrupulous.

Perhaps he was just using hyperbole to distance himself from socialism as much as possible.

Re:Counterfeiting is Ok. (1)

Mashiki (184564) | about 4 years ago | (#33119428)

Perhaps he was just using hyperbole to distance himself from socialism as much as possible.

That's pretty obvious when you compare his ideas to Keynes ideas on how to stabilize failing or stalled economies.

Re:Counterfeiting is Ok. (0)

Anonymous Coward | about 4 years ago | (#33119664)

What he's saying isn't that we shouldn't try to achieve something. What he's saying is that Social Justice is something we shouldn't strive for because any halfway measure is at least as bad as not trying at all, and more likely to be worse. The desirable aims he refers to are things like education for the middle class's children, which is slowly being eroded by the flood of the lower classes being duped into believing that spending 4 years buying a piece of paper guarantees them a lifetime of comfort, when all the "social justice" programs have achieved has been a stark increase in the cost of an education which is being borne by the people least able to afford it.

Or how about low-income housing projects which, far from being places of social justice are hotbeds of crime and injustice pitting neighbor against neighbor.

No, his message is very clearly not that we shouldn't try anything that we can't succeed at. He is very clearly indicting the idea of social justice as something which destroys people and societies.

Hang on, I'll put it simply: You need to learn some reading comprehension and analytical skill.

Re:Counterfeiting is Ok. (5, Informative)

copponex (13876) | about 4 years ago | (#33119958)

The difference is between effective government and ineffective government, not the ability of a government to provide a just society. Hang on, I'll put it simply: you need to learn more than what your daddy told you. It's a big, big world out there.

Let's look at two modern western nations and see what the results are:

USA vs Norway

GDP per Capita (World Bank)
Norway: $55,000
USA: $46,000

Life Expectancy
Norway: 80 years
USA: 78.2 years

Poverty Rates
Norway: 7%
USA: 12%

Employment Rates:
Norway: 3.5% (April 2010)
USA: 8% (April 2010)

Income Inequality (Lower is Better)
Norway: 25.8
USA: 40.8

Vacation Time
Norway: 25 days
USA: 14 days

Awww boo. Reality is a bitch, ain't it?

Re:Counterfeiting is Ok. (1)

copponex (13876) | about 4 years ago | (#33119962)

Bah. That should read unemployment rates.

Re:Counterfeiting is Ok. (1)

feepness (543479) | about 4 years ago | (#33119818)

Hayek: the unoriginal "too hard; don't try" philosopher.

Tell that to the millions who voted for the "lesser of two evils" in the last election(s).

Re:Counterfeiting is Ok. (0, Troll)

hibiki_r (649814) | about 4 years ago | (#33119136)

And this is informative? The Federal Reserve has the power to print money and make equivalent digital records on their ledger. The currency is not backed by anything. How is that counterfeiting? If you don't like the paper they print, which has no intrinsic value, feel free to trade it to people who value it for gold, carrots, tin foil, or whatever else floats your boat. Luckily for you, the US government asks to receive said pieces of paper in their tax collection. If it's counterfeit and worthless, you'd have no problem giving them all that useless paper, woundn't you?

Counterfeiting is a key world that will separate the libertarians that at least attempt to be rational from the loonies. I doubt that even their high priests Hayek and Mises would like them.

Re:Counterfeiting is Ok. (1)

Mashiki (184564) | about 4 years ago | (#33119514)

Simply? You get deflationary spirals, much like with what we're seeing now.

Re:Counterfeiting is Ok. (1)

internettoughguy (1478741) | about 4 years ago | (#33119642)

If you don't like the paper they print, which has no intrinsic value, feel free to trade it to people who value it for gold, carrots, tin foil, or whatever else floats your boat.

You must accept the legal tender as payment of debt, and IFIK that's at least part of the problem they have with it, because from the time that issue the debt to the time you receive the payment, the tender could have devalued significantly.
That's not to say that the value of Fiat currency has to be any less stable than say carrots or tin, but simply that you don't have a choice.

Re:Counterfeiting is Ok. (1)

Surt (22457) | about 4 years ago | (#33119854)

So, they're smart enough to care about Fiat currency, but too stupid to write their debt contracts with an inflation provision?

Got the wrong message off that tagline (4, Funny)

SuperKendall (25149) | about 4 years ago | (#33118808)

The whole "back it up" line made me think for a second, they wanted people to copy money to preserve it from counterfeiting...

Strange notion of God (1)

Trivial Solutions (1724416) | about 4 years ago | (#33118864)

Jacob did some sleazy shit and he was loved, but that's not how I behave in the eyes of God. God says... plain enquiry faithfulness orator MS t vagrant explain melodious modestly followed P subject line savour deceive PUNITIVE acts meeting warned Carthaginian debated glittering gathering speed exult drunk granted desires secure unjustly mutually Creation dignities preferred DOMINE affirming unsought bounds unassuming whispered whatsoever g whether haply drowsy encouraged continent Academicians fortunate meaning tempestuously cud torments insolently like smelleth want Just covered evidently wrought enjoying volumes Repent fostering built NUMBER whirlpool merely losing comparing toss proud discreetly express bulky gathers BOOK drudgery lesson Did gnawed remembers Divers envenomed charmed unsound became wins tempered remained consuming problem plant Honor travailed willing succeeding himself unwearied empire intercede Nature harts deferring nevertheless

ACTA propaganda campaign? (3, Interesting)

SIGBUS (8236) | about 4 years ago | (#33118934)

When they start using rectal numerology to prop up a story like this, I can't help but think that this is a propaganda piece to grease the skids for ACTA.

The obligatory Obama comment (2, Funny)

NynexNinja (379583) | about 4 years ago | (#33118938)

An article would not an article without the obligatory "Obama" comment. It doesn't matter if the article is about counterfeiting or sewing, I read the comments intently for the Obama comment, and sure enough am able to find it.

Re:The obligatory Obama comment (3, Informative)

WillDraven (760005) | about 4 years ago | (#33119480)

Well then why didn't you reply to it? Oh, wait, it isn't there. I expanded all the comments and ctrl+f'ed Obama, the only three instances were in your post..

Re:The obligatory Obama comment (1)

internettoughguy (1478741) | about 4 years ago | (#33119510)

Meta-"Obama" comments seem to be on the rise too. :)

$5,000,000,000 (1)

Black Parrot (19622) | about 4 years ago | (#33118942)

Five billion dollars is still a lot of money.

Re:$5,000,000,000 (2, Insightful)

paulsnx2 (453081) | about 4 years ago | (#33119256)

5 billion is a small number in the context of the national economy. In fact, it is so small as to be dwarfed by the margin of error when Considering economic trends.

Re:$5,000,000,000 (2, Insightful)

dnahelicase (1594971) | about 4 years ago | (#33119506)

Not only is $5,000,000,000 a relatively small number compared to GDP and the market as a whole, but you have to look at who is losing the money.

The counterfeit manufacturers only sell this product once. Once they sell it to a distributor (most likely someone in the US) the product becomes part of the economy.

Those counterfeit goods that are sold on the street (as in pictures article) were originally purchased from China (probably also true for the legit product) but the one making the money is the street vendor. That street vendor in turn probably uses this money to buy food, clothes, other retail goods, etc.

While it is very wrong to use a trademark without permission and there is no legal way to justify this type of counterfeiting, the economic arguments aren't necessarily so strong against it. That money is going to stay fairly locally to where that good was purchased, consumption is going to increase, and dollars spread more evenly. Instead of the mall/retailer getting a half decent margin and the trademark holder getting a decent margin, the street vendor gets a very good margin and the consumer gets a steep discount.

I'm not saying that counterfeit goods are good for the economy, I'm just saying that if you are going to throw out numbers (either high or low) without sources, support, or justification, it can lead to a lot of questions about what that number contains. Are 5/200 Billion dollars disappearing from the US economy? From the trademark holders? From local communities? From sales tax coffers?

Re:$5,000,000,000 (5, Insightful)

Lloyd_Bryant (73136) | about 4 years ago | (#33119370)

Five billion dollars is still a lot of money.

But put the numbers in perspective.

US GDP $14,260,000,000,000 (2009 estimate, courtesy of the CIA [cia.gov] )

$200 Billion equals 1.4% of the GDP
$5 Billion equals 0.035% of the GDP

One is a problem worthy of immediate attention. The other is a problem to worry about when nothing else is pressing.

I did not rtfa but... (1)

plague911 (1292006) | about 4 years ago | (#33118962)

I have no idea what they are using as a strict definition of counterfeiting but.. 200 bill seems easily doable. Seriously with china alone stealing massive amounts of military and manufacturing tech its very easy to get up into the high 100s of billions when a single lost arms deal can be ~30 billion.

All Hogwash! (0, Troll)

no-body (127863) | about 4 years ago | (#33119086)

Loosing sales to somebody who has no money (extremely put)? Would everyone downloading be able to pay and is just refusing to do so? Highly doubtful. Maybe sharing of things a basic human trait and all the business money making schemes run against it?

Post news (1)

oldhack (1037484) | about 4 years ago | (#33119090)

Stop posting second/fifth-hand blog bitch-fest.

Re:Post news (1)

honestmonkey (819408) | about 4 years ago | (#33119926)

Would I could mod you up. Techdirt (Mike) is occasionally even right, but as always, he's a biased, opinionated jerk who just loves to hear himself type. I'm unclear as to why anyone reads that crap anymore.

Yeah but $200B 20 years ago is worth (2, Insightful)

kawabago (551139) | about 4 years ago | (#33119102)

Yeah but $200B 20 years ago is worth in the trillions in todays dollars! They better get on that counterfeiting before the losses are greater than the economy can possibly produce!

Direct or Indirect? (4, Interesting)

cdrguru (88047) | about 4 years ago | (#33119190)

The place to start with this is doing something like purse shopping. You can go to a Coach store or Prada and find a really nice purse for $1500 and an OK one for $500. Then go to a store that sells similar knock-offs and you can see things that look more-or-less like the Prada ones for $100. Then stop by the street vendor with a absolutely faithful Prada copy for $35.

There are two things that the average Joe learns from this adventure:

  1. Only an idiot would buy a "real" Coach or Prada purse.
  2. There has to be cheaper version of just about everything else.

What this does is by the mere presence of the counterfeit goods in the marketplace is reduce the willingness of the public to buy originals. It doesn't matter what the "original" is, obviously there has to be a cheaper counterfeit version available. This applies to everything from caviar to computers and automobile parts to luggage.

$200 billion lost because of the presence of counterfeit goods? Easy. The direct losses might only be a few million, but pushing the idea of "just as good as" in front of people pushes the originals out completely.

Re:Direct or Indirect? (1)

mevets (322601) | about 4 years ago | (#33119738)

The fashion industry has dealt with counterfeiting for ages; the cheap knock offs actually help them. The real key (to tthem) is about creating something fashionable. The hilarity is that they have to watch what people do with the knock-offs to figure out what fashionable means. Oh-Bla-Di, Oh-Bla-Dah, ....

Re:Direct or Indirect? (0)

Anonymous Coward | about 4 years ago | (#33119886)

There would be no "just as good" if the "good" was worth what the people who write these dumb articles are whining about. But its not and "just as good" is free market capitalism anarchy at its bestest and it rocks. There are no billions "LOST" just billions to be "GAINED" through intelligent marketing and supply and demand. I.e. sell that real "Prada" for 35$ dood...

I don't see why this is a problem. (3, Interesting)

feepness (543479) | about 4 years ago | (#33119252)

The "victim" still has their product to sell. It's not like I'm "stealing" something from them.

Re:I don't see why this is a problem. (1)

Raineer (1002750) | about 4 years ago | (#33119928)

The "victim" still has their product to sell. It's not like I'm "stealing" something from them.

This is a very valid point. They should stop calling this "theft".

Re:I don't see why this is a problem. (0)

Anonymous Coward | about 4 years ago | (#33120004)

The same reason you sneak into concerts and amusement parks? Hey, if they aren't 100% full, then you aren't depriving anyone of selling one more ticket.

In other news... (1)

w0mprat (1317953) | about 4 years ago | (#33119576)

Fair use is worth $ Trillions in the US alone. http://www.wired.com/threatlevel/2010/04/fairuse-economy/ [wired.com] An independant, peer-reviewed study.

Oh wait... finally. I get it now. Copyright trolls want a slice of that untapped uncontroleld trillion dollar economy.

I'm not going to RTFA, or all your comments. I just read the headline and posted this. Any redundancy is intentionally accidental.

Manufacturing (1)

codepunk (167897) | about 4 years ago | (#33119596)

The manufacturing industry sold it's soul to China and now we are supposed to feel bad for them?

The News Media Insist that... (1)

w0mprat (1317953) | about 4 years ago | (#33119632)

The internet is full of viruses, hackers, porn, movie pirates funding al queda, terrorists and sexual predators. A day doesn't go by with the mainstream media spreading these fearmongering stories.

Why do they do this? Because their business depends on it.

Ask anyone who gets their opinion of things from the 6pm news about the internet and they'll tell you what they've been told to say.

It's worse than that because as we all know.. (1)

sparkeyjames (264526) | about 4 years ago | (#33119690)

95% of all statistics are made up on the spot with no corroborating evidence.

 

Bad numbers (3, Insightful)

uvajed_ekil (914487) | about 4 years ago | (#33119764)

I've said it a thousand times, and I'll say it again: the statistics that the RIAA, MPAA, BSA, etc. claim are misleading, and very wrong. They are drawing conclusions that suite their cause (wallets), not getting to the root of things. I do not condone outright piracy and counterfeiting, though hopefully this explains some of it. They count every instance of and illegal or unauthorized copy being transferred as a lost sale, or a net loss. This is not so, and I contend that most downloads or sales of cheap counterfeit merchandise are in fact a direct result of ridiculously high prices for legitimate items, rather than a cause of high prices.

Back in the days of cassettes and when VHS was king, I used to get all sorts of things from the local library. I'd often dub copies for myself and return the borrowed copy almost immediately. When we all transitioned to CDs, I kept up this practice. I was also known to download a fairly hefty amount of software from local BBS's, and later the internet. My reason for doing this? I simply could not afford to spend $12 on a tape I wasn't sure I'd even like, $15+ for a CD that might include one song I liked, or $20-$30 for a movie I'd watch once or twice then stick on a shelf. Buy a shirt, a hammer, or a TV, or a pizza that turns out to be crap? You can return it for a refund. Not so with music, movies, software, etc., even if it doesn't work right (in the case of lots of software and computer games). Nearly everyone has bought a CD they don't like, and they are all screwed.

So perhaps downloading, torrents, and p2p file transfers are rampant. I'm sure of it. But much of this is due to high prices and the flooding of the music/movie/software markets with utter crap. Were the opportunity to download for free not there, most of these unauthorized downloads would absolutely NOT translate into sales. I buy a few CDs a year to support my favorite few artists, as I have for the past 15+ years, which is what I can afford to buy. Yes, I download more than that, but if I couldn't, I still would not buy more. I did not buy movies before I could download them, and I never will - not enough re-use value. Software? I use linux and almost strictly free software now, and have no need for windows junk. A lot of people are like me, too.
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