Russia plagued by counterfeit goods

Some 40 per cent of all the alcoholic beverages and 36 per cent of all the foodstuffs on sale in Russia during the first half of the year were counterfeit - part of a worsening problem that is costing Moscow over $1 billion a year.

The latest figures from the state trade inspectorate of the ministry of economy show that food products in particular were frequently passed off as something else. Nadezhda Nazina, head of the inspectorate, said that margarine was often sold as butter, soybeans as tinned meat and milk substitute as condensed milk.

Some 3,000 inspections of retail premises were carried out during the first half of the year, and 48 per cent of the cases violations were discovered, Nazina said. In addition, more than 2,000 trading outlets were shut down and counterfeited goods worth approximately $1 million were seized during the period.

While food and drink products feature prominently among the most counterfeited goods, they are by no means the only ones. For example, around 20 per cent of all the tobacco on sale in Russia is fake, while 22 per cent of clothing and footwear items, 83 per cent of video cassettes, 76 per cent of audio cassettes and 80 per cent of DVDs produced in Russia are counterfeited.

Nazina said that the government was taking measures to address the growing problem of counterfeit goods, which is not only bad for the Russian economy but is also damaging Russia's reputation as a trading partner as more and more fake products are exported.

She said that new laws governing customs should help stop the influx of counterfeit goods from elsewhere - primarily Asia - although more action would have to be taken to combat the production of counterfeit goods within Russia itself.

Some estimates suggest that as many as 90 per cent of the goods on sale in Russia are counterfeit, a major problem which Russia will have to act quickly to counter if it is to show its future World Trade Organisation partners that it is moving in the right direction.

Worsening situation​

But acting quickly does not appear to be high on the agenda. A survey published in March this year by the Coalition for Intellectual Property Rights (CIPR), a private-public partnership dedicated to advancing intellectual property rights protection and reform in the CIS countries and the Baltic states, based on 2002 data shows that the situation has not improved over the last 18 months.

The CIPR survey revealed that 93 per cent of Muscovites 'encountered' counterfeits during 2002, and while many of them admitted to buying them, there was also a growing level of discontent with the proliferation of such products, with 90 per cent of all consumers questioned saying they had a negative attitude towards counterfeit goods.

The survey showed that clothing, footwear and sportswear were the counterfeit products most encountered by consumers (51 per cent), followed by alcohol (47 per cent), food, (46 per cent), pirated music and film (37 per cent), medicines (31 per cent), soft drinks (24 per cent), tobacco (23 per cent) and personal care items like perfume, cosmetics, shampoo and toothpaste (18 per cent).

Among the brands named as suffering in particular from counterfeiting were Adidas, Nike, Reebok, Kristall (vodka) and Nescafé.

The survey found that most consumers had purchased counterfeit products at open markets (45 per cent), followed by small shops (22 per cent), kiosks and street vendors (14 per cent), hypermarkets, supermarkets and department stores (6.5 per cent) and pharmacies (6 per cent).

Dmitry Yanin, chairman of KonfOP, the International Confederation of Consumer Organisations which assisted in the survey, said: "There is no doubt that consumers feel at risk of purchasing tainted or fake products when shopping at small stores, pharmacies and, especially, in kiosks and open markets. However, consumers are clearly less tolerant of certain counterfeit products than others."​

Not surprisingly, counterfeit medicines were top of the list of 'unacceptable' products (84 per cent), followed by counterfeit food (81 per cent) and counterfeit alcohol (77 per cent). On the other hand, consumers were much more lenient regarding both clothing and sportswear (34 per cent and 22 per cent respectively) and counterfeit music and film (42 per cent and 27 per cent respectively).

The low income of the average Russian households, the high price of genuine goods, weak anti-counterfeiting laws and a lack of effective law enforcement all combine to make counterfeiting one of the most profitable businesses in Russia today, the survey shows.

The volume of counterfeits and the quality of counterfeit packaging has increased significantly across the 12 product categories evaluated in the study, with the most dramatic increases in volume reported for clothing and sportswear (50 per cent), medicines (48 per cent), alcoholic beverages (48 per cent) and personal care products (36 per cent). But, tellingly, the price of fake goods has also increased in the last two years, with the price of counterfeit food, medicines, alcohol, soft drinks and clothing/sportswear escalating the most.

Tougher sanctions needed​

But while many consumers will continue to buy counterfeit goods - if only because they are still cheaper than genuine ones, despite the price increases - most are also in favour of tougher penalties for retailers found guilty of selling fake goods.

The CIPR said that the survey should act as a warning to retailers as well as producers of counterfeit goods. It said that 70 per cent of consumers wanted harsher penalties specifically for distributors and retailers who sell counterfeits, while eight in 10 respondents said retailers should be required to certify to customers that they do not sell counterfeited products.

A worrying factor given the apparent slowness of the authorities to tackle the problem is the revelation that most Russians - let alone the country's trading partners and international brand owners - think that the problem of counterfeiting is one of the worst facing the country today, on a par with unemployment, alcoholism and poor medical services.

But most consumers are in little doubt as to who is responsible for tackling the problem. Some 67 per cent of those questioned named the state and regional authorities as those best suited to take action to curb the growing levels of counterfeiting.

Nor is there much debate about who is behind the problem. Three quarters of respondents believed that organised crime was the reason for the high levels of counterfeiting, with one out of three even believing it was linked with terrorist groups. There is also a great deal of cynicism - many consumers said they thought that counterfeiting would never be eliminated in Russia, unless corruption in government circles was also eliminated - in other words, the problem will only be solved if President Putin makes it a priority.