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Swiss watch industry loses up to 1 billion francs as fakes enhance in quality

Counterfeit Swiss watches represent an annual shortfall in revenue of one billion Swiss francs, the equivalent of a thousand jobs. Last year, a million fake watches were seized following action by the Federation of the Swiss Watch Industry. Buyers face heavy penalties.

A person who buys a counterfeit watch is liable to find themselves in court on criminal and civil charges, and in breach of Customs regulations, says the Federation of the Swiss Watch Industry (FH). In many countries, it is an offence to even be in possession of counterfeit goods. Intellectual property right-holders are also entitled to claim damages. Customs are authorised to confiscate and destroy illegal goods, and impose heavy fines. In Switzerland, it is illegal to import a counterfeit watch, including a single watch purchased in good faith for personal use.

Better quality fakes

So is it worth the gamble? The answer is a resounding No. When you buy a counterfeit watch you finance organised crime, encourage sweatshops and child labour, support intellectual property theft, destroy jobs, and more. The companies whose products are copied also pay the price of this clandestine industry. Trade in counterfeit and pirated goods costs Switzerland CHF 2 billion (EUR 1.65 billion) annually, and in the region of EUR 500 billion (CHF 600 billion) worldwide. While putting a precise figure on the counterfeit market isn’t easy, the OECD estimates that fakes account for some 5% to 7% of world trade, compared with 3.5% in 1990.

The Swiss watch industry is particularly hard hit. Each year some 40 million fake Swiss watches go on sale, which is more than the 30 million authentic Swiss-made watches produced each year. Watches are the second most commonly counterfeited goods after textiles. The impact on the sector in terms of lost revenue used to be estimated at CHF 800 million (EUR 650 million), a figure that has considerably increased in recent years according to Michel Arnoux, who heads the anti-counterfeiting division at the FH.

As the quality of counterfeits increases, so does their price, a factor that goes some way towards explaining this. Chinese-made mechanical movements, for example, are now produced to a higher standard, and are more likely to incorporate polished screws, seals, and sought-after materials such as ceramic. “It could well be that certain counterfeits have reached the same standard of quality as authentic watches issued less than a decade ago,” rues Michel Arnoux. It’s not unusual now to come across fakes selling for EUR 800 (CHF 970) each. The shortfall for the watch industry as a whole now stands at around CHF 1 billion, which broadly speaking corresponds to a thousand jobs in the sector. On a global scale, counterfeiting destroys more than 200,000 jobs a year, half of which are in Europe.

Multiple distribution channels

The internet has transformed how fake watches reach the public, and boosted sales, by allowing transactions to take place anonymously with no contact between buyer and seller. Counterfeiting is an effective means to launder money from other illegal activities, and is also used for tax evasion purposes. In fact the criminal ramifications of counterfeiting are such that the FBI is taking a close interest; last year the FH trained several special agents at the American organisation’s field office in Arlington, Virginia. “We make it a priority to inform authorities about counterfeiting,” says Michel Arnoux.

The number of fake watches seized each year as a result of action by the FH remains relatively stable at around one million, which doesn’t mean the problem is under control: counterfeiting’s underground economy is thriving. China and Thailand are in the frontline in Asia, Italy in Europe. As well as seizing products, in 2013 the FH blocked 28,000 auctions of fake watches and had several websites taken down.

Another difficulty in stemming the flow of counterfeit products is the number of channels involved. Most fake goods are released onto the market via wholesalers using five main outlets: online, street vendors, stalls set up in popular shopping zones or tourist drags, in some countries brick-and-mortar stores openly selling fakes, and small ads. No end of choice for sellers and, for those fighting back, all the more reason to stay constantly alert.

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