Rome, Dec. 14, 2022. Rome Business School, part of Planeta Formación y Universidades, an international network created in 2003 by De Agostini and the Planeta Group, has published the research “The Second Life of Counterfeit Goods in Italy. Case studies from the world of art and fashion,” edited by Giuliana Baldo Chiaron, Program Director of Rome Business School’s International Master in Fashion and Luxury Management; Michela Bonafoni, Program Director of the Executive Master in Fashion and Luxury Management; Giosuè Prezioso, Lecturer of the International Master in Arts and Culture Management; and Valerio Mancini, Director of Rome Business School’s Research Center.
The study analyzes the phenomenon of counterfeiting, a growing danger not only for consumers, but for companies and the entire world economy, with a turnover of 412 billion euros already in 2019, corresponding to 2.5 percent of world trade. Today, Italy is the fourth largest country in the world for counterfeit goods, particularly counterfeiting in the fashion, cosmetics and art sectors, generating losses for Italy of nearly 4 million euros (Guardia di Finanza, 2022). The authors of the research analyze the movements of counterfeiting worldwide, the damage to Made in Italy, the role of social media as amplifiers, and propose solutions to counter the consequences of this crime such as a wider and more systematized use of blockchain and open source database.
Italy is the fourth most affected country in the world by counterfeiting after the United States, France and Germany, with total losses amounting to about 225 million euros. All of this has serious consequences for labor: according to the International Chamber of Commerce, jobs put at risk by the gray market are expected to amount to 5.4 million worldwide for the current year.
According to the aggregate figure of seizures made by the Excise, Customs and State Monopolies Agency and the Guardia di Finanza, it shows that from 2008 to 2021, 208,000 seizures were recorded in Italy with 617 million counterfeit items, with an estimated economic value of more than 5.9 billion euros taken out of the illegal circuit (without considering their joint operations and excluding food, alcoholic beverages, medicines and tobacco). More recently, the Guardia di Finanza revealed that more than 3 million irregular items were intercepted at Italian ports and airports in the first half of 2022, an increase of more than 150 percent compared to the first 6 months of 2021. The goods, placed on the market, would have generated a total value of nearly four million euros.
In June 2022, EUIPO conducted a study to investigate the habits of young people in the 15-24 age group in relation to the use of counterfeit and pirated products. The analysis shows that: 37 percent of young people surveyed say they have bought through an e-commerce channel at least one counterfeit product in the past 12 months (up from 14 percent in 2021); and that 1 in every 5 young Europeans has used pirated services online in the past few months, specifically movies (61 percent), TV series (52 percent), music (36 percent), software, and live sporting events (both at 35 percent).
Every year, police forces across Europe in the annual Operation Aphrodite seize millions of irregular products (Guardia di Finanza, 2021). Clothes and accessories remain in first place (17 percent), followed by footwear (14 percent), electronic devices (13 percent), and hygiene products, cosmetics, personal care, and perfumes (12 percent). Sometimes shoppers do not do this intentionally but are misled given the difficulties in distinguishing authentic from counterfeit products, particularly in the online where one can stumble upon counterfeit products more easily. Michela Bonafoni, one of the authors of the research, recalls that “social increases the desire of the younger generation to keep up with the trends, and they are driven to buy fake products because of the rising prices of originals and the extreme reachability of fake products online.”
As for Italy, the impact of cosmetics counterfeiting is 11.9 percent, amounting to 935 million euros in lost sales each year. Despite this, the cosmetics industry is growing strongly. According to Confindustria, in 2021 Italian cosmetics recorded a total turnover of 11 billion 810 million euros, exceeding that of 2020 by 9.9 percent, with 59 percent of production going to the domestic market while 41 percent of it to exports with a greater focus on Germany, the United States and France.
In Italy, total spending on cosmetics purchases over the past decade has risen from 10 billion 448 million to 10 billion 640 million while, in online, it has risen from 27 million in 2011 to 871 million in 2021. However, there is an increase in counterfeit cosmetics being bought knowingly: according to a study by the Ministry of Infrastructure and Made in Italy (formerly the Ministry of Economic Development, MISE), 21 percent of the Italian population has purchased a counterfeit cosmetic at least once and 12.9 percent have done so intentionally. To a large extent, these products are acquired online: a report by the OECD and EUIPO (2022) analyzing the period 2017-2019, shows that at the European level 56% of seizures of counterfeit goods come from web sales and in particular through e-commerce.
In 2021 there were 120,000 cosmetics products seized by the Customs Agency and the Guardia di Finanza in Italy, numbers that increase if we consider that in the first six months of 2022 the products seized by the Guardia di Finanza alone amounted to 105,280, bringing the percentage to an increase of 83.8 percent in the same period of 2021. According to MISE, in 2021 Lodi was the province where the largest number of counterfeit cosmetics were found with a total of 50,218 items seized, accounting for 41.8 percent of the total. This was followed by Rome (23,090), Naples (17,609) and Trieste (11,097).
Facial products rank first, followed by anti-wrinkle and anti-aging creams, all items whose provenance and ingredients are key to know because they could potentially harm health. Despite this, a MISE report (October 2022), finds that only 15.1 percent of Italians care about their safety when buying cosmetics and 10.1 percent about sustainability. Speaking of generations, Millennials care more about sustainability (15.7 percent) than the over-65s (5.1 percent).
What to do with the thousands of counterfeit goods seized each year? Valerio Mancini, among the authors of the research, says that it would be necessary to “reintroduce goods to the market once it is confirmed that they pose no risk to people. This is from the perspective of sustainability and circular economy, especially considering the scarcity of raw materials. The practice of destruction, now more than ever, is highly harmful to the environment.” He also adds that its non-recyclable parts could be used for the creation of alternative source fuels, as proposed by numerous entities and startups, such as “Re-Circulate.”
Regarding works of art, one alternative to put them back into circulation is to auction them off, sell them or put them to social purposes, as happens with assets seized from the Mafia and which could likely happen with assets that are currently frozen to Russian oligarchs. Surely, however, there are works that simply cannot have a second life in the marketplace because they belong to human history. In this case, it is worth highlighting virtuous examples such as the “Museum of Rescued Art” a section of the National Roman Museum that houses artworks that have been stolen, dispersed, sold or exported illegally. This recent initiative (the museum just opened in June 2022) was inspired by the thousands of lots of counterfeit art recovered by the Guardia di Finanza each year (34,000 in 2021 alone), including the 58 lots worth 19 million euros that were returned to Italy by the Metropolitan Museum in New York in September 2022.
For Valerio Mancini, another hypothesis under consideration for the protection of goods is the establishment of a scientific monitoring observatory, with a database directly or indirectly shared by marketplace managers, companies that own the brands, postal operators, law enforcement and other public authorities. Finally, the idea of collaborative tables with fashion and luxury companies to curb the phenomenon is a meritorious action from which companies, consumers, ultimately the entire marketplace, could benefit.
“Bar codes, radio frequency identification, scannable tags, and blockchain technology are just a few examples of applications that aim to protect and safeguard brands and end consumers. We need to make use of technology to tackle counterfeiting by coming up with effective, international solutions to protect consumers, sellers and the global economy,” Mancini says.