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Counterfeiting Thrives in Expanded EU

Manfred Götzke (ncy)
April 26, 2005

Experts fear that EU expansion has allowed more counterfeit brand products from Eastern Europe to make it to the Germany market -- despite laws meant to prevent just that.

EU expansion has given pirates a boostImage: BilderBox

Visitors to the weekly market in Borsa in northern Romania have the chance to buy Adidas sneakers for 10 euros ($13), cK one perfume for seven euros or the newest Britney Spears CD for just five. The goods are new, unused -- and pirated copies of the originals.

Rüdiger von Fritsch-Scherhausen, deputy head of Germany's Federal Intelligence Agency (BND) fears that such counterfeit items will increasingly appear for sale in Germany.

CD Regal im Laden Beatles
Image: AP

"CD bootlegs, for example, from the area east of the external borders end up in large amounts on the markets," he said. The governments in eastern European had indeed introduced countermeasures and passed new laws based on Western norms. "But mix-ups over competency and corruption prevent application."

The European Commission estimates that German business misses out on 20-30 billion euros and 70,000 jobs due to counterfeiting. The pirated goods are made in eastern Europe or Asia and sold on the streets or even in legal stores after a bit of graft has changed hands. The BND describes it as organized crime, where the big fish escape criminal persecution because they pay high bribes.

High costs

In 2003, before the EU grew from 10 to 25 states, German customs confiscated 50 million pirated items, including 41,000 copies of Viagra pills and 11,000 turn-signal indicators. Fritsch-Scherhausen is concerned that since EU expansion in 2004, the German authorities won't succeed in confiscating as much. "Regular customs checks will cease, at the same time as the traffic in goods and of people will increase." The vast array of counterfeit products already available beyond the border will make it to the German market, he believes.

Infineon Singapur
Microchip productionImage: AP

German businesses are trying to protect themselves, too. Jürgen Järnecke, security head at computer chip manufacturer Infineon, keeps an eye on the situation, including Internet auctions. He said he often discovers that goods for sale under the name Infineon that couldn't possibly stem from his company.

But copying high-tech products like computer chips or machines requires much more than just switching a labels. Pirates frequently get their hands on secret information through spying. "We must assume that German firms are also decidedly the targets of espionage from competing firms, but also from intelligence services in other regions of the world," said von Fritsch-Scherhausen.

Insufficient security

And it's becoming more dangerous the more information companies save and communicate digitally. Reports surface again and again of instances of hackers successfully gaining access to the secret data of companies thought to be impregnable.

Von Fritsch-Scherhausen criticizes companies for failing to handle sensitive data with enough caution, adding that some firms are so bold as to transmit entire contracts over mobile phones. "We could just as well use a megaphone; it would have the same effect," he said.

Despite the dangers of espionage and the enthusiasm for counterfeiting, businesses still seem to find EU expansion more useful rather than damaging. Otherwise, they would hardly be moving a growing amount of production to the new members in Eastern Europe.

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