The Economic Impact of Counterfeit Goods in the EU (and Why Brand Protection Saves More than Just Revenue)

Counterfeit goods. Fake products passed off as genuine. They pose a serious economic threat to the European Union. Beyond just lost sales for brand owners, the economic effects of counterfeiting in the EU ripple through lost tax revenues, job losses, eroded brand value, consumer safety risks, and increased compliance burdens on businesses and authorities. This data-driven overview examines the cost of counterfeit goods to the EU economy and why robust brand protection measures (like MarqVision’s AI-powered solution) ultimately save more than just revenue.

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Consider these key figures:

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• An estimated 5.8% of all imports into the EU are counterfeit products, worth around €119 billion in lost economic value (eucrim.eu).
  
  
• EU industries lose over €50 billion in direct sales annually due to counterfeit competition (eusemiconductors.eu) (over €90 billion if indirect supply-chain losses are included).
  
  
• Governments forego roughly €15–16 billion in tax revenues (unpaid VAT, duties, and social contributions) each year because of counterfeit trade.
  
  
• More than 670,000 jobs across Europe are estimated to be lost due to the impact of counterfeit goods on legitimate industries (eucrim.eu).
  
  

These numbers underscore that counterfeiting is not a victimless crime. It undermines Europe’s economy, public finances, and consumer well-being. Below, we break down the multiple dimensions of this impact and explain why brand protection saves more than just revenue.

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The Scale of the Counterfeiting Problem in Europe

The trade in counterfeit and pirated goods has reached significant proportions globally and in Europe. A joint study by the OECD and EUIPO estimated that international trade in counterfeit products was worth as much as USD 509 billion in 2016, representing up to 3.3% of world trade (oecd.org). Europe faces an even higher exposure: about 6.8% of EU imports in 2016 (equivalent to €121 billion) were fake goods, up from around 5% in 2013 (oecd.org). Recent analyses indicate the problem persists at similar levels, in 2019 nearly 6% of all EU imports were counterfeit (≈€119 billion) according to the European Commission (eucrim.eu). These figures do not even account for counterfeit products made and sold within the EU’s internal market or pirated digital goods, which would push the totals higher.

Crucially, counterfeit goods span nearly every product sector. While apparel, footwear, and luxury leather goods have long been among the most affected (together comprising over 60% of EU customs seizures by volume) (oecd.org), counterfeiters are increasingly infiltrating new areas of daily life. Everything from electronics and pharmaceuticals to cosmetics, toys, auto parts, food and beverages, and even pesticides have been found in counterfeit form on the EU market. Many of these fake products pose not only economic losses but also health and safety risks (discussed later). The breadth and value of the counterfeit trade in Europe make it a pressing economic concern requiring multi-faceted countermeasures.

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Lost Sales and Economic Costs to Industry

One of the clearest impacts of counterfeit goods is the direct loss of sales and revenue for legitimate manufacturers and retailers. Consumers buying fake products instead of genuine ones translate into billions in unrealized sales for EU companies. The European Union Intellectual Property Office (EUIPO) has conducted sector-by-sector studies on this phenomenon. On average, the presence of counterfeit products reduces the sales of affected legitimate EU businesses by about 7.4%. In absolute terms, that equated to roughly €56 billion in direct lost sales per year (based on 2012–2016 data across key IP-intensive sectors). When accounting for indirect effects (suppliers losing business, knock-on spending reductions, etc.), the total lost sales were estimated at over €92 billion annually. These losses hit industries ranging from clothing and cosmetics to electronics, pharmaceuticals, spirits, toys, and more.

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To put this in perspective, sales lost to counterfeiting often range from a few percent to over 10% of a given sector’s revenue. For example, before recent improvements, the EU’s cosmetics and personal care sector was found to lose about 10.5% of its sales due to counterfeit products (eusemiconductors.eu), a testament to how pervasive fake perfumes, toiletries, and beauty products had become. Even in the EU clothing and footwear sector, counterfeits were siphoning off nearly €12 billion annually (≈5.2% of the sector’s turnover) in the late 2010s (dailysabah.com). The toy and games sector experienced an 8–9% loss in sales (around €1 billion per year) from fake toys flooding the market (dailysabah.com). Such revenue erosion affects not only large luxury brands but also mainstream consumer goods companies and small niche manufacturers.

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Importantly, lost sales mean lost profits that would have been reinvested in growth, innovation, or new hires. They also mean legitimate retailers lose foot traffic and market share when cheap fakes undercut the market. Over time, this erosion of lawful market revenue can discourage companies from investing in product development or entering markets where counterfeiting is rampant, ultimately harming Europe’s competitiveness. Brand protection measures that reduce counterfeit availability can thus directly help reclaim these lost sales and preserve the incentive to innovate.

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Impact on Tax Revenue and Public Finances

The economic harm from counterfeit trade extends to government coffers. Illicit sales of counterfeit goods usually evade taxes, counterfeiters rarely remit value, added tax (VAT), customs duties, or corporate income taxes on their black-market transactions. This results in a substantial loss of public revenue that would otherwise fund public services and infrastructure. EUIPO’s research estimates that governments across the EU lose over €16 billion each year in taxes and social security contributions due to counterfeit goods. Likewise, the European Commission reported roughly €15 billion in tax revenues lost annually from counterfeit imports as of 2019 (eucrim.eu). These figures include uncollected VAT on sales of fake goods, customs duties not paid on counterfeit imports, and lost income taxes from jobs and profits that would have existed in the legitimate economy.

Such tax losses directly affect EU Member States’ budgets. For example, unpaid VAT on a €100 counterfeit shoe sale denies the state perhaps €20 that would have been collected had a genuine product been sold. Multiply this by millions of counterfeit transactions, and the hit to public finances is huge. Additionally, companies whose sales are weakened by counterfeit competition will report lower profits and thus pay less corporate tax, compounding the effect. The cost of counterfeit goods is therefore borne not just by private firms but by taxpayers and governments as well. Reducing counterfeiting can help recover billions in public revenue, improving fiscal health and ensuring fair taxation. This is one reason authorities are ramping up enforcement, investing in anti-counterfeiting efforts can have high returns in terms of saved tax income.

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Job Losses and Erosion of Employment

Counterfeiting also destroys jobs in the legitimate economy. When authentic products lose market share to fakes, companies produce and sell less than they otherwise would, meaning they require fewer workers. EUIPO’s studies have quantified significant employment impacts from counterfeit trade. In the sectors analyzed, about 468,000 jobs were directly lost because legitimate businesses sold less due to competition from counterfeits. These are jobs that would have existed if consumers purchased authentic goods instead of fakes. The losses include manufacturing jobs (e.g. in factories producing clothing, electronics, pharmaceuticals, etc.), retail and distribution jobs, and ancillary roles supported by those industries.

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The total employment impact is even higher when one considers the broader economy. If one industry lays off workers due to counterfeit-related losses, there is a multiplier effect, those workers have less income to spend, affecting other businesses. The European Commission noted that over 670,000 jobs may have been lost in the EU once such knock-on effects are included (eucrim.eu). In other words, well over half a million Europeans could be employed today if the counterfeit market were instead served by legitimate companies. For context, that is roughly equivalent to every person in a mid-sized city being unemployed due to fakes.

No sector is immune: EUIPO found job losses ranging from a few hundred in smaller industries to over 300,000 jobs lost in the clothing, footwear and accessories sector alone during 2012–2016. Even high-tech and creative fields (like software, film, and music piracy, though not the focus of this article) see employment impacts when intellectual property is infringed. By protecting brands and IP, companies not only save revenue but also protect jobs. Each genuine product sold supports European employment, whereas every counterfeit displaces that labor with illicit operations (often outside the EU or in the shadow economy). This makes anti-counterfeiting efforts a matter of protecting livelihoods and communities, not just corporate margins.

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Brand Value Erosion and Loss of Consumer Trust

Beyond immediate financial losses, counterfeiting inflicts intangible damage to brand value and consumer confidence. Brands, especially in sectors like luxury goods, fashion, and electronics, spend years and resources building a reputation for quality, safety, and trust. The influx of fake goods can erode this hard-earned goodwill. When consumers encounter what they believe is a brand’s product and it turns out to be a substandard counterfeit, they may blame the brand for a poor experience. Multiple studies and surveys have indicated that a large share of consumers lose trust in a brand after unwittingly purchasing a counterfeit product, even though the brand itself was a victim of the counterfeit (wipo.int). Thus, counterfeiting can tarnish a brand’s image and reduce consumer loyalty.

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There is also a dilution effect: exclusivity is diminished when knock-offs are widely available. For luxury brands, part of their value proposition is scarcity and prestige – counterfeit versions in street markets or online can cheapen the brand’s perceived value. Even for non-luxury goods, the prevalence of fakes can cause confusion about which channels or sellers are trustworthy. Consumers may become hesitant to buy products online or from certain marketplaces if they fear those goods could be counterfeit.

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From the business perspective, brand erosion directly hits the balance sheet in the form of goodwill loss. The European Commission has recognized that small and medium-sized enterprises (SMEs) are especially vulnerable – they are more likely to suffer severe consequences or even business failure when their products are counterfeited, compared to larger companies with more resources (eucrim.eu). Smaller brands can see their market niche essentially stolen by knock-offs, undermining years of innovation and marketing. In one EU survey, 1 in 4 EU-based SMEs reported having suffered from IP infringement (counterfeiting or piracy of their products or services)(eucrim.eu). This not only causes immediate revenue loss but also discourages entrepreneurs and investors, knowing that a counterfeit competitor could free-ride on their brand’s success.

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Ultimately, effective brand protection isn’t just about recouping lost sales – it is about preserving brand integrity, customer trust, and the incentive to create quality products. Companies that invest in anti-counterfeiting measures are investing in their long-term reputation and relationship with consumers. By keeping fakes at bay, they ensure that customers get the expected quality and safety, which reinforces confidence in the brand name.

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Risks to Consumer Safety and Public Health

Counterfeit goods don’t go through the rigorous safety testing and quality control that legitimate products must undergo. As a result, consumer safety is often jeopardized by counterfeit products. Europol and OECD have warned of “dangerous fakes” – counterfeit items that can cause direct harm to health, safety, or the environment. Unfortunately, such hazardous counterfeit goods are increasingly prevalent in the EU market (oecd.org). Examples abound: counterfeit pharmaceuticals that contain incorrect or no active ingredients, fake cosmetics or foods contaminated with toxic substances, counterfeit electrical appliances or batteries that can overheat and catch fire, and fake automotive parts (brake pads, airbags, tires, etc.) that fail catastrophically and put lives at risk (worldtrademarkreview.comoecd.org).

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According to a joint EUIPO-OECD study focused on dangerous counterfeits, nearly 15% of all counterfeit articles seized at EU borders were products that pose health and safety hazards (such as medicines, personal care items, toys, and technical products)piqr.io. Moreover, 97% of counterfeit goods classified as “dangerous” were found to pose a serious risk to consumers upon assessment (oecd.org). Many of these were everyday consumer items targeted at vulnerable groups. In fact, around 80% of the dangerous counterfeit goods detected were intended for use by children (e.g. toys, baby supplies, kids’ clothing) (oecd.org). This is a chilling statistic: it means counterfeiters are selling toys with choking hazards or toxic materials, counterfeit baby formula lacking nutrition, etc., putting the most vulnerable at risk.

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Because counterfeiters operate outside regulations, they do not comply with EU safety standards or labeling requirements. As one expert noted, it’s a “dangerous trade” precisely because counterfeit producers cut corners on health and safety (wipo.int). The public consequences can be dire: patients taking fake medicine instead of real treatment, drivers relying on fake spare parts that fail, or consumers getting chemical burns from fake cosmetics. There have been cases of counterfeit alcohol causing poisoning and death, or counterfeit electronics causing electric shocks. Each dangerous fake on the market undermines the strict regulatory frameworks the EU has established to protect consumers.

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From a societal perspective, the cost of counterfeiting includes the cost of injuries, health care, and even loss of life due to substandard fake products. It also forces authorities to expend resources on consumer protection alerts and recalls for products that should never have been sold. Brand protection efforts thus have a humanitarian dimension: by keeping illicit and unsafe products off the market, companies and enforcement agencies are literally protecting consumers from harm. This is a key reason why brand protection saves more than just revenue. It safeguards the public.

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Compliance and Enforcement Burdens

Fighting counterfeiting imposes significant compliance costs and burdens on both businesses and government agencies. For companies, especially those in highly targeted industries, maintaining an effective anti-counterfeiting program can require substantial resources – from hiring legal and brand protection teams to conducting investigations and pursuing takedowns or lawsuits. Many SMEs lack the capacity to actively monitor and enforce their IP rights across global marketplaces; indeed, about 40% of EU small businesses do not monitor markets for potential IP infringements, or only react ad hoc when issues come to their attention (oecd.org). This suggests that a large portion of brands are effectively unprotected due to the high burden of vigilance, allowing counterfeiters to exploit those gaps.

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For larger companies that do invest in brand protection, the sheer volume of counterfeits in the digital age has made enforcement a game of “whack-a-mole.” Fake listings on e-commerce sites and social media appear almost as fast as they can be taken down. As WIPO officials have noted, the anonymity of online sellers and the ease of creating new listings means the moment one counterfeit web listing is removed, another can pop up in a different guise (wipo.int). This whack-a-mole phenomenon forces brands into constant surveillance and notice-and-takedown actions, which can be costly and time-consuming. Legal processes to shut down infringers or seize domains are often too slow relative to the speed at which counterfeiters operate in cyberspace.

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Enforcement agencies face their own challenges. Customs authorities must inspect an ever-growing number of small parcels in the era of online shopping. Notably, around 65% of counterfeit goods seizures now involve small packages sent by mail or express courier (oecd.org). Counterfeiters deliberately ship products in many low-value parcels to fly under the radar. This flood of small shipments significantly raises the cost and difficulty of customs screening – it’s much harder to intercept 1,000 parcels each containing one fake item than a single container with 1,000 fakes. As the OECD observed, the proliferation of small parcel trade “raises the cost of checks and detention for customs” and strains enforcement capacity (oecd.org). Authorities must invest in new scanning technologies and intelligence just to keep up.

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Additionally, when counterfeit goods are seized, authorities must follow procedures to store and eventually destroy the items, which incurs further cost and logistical burden. Legal prosecutions of counterfeiters can also be complex, especially when networks span multiple countries. Europol and Interpol report that organized criminal groups are often behind large-scale counterfeiting operations, using profits to fund other illicit activities, which complicates investigations (eucrim.eu). All of this means that counterfeiting not only steals revenue from rights-holders, but also forces both the private and public sector to spend heavily on compliance and enforcement efforts. These are resources that could otherwise be used for productive investments or public services.

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Reducing counterfeit trade would alleviate these burdens. Every fake prevented from reaching the market saves the cost of detecting, seizing, and destroying it later, and saves a brand the effort of a takedown. This is where preventative brand protection measures and improved cooperation come into play, as discussed next.

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Combating Counterfeiting: The Role of Brand Protection and Technology

Tackling the scourge of counterfeiting in the EU requires a concerted strategy involving policy action, law enforcement, and private-sector innovation. Recognizing the need for stronger coordination, the European Commission in 2024 issued a new Recommendation as an anti-counterfeiting “toolbox,” calling for greater cooperation between rights holders, intermediaries (like online marketplaces, social media, payment providers, etc.), and authorities. A key focus is on adopting modern tools and technologies to outsmart counterfeiters. For example, the Commission specifically recommends the use of advanced systems – including AI-based solutions to recognize and remove counterfeit goods online – and improved information-sharing channels (eucrim.eu). Member State authorities are likewise urged to upgrade their capabilities (such as using data analytics to target shipments and employing undercover investigatory techniques against criminal networks).

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On the industry side, companies are increasingly turning to high-tech brand protection solutions to defend their products. MarqVision’s brand protection platform is one prominent example of leveraging artificial intelligence to fight fakes. Such platforms can monitor online marketplaces, e-commerce sites, and social media in real-time, automatically identifying counterfeit product listings that infringe on a company’s intellectual property. By using image recognition, text analysis, and other AI techniques, these tools flag suspected fakes at a scale and speed that human teams alone could not match. Once counterfeits are detected, rights-holders can swiftly issue takedown requests, removing fake listings before they reach more consumers. MarqVision and similar solutions also often integrate case management and enforcement workflows, tying the online insights to offline action, such as gathering evidence on counterfeit sellers and aiding law enforcement in tracing the sources. This kind of proactive monitoring and automated enforcement significantly reduces the window of time that fakes are available for sale, thereby cutting into counterfeiters’ profits and deterrence.

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Crucially, brand protection technology saves more than revenue: it helps protect customers from dangerous knock-offs, preserves brand reputation by ensuring consumers are less likely to encounter a fake, and eases the compliance burden by automating what used to be labor-intensive processes. By investing in these solutions, companies also demonstrate due diligence in the eyes of regulators and consumers – showing that they take product authenticity and safety seriously. This is increasingly important given regulatory developments like the EU’s Digital Services Act, which holds online platforms accountable for illicit goods sold by third parties. Brands that actively police their online presence with modern tools not only shield their own interests but also contribute to a cleaner, safer digital marketplace for everyone.

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Public-private partnerships are another pillar of the anti-counterfeiting response. Europol’s Intellectual Property Crime Coordinated Coalition (IPC³), for instance, works closely with EUIPO and industry to conduct major operations against counterfeit production and distribution networks. EU customs authorities cooperate with rights holders through systems that let brands record their IP information and aid in identifying fakes at the border. Meanwhile, consumer awareness campaigns, often led by the EUIPO Observatory, aim to reduce demand by educating buyers on how to spot fakes and the risks involved in buying them. All these efforts are maximized when combined with cutting-edge brand protection techniques deployed by companies themselves.

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Conclusion: Protecting More Than Just Revenue

Counterfeit goods have a far-reaching economic impact on the European Union. From billions in lost sales and taxes to hundreds of thousands of jobs gone, from dilution of brand value to threats to public health and safety. The data makes clear that combatting counterfeiting is not merely about protecting corporate profits; it is about safeguarding consumers, ensuring fair competition, supporting innovation, and maintaining the integrity of the single market. In sum, effective brand protection saves more than just revenue:

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• It preserves public funds: Every euro not lost to the black market is taxable income that can support public services.
  
  
• It protects jobs and livelihoods: Keeping markets free of fakes helps legitimate businesses grow and continue employing Europe’s workforce.
  
  
• It upholds quality and safety standards: Removing counterfeits ensures that consumers get products that meet EU safety regulations and perform as expected, thereby preventing accidents and health incidents.
  
  
• It maintains consumer trust and brand equity: By fighting fakes, companies defend the reputation and goodwill that are essential for long-term customer relationships and brand loyalty.
  
  
• It reduces compliance costs and legal risks: A proactive stance against counterfeiting lowers the enforcement burden and helps companies avoid potential liabilities (for example, liability for third-party sales, or damage from counterfeit-related incidents).
  
  

In today’s interconnected economy, no single entity can eliminate counterfeiting alone. It requires collaboration between brands, governments, and technology providers. Encouragingly, the EU is moving in this direction with coordinated policies and support for innovation in anti-counterfeit tech. Companies like MarqVision are demonstrating how artificial intelligence and automation can tip the balance in favor of rights-holders, making it easier to detect and deter fake goods at scale.

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For EU-based decision-makers, whether brand managers, legal counsels, or policy makers, the takeaway is that investing in brand protection is an investment in economic resilience and consumer safety. The fight against counterfeiting will save revenue, but as we've shown, it will also save jobs, save reputations, and even save lives. By protecting their brands, organizations help fortify the European economy and uphold the high standards that consumers expect and deserve.

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