A study on the economic cost of intellectual property rights infringement in toys and games in the European Union is the fourth sector-focused report published by the European Observatory on infringements of IP rights.

Sales of toys and games get a boost out of the winter holidays. But how much does counterfeiting of intellectual property rights (IPRs) affect profits and employment in the European Union’s toy industry?

A well documented answer is given in The economic cost of IPR infringement in toys and games, a study published this week by the European Observatory on infringements of Intellectual Property Rights.

According to the report, the EU as a whole suffers a yearly loss of sales of original products of 12.3%, worth over 1,400 million euro. Germany, the United Kingdom and Italy are the three countries most affected by counterfeiting in terms of lost sales at a national level. Fake toys and games cause a yearly loss of 15.6% of original product sales in Italy, worth over 200 million euro.

Considering that counterfeit toys and games have a negative impact also on induced activity, thus affecting also other industries, the total direct and indirect effects in the EU of lost sales due to counterfeiting as an annual average is estimated at 2.3 billion euro.

The study also looks at the damage caused by counterfeiting in terms of employment, setting the total EU figure of lost jobs in the industry at 6,150, a number that increases to over 13 thousand considering induced activity. The estimate for Italy is a -14% impact on employment.

Reduced activity in the legitimate sector also affects government revenue in terms of lost VAT, income tax and other taxes, as well as in terms of lower social security contributions owing to loss of employment: the total approximate estimate loss of government revenue is about 370 million euro.

The economic impact of counterfeiting of IPRs in the toys and games sector therefore appears to be severe, and all the more so considering that the study’s estimates take into account only manufacturing activities and do not include wholesale and retail trade.

The study on the games and toys sector follows three earlier sector studies issued by the European Observatory on infringements of Intellectual Property Rights:

The economic cost of IPR Infringement in sports goods

The economic costs of IPR infringement in the clothing, footwear and accessories sector

The economic cost of IPR infringement in the cosmetics and personal care sector

16 December 2015