Hey NY Times: Can You Back Up The Claim Of $200 Billion Lost To Counterfeiting?

from the and-you-want-people-to-pay-you? dept

It's getting really frustrating watching the supposedly professional press repeat stats that have been thoroughly debunked as if they're factual, so I think it's about time that people started calling out the publications and reporters who make these mistakes directly. So, Stephanie Clifford, reporter for the NY Times, can you give any evidence whatsoever to support the claim that you made in your article this past weekend that counterfeiting "costs American businesses an estimated $200 billion a year?" I don't think that Clifford can, because that number has been thoroughly debunked time and time again.

Back in 2007 we wrote about a study by the well-respected GAO which noted that industry claims on counterfeiting were massively overblown. The GAO looked at the actual data and found that, contrary to claims from the industry that 5 to 7% of world trade involves counterfeit materials, the research they've seen shows it happening in less than 1% of trade and the value of those goods was significantly lower. Of course, obviously, those trying to pass counterfeit goods across the border will do their best to hide it, the evidence of the supposed 5 to 7% is totally lacking.

Soon after that, we wrote about a similar OECD report that tried to look at how big an issue counterfeiting really was. After it was announced (before the actual report came out) that the OECD numbers were going to show that the $200 billion number was totally bogus, there was lots of talk of "pressure" being put on the OECD to still support the $200 billion number. Eventually, the actual report (pdf) came out, and the OECD hedged its bets by claiming that, even though the data didn't support it, counterfeiting could be a problem that cost up to $200 billion. Lots of weasel words. But since the data was actually there, some enterprising reporters, like Felix Salmon, actually looked at the details and found the real number appeared to be more like $5 billion. Still an issue, but hardly $200 billion. That link amusingly goes through the report to figure out how it came up with the "up to $200 billion" claim, and finds that the OECD, repeatedly basically says "well, this part seemed low, so we doubled it." And then they get to the next number and say "well, this seemed low, so we doubled it again." They end up doing that a bunch of times -- compounding the wild ass guess even further just to make the industry happy.

But where did that actual $200 billion number come from? Well, back in 2008, Julian Sanchez famously went to hunt down the origins of the claim, and found that it was always totally made up. Sanchez tries to track down where the number first came from, and finds it all dates back to a claim made in a 1993 Forbes article. That article claims counterfeiting is a $200 billion problem, but gives no citation or explanation, but that's the original citation if you trace back everyone else who's claiming $200 billion. It's just made up. From 20 years ago. And the NY Times is still relying on it despite all of the research debunking it?

And, of course, all of these numbers tend to come from the industry itself, who has every reason to make the numbers sound bigger than they really are. In fact, all of this ignores more recent studies that have shown the claim of "losses" from counterfeits almost certainly massively overstates the problem, because a significant number of the people who are buying counterfeit goods (1) know they're buying counterfeit goods and (2) at a later date, when they can afford it, often upgrade to the real version. In other words, the counterfeit isn't a "loss" at all, but a market entry point for those who never would have bought otherwise.

So, considering that we have two respected organizations (the GAO and the OECD) showing that the $200 billion number is massively exaggerated, followed by good reporters like Felix Salmon and Julian Sanchez pointing out the real number is much lower, and the basis for the $200 billion number is more or less made up... why is a respected publication like the NY Times still citing it as if it were factual? Of course, I don't mean to just pick on Stephanie Clifford or the NY Times, because plenty of reporters seem to repeat this number without thinking, but it's about time that people started calling them on it, and asking them to back it up with evidence or stop using it.
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Filed Under: $200 billion, bogus numbers, counterfeiting, stephanie clifford

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  1. icon
    Jay (profile), 3 Aug 2010 @ 9:17am

    Assume = Ass out of U and ME

    Look, your argument is inaccurate. You tried to say that people won't know about the differences in Rolexes because they can make a digital copy. People told you about the variables that can make this untrue.

    Then you say we should calculate how many counterfeits are seized in a year. Which again is complete BS because, again:

    "available information on the scope and magnitude of counterfeiting and piracyprovides only a crude indication of how widespread they may be, and thatneither governments nor industry were able to provide solid assessmentsof their respective situations.""

    And the OECD report is nothing more than a guess. It's a made up number.

    Now you're saying "if we didn't have government protection, or don't protect the consumer from these ill gooods, we'll lose corporations?"

    If you take away the patents and copyrights, what's going to happen is that you'll have smaller businesses in the field, not a monopoly run by one. Innovation would work and become a lot more important as first runners get the most profits.

    If you really need everyone to prove you wrong, then look at the recent posts Mike has done about software patents. No one said R&D is free, it's just a fact that monopolies do LESS of it because they have no incentive to alter the field and the status quo.

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