Memorandum by The Alliance Against Intellectual
Property Theft (MARKETS 26)
ABOUT THE
ALLIANCE AGAINST
IP THEFT
Established in 1998, the Alliance Against Intellectual
Property (IP) Theft is a UK-based coalition of 21 trade associations
and enforcement organisations with an interest in ensuring intellectual
property rights receive the protection they need and deserve.
With a combined turnover of over £250 billion, our members
include representatives of the audiovisual, music, games and business
software, and sports industries, branded manufactured goods, publishers,
retailers and designers.
The Alliance is concerned with ensuring that intellectual
property rights are valued in the UK and that a robust, efficient
legislative and regulatory regime exists, which enables these
rights to be properly protected. Our members work closely with
trading standards and local police forces to reduce the harm caused
by intellectual property crime in local communities and to ensure
that legitimate businesses and traders are able to operate fairly.
We work closely with the Department for Innovation,
Universities and Skills and the Intellectual Property Office to
raise awareness of the harm caused by IP theft. We, and many of
our members, are also participants in the IP Crime Group, which
facilitates cross departmental dialogue and joint working amongst
the relevant enforcement bodies and organisations.
INTRODUCTION
Traditional markets play a valuable part in
the consumer shopping experience, providing for many an environment
where they can purchase goods more cheaply than those for sale
in retail shops. Visits to such markets can also provide an outing
for the whole family, in the belief that they offer a safe shopping
environment.
The Alliance is very concerned, however, about the
amount of counterfeit and pirated product that is available at
markets up and down the country and appreciates the opportunity
to draw the Committee's attention to this, and to the harm it
causes.
We recognise that the inquiry is designed to
consider mainly the operation and the social/economic effects
of traditional retail markets, and that car boot sales have been
deemed to be outside the scope of this inquiry, and we understand
why such a distinction has been made. However, we respectfully
draw the committee's attention to the fact that the same problems
regarding the sale of fake and counterfeit goods, and the harm
this activity causes, are equally to be found in traditional retail
markets (be they covered or uncovered), occasional and seasonal
markets and car boot sales and trade fairs (eg computer, watch
and book fairs).
WHY GREATER
REGULATION IS
NEEDED
Markets (which include occasional sales, non-chartered
markets and car boot sales), are not uniformly regulated and therefore
offer easy opportunities for those who wish to trade illegally.
Markets are infiltrated by racketeers and criminal gangs for whom
intellectual property (IP) crime is just one in a portfolio of
illegal activities that makes up a criminal lifestyle. At present,
the trade in counterfeit and pirated goods represents a high return
and very low risk and markets—be they occasional, fixed
or permanent—are the venues of choice.
There is increasing evidence of children being used
to front up market stalls in order to protect the counterfeiters,
and of violence and intimidation in the enforcement of traders'
patches. The link between the trade in counterfeit goods and organised
crime such as people smuggling and the drugs trade is also well-established.
The extent of the problem was acknowledged in
the Gowers Review of 2006, which recommended that the Government
consult on measures to tighten the regulation of occasional sales
and markets by the end of 2007. This timetable has slipped and
the delay is doing real damage to legitimate businesses and helping
to line the pockets of serious organised criminals, so there is
a need for urgent action.
Alliance members have been working with local
authorities to encourage the implementation of codes of practice
to introduce measures to clean up markets but the implementation
of these has been patchy and criminals move from areas of vigilance
to set up where there is little personal risk from local enforcement.
The Alliance and the Trading Standards Institute are therefore
united in pressing for commonsense light touch regulation of such
markets in order to stop them being used for criminal activities.
This would protect the public from the risk of purchasing fake,
substandard goods, and protect local businesses from unfair competition
from illegal traders, whose activities undermine local communities
and defraud the Exchequer (by not paying taxes, including VAT).
THE THREAT
Harm to consumers
Unregulated markets of any kind expose consumers
to a risk of real harm which they would not encounter in other
retail environments. The Anti-Counterfeiting Group, an Alliance
member, reports a wide range of potentially harmful products found,
by their brand owner members, for sale at markets. Specific examples
include:
— fake alcohol and cigarettes containing
noxious and harmful substances;
— fake appliance batteries which have exploded
under testing conditions;
— fake disposable razors that have caused
extensive skin damage; and
— other fake personal care products (skin
creams, soaps etc).
It goes without saying that the safety of counterfeit
electrical goods and children's toys cannot be guaranteed, but
add to this the number of DVDs, CDs, computer games and software,
and books on sale in such markets, and it can be appreciated just
how much damage is caused to legitimate local retailers and business.
Harm to communities
The link between the trade in fake goods and
other serious organised crime, such as people smuggling, hard
core pornography, drugs and the use of offensive weapons, is becoming
increasingly clear. The harm caused by IP crime is now recognised
by crime prevention and enforcement bodies such as the Serious
Organised Crime Agency. IP crime is one of SOCA's priorities,
and addressing counterfeiting and piracy has been identified as
one of the five national priorities for local regulatory services
following the Rogers Review.
Harm to businesses and the economy
This multi-billion pound trade hits UK industry at
all levels—from large corporations through to local traders.
The collapse of three major British video store chains, Choices
UK, Global and Apollo Video Film hire, with the loss of over 500
outlets and many jobs, was partly attributed to the piracy of
DVD/film product. The impact of this closure was felt not just
in economic terms but also through the damage it has done to the
vitality of high streets and the lack of legal outlets for video
across the country, which have been replaced by illegal street
sales. The TECHNOPOLIS Study,[1]
quoted in the IP Crime Report 2007 demonstrates that 23% of Small
and Medium Sized Enterprises have had their business significantly
affected by IP crime. Since the Government has acknowledged the
need for regulation of markets it is regrettable that lack of
action by DBERR is adding to the burden faced by nearly a quarter
of the UK's most vulnerable businesses.
In addition, the Exchequer is losing out on valuable
tax revenue because of non-payment of VAT, corporation tax and
other business rates by IP criminals who are instead making vast
profits from the illegal trade in fakes.
SOME EXAMPLES
OF PROBLEMS
AT MARKETS
Dagenham Market, London
In the week before Christmas 2007, a huge haul
of fake "designer" clothing worth more than £150,000
was seized in a raid on Dagenham Market.
Barking & Dagenham Council's trading standards
team led the raid, supported by the police and street wardens,
targeting two stalls suspected of selling counterfeit brands,
and removed 10,000 items of clothing. Several test purchases had
previously been made from the stalls and both stallholders had
already received warning letters regarding the sale of fake goods.
Grey Mare Lane Market, Manchester
This market is a perennial problem for many Alliance
members, resulting in FACT arresting 11 people during 2008 and
over 17,000 counterfeit DVDs being seized. Quantities of counterfeit
cigarettes were also found. The results of 10 prosecutions are
still pending. It is estimated that at least 25% of the stalls
are selling counterfeit goods.
Nine Elms Market, Vauxhall
Nine Elms is a serious problem for law enforcement
with trading standards no longer investigating without police
support. 40-45% of stalls are selling all manner of counterfeit
goods including DVDs, clothing, toiletries, tools and batteries;
the danger such goods pose to consumers from these products is
clear.
Brownhills Market, West Midlands
Industry, trading standards and the police work jointly
in an attempt to ensure Brownhills Market is a safe place for
consumers and legitimate traders. However, nine people have been
arrested over the past year and over 23,000 counterfeit DVDs seized.
One of the people arrested tried to resist and ended up assaulting
one of the police officers. He was also arrested for this offence.
FACT estimate up to 30% of the stalls at this market are involved
in the sale of counterfeit goods.
Bank Holiday Market, Warwickshire
On 24 March 2008 officers from Warwickshire Trading
Standards and Police Services attended a Bank Holiday Market in
Warwickshire. Whilst there, they identified a stall selling counterfeit
clothing, razors and DVDs. The four stallholders were arrested.
SCALE OF
THE PROBLEM
— A 2005 report (Fake Nation) co-funded
by the government and industry into consumer usage and attitudes
towards counterfeits and fakes revealed that roughly 25% of all
purchases take place at such markets.— Research by the audio-visual
industry conducted by IPSOS shows that 33% of buyers of counterfeit
DVDs purchase them at car boot sales and markets.
— In addition, 1 in 3 counterfeit DVDs
are sold at car boot sales and markets.
— Similar research conducted by IPSOS for
the music industry shows that 29% of counterfeit CDs bought come
from car boot sales or markets.
— An independent survey by Ledbury Research
in January 07 shows that markets and car boot sales remain the
prevalent source of counterfeit clothing and footwear, with two-thirds
of respondents who purchase such goods doing so from market stalls.
— This research also found that criminals
are receiving £750 million each year from the sale of such
fake clothes and shoes at markets alone representing the sale
of 33 million fake items.
Ledbury's research also shows that fake clothing
and footwear alone cost local shops, traders and manufacturers
nearly £3.5 billion a year in lost UK sales.
EXAMPLES OF
LINKS WITH
ASSOCIATED CRIMINAL
ACTIVITY (COURTESY
OF FACT)
Youth Exploitation
Location: Glasgow
A group of youths, all aged under 16, were arrested
as they tried to covertly sell counterfeit DVDs at a well-known
market. Surveillance had revealed that the youths were operating
under the control of a recidivist DVD seller who was using the
youths to sell the product. The ringleader was subsequently arrested.
The use of children in the sale of counterfeit DVDs
highlights how easy it is for minors to become involved in criminal
activity. The use of children also demonstrates how lifelong criminals
exploit minors in order to cover up their own financial greed
and attempt to distance themselves from being caught.
Benefit Fraud
Location: North West of England
Barry Powell and Mark Quincey, who ran a well-organised
counterfeiting operation in the North-West of England were imprisoned
for 12 and 15 months respectively for their role in a six-month
scam that also involved an extensive benefit fraud. His Honour
Judge Morrow QC also handed down a nine month prison sentence
to fellow ringleader Sarah Haynes. They operated this illegal
business from their homes, supplying local markets and car boot
fairs, generating in excess of £40,000 in criminal proceeds
during its six month operation. The defendants had also claimed
a total of £20,000 illegally in state benefits. The convicted
may now lose all their assets under the Proceeds of Crime Act.
These defendants were arrested along with 21 others as part of
a massive police operation involving 135 officers, and coordinated
with UK record industry body the BPI, FACT, games industry enforcement
body ELSPA and the Department for Work and Pensions.
Drugs
Location: Deptford, London
A search warrant was executed at a flat in Deptford,
London. The warrant had been obtained by the Metropolitan Police,
also present were Lewisham Trading Standards, Borders & Immigration
Agency, and FACT personnel. The flat contained a DVD factory consisting
of multiple DVD burning units, printers, a large quantity of printing
ink, 6,600 blank media discs, 7,600 counterfeit DVDs and false
identity documents. An illegal unregistered dental practice was
also found to be set up by one of the occupants operating from
the living room of the premises. From this, drugs including cocaine-derived
dental anaesthetic and arsenic tinctures were seized. One man
was subsequently arrested and cautioned under the Dentists Act
1984.
People smuggling
Location: Lancaster, Lancashire
On 5 February 2004 21 Chinese illegal immigrants
tragically lost their lives whilst picking cockles in Morecambe
Bay near Lancaster. Investigations by Lancashire Constabulary
led the Police to addresses in the Merseyside area. Upon searching
the homes Police found over 4000 counterfeit DVDs and computers
containing counterfeit material. The two men were arrested for
the involvement in the death of the Chinese cockle pickers and
named as Lin Liang Ren and Lin Mu Yong.
On 28 March 2006 Lin Liang Ren was charged with 21
counts of manslaughter, perverting the Course of Justice and manufacturing
of false work permits. Ren was sentenced to 14 years imprisonment.
Due to the severity of Ren's involvement with the death of cockle
pickers the Crown Prosecutor decided that Ren would not be charged
with trade mark offences.
Lin Mu Yong was charged with Assisting and Facilitation
Illegal immigration and perverting the Course of Justice. Yong
was sentenced to five years imprisonment. Yong also pleaded guilty
to 11 offences under the Trade Marks Act of 1994 and was further
sentenced to nine months imprisonment.
Dangerous weapons
Location: Sunderland, Tyne & Wear
A male was stopped by Northumbria Police for
appearing to be driving without valid insurance for his vehicle.
When told the vehicle would be searched the male advised there
was a knife under the driver's seat. A search revealed this to
be a 7" kitchen knife. The male was arrested and a subsequent
search under PACE of his home address revealed a large quantity
of counterfeit DVDs.
WHAT THE
ALLIANCE WOULD
LIKE TO
SEE
1. Civil and criminal liabilities on market
organisers who knowingly allow the sale of counterfeit or pirated
goods on their land, for example from market stalls or car boot
sales. There are already several precedents for holding them liable—aiding
and abetting, and money-laundering (in the full knowledge that
the profits are from illegal sales of fakes) have both been established
as a basis for prosecution in recent years.[2]
It would therefore be difficult to argue against, providing the
measure allowed for the owners and organisers first to be given
adequate warning through an enforcement notice that illegal sales
or activities are taking place at the occasional sale.
2. The introduction of national light touch regulation
which would include such measures as:
— Requiring the market organiser to notify
the local authority notified 21 days in advance.
— Requiring that the organiser collect basic
information on the day of all traders operating at the market—could
include name, address, vehicle registration.
— Requiring that the adult responsible
for renting the stall remains which the precincts of the sale
while trading was taking place. The Alliance has growing evidence
of illegal traders using children to sell fake products in order
to escape prosecution.
— A standard clause in local authority
licence agreements whereby a licence would be revoked if counterfeit
or pirated products were continually sold.
— A National Licence Database for all authorities
to access which would alert them to people applying for a licence
in one authority who had had a previous one revoked by another.
This might go someway to addressing the continuing problem of
displacement.
ALLIANCE MEMBERS
Anti-Counterfeiting Group
Authors' Licensing and Collecting Society
British Brands Group
BPI (British Recorded Music Industry)
British Video Association
Business Software Alliance
Cinema Exhibitors Association
Copyright Licensing Agency
Design and Artists Copyright Society
Entertainment and Leisure Software Publishers Association
Entertainment Retailers Association
Federation Against Copyright Theft
Federation Against Software Theft
Film Distributors Association
Institute of Trade Mark Attorneys
Motion Picture Association
Premier League
Publishers Licensing Society
ASSOCIATE MEMBERS
Anti-Copying in Design
British Jewellery, Giftware & Finishing Federation
Video Standards Council
1 TECHNOPOLIS Study: "Effects of counterfeiting
on EU SMEs and a review of various public and private IPR enforcement
initiatives and resources." Back
2
Northern Promotions 2005; Wendy Fair Markets 2007. Back
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