'Korean Companies' Counterfeit Goods Overseas Distribution Worth 11 Trillion Won... "Over 59% Purchased Knowing It"

The scale of counterfeit goods infringing on the intellectual property (IP) of Korean companies and distributed overseas has exceeded 11 trillion won. More than half of the consumers who purchased counterfeit goods were found to have knowingly bought the fake products.

According to the "Illicit Trade and the Korean Economy Report" published on the 4th by the Organisation for Economic Co-operation and Development (OECD), the overseas distribution scale of counterfeit goods infringing on Korean company brands in 2021 reached 11.1 trillion won. This corresponds to 1.5% of Korea's total exports in the same year.

Source=Asia Economy DB

By product category of counterfeit goods distributed overseas (based on customs seizure cases), electronic devices and electronic products accounted for the highest proportion at 51%, followed by textiles and clothing (20%), perfumes and cosmetics (15%), miscellaneous goods (6%), and toys and games (5%).

Hong Kong and China were named as the main countries producing counterfeit goods infringing on Korean companies' IP. Among counterfeit goods distributed overseas, 69% originated from Hong Kong and 17% from China.

The OECD found that more than 59% of consumers seeking counterfeit goods knowingly traded products in the secondary market (knockoff market). The proportion of product categories traded in the secondary market was highest for ▲clothing, footwear, and leather goods at 73.6%, ▲furniture, lighting equipment, and other manufactured goods at 61.3%, ▲home appliances, electronics, and telecommunications equipment at 59.7%, ▲watches and jewelry at 46.0%, and ▲perfumes and cosmetics at 33.3%.

In the report, the OECD analyzed that although Korea is considered one of the most innovative countries in the world, the IP contained in Korean products has become a target of counterfeiting and piracy, making the Korean economy vulnerable to the threat of counterfeit goods. The spread of counterfeit goods distribution is negatively impacting Korean companies' domestic and overseas sales, manufacturing sector jobs, and government tax revenues.

For example, the OECD estimated that in 2021, Korean companies suffered domestic and overseas sales losses of 6.1 billion USD (7 trillion won) due to IP infringement. This corresponds to 0.6% of the total domestic manufacturing sales. By industry, home appliances, electronics, and telecommunications equipment suffered the largest loss at 3.6 billion USD, followed by automobiles at 1.8 billion USD.

Due to IP infringement, 13,855 jobs in the domestic manufacturing sector were lost, and in terms of government tax revenue, a total loss of 1.57 billion USD (1.8 trillion won) was estimated in 2021. The OECD explained that if there had been no IP infringement on Korean company products, the job losses and tax revenue losses would not have occurred.

Kim Wanki, Commissioner of the Korean Intellectual Property Office, said, "The IP damage (distribution of counterfeit goods) to Korean companies not only damages the brand image of individual companies but also causes serious harm to the national economy, including company sales, jobs, and tax revenues. Based on the OECD survey results, the Korean Intellectual Property Office plans to strengthen support to help domestic companies avoid IP damage overseas."

Meanwhile, the report is the result of research commissioned by the Korean Intellectual Property Office to the OECD to analyze the economic damage to domestic companies caused by the distribution of counterfeit goods. This is the first case in which the OECD has analyzed the economic impact of counterfeit goods distribution on Korean companies.