CNBC embarrasses itself on counterfeiting

By Felix Salmon
July 19, 2010
counterfeiting documentary, and now that I've seen the trailer, I can see why: it gobbles uncritically all of the baseless statistics that I've been railing against since 2004.

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The people at CNBC never got back to me when I asked to talk to them about their counterfeiting documentary, and now that I’ve seen the trailer, I can see why: it gobbles uncritically all of the baseless statistics that I’ve been railing against since 2004.

The trailer talks ominously of a “secret criminal world robbing businesses of $250 billion a year,” before cutting to a customs agent talking about how the volume of seized counterfeit goods has risen from $47 million in 2000 to $261 million in 2009. Is she really saying that Customs and Border Protection literally lets through 99.9% of all counterfeit goods, despite inspecting 8% of shipments coming into the country?

The show never does those sums; instead, it goes to a big warehouse with “just over $200 million of seized cargo,” adding that “there are 12 more like it around the country.” Hm, that would make $2.4 billion of seized counterfeit goods, if true — but when were they seized, given that ten years ago, customs was only seizing $47 million a year in such material?

And that’s not the only quantitative dissonance. “This year alone, counterfeited medicines will be a $75 billion industry,” says a representative of Big Pharma; there’s no indication that that number comes form a mysterious report which no one can ever seem to produce, which was published in 2005, and which projected the number basically out of thin air. Meanwhile, CNBC’s own slideshow puts the volume of seized counterfeit drugs at just $11 million last year.

It’s worth remembering, too, that often the values of seized goods are generally based not on how much they would sell for on Canal Street, but rather how much the real items would sell for. How can Customs claim to have seized $21.5 million in handbags? When you try to track down the figures, which is often hard, you tend to come up with implausibly high numbers for the value of one counterfeit handbag or CD.

The CNBC report insists on parroting the old “7% of world trade” number which was never based on anything at all; that allows it to inflate the numbers in the documentary as much as possible. It doesn’t even use the dreadful OECD report, which massively overestimated trade in counterfeit goods and even then could only manage to reach a “global ceiling” of $200 billion by pulling a grossly inflated number out of thin air, doubling it, and then doubling it again. CNBC, by contrast, says that trade in the US alone is more than that.

Oh, and they also say that counterfeiting costs “nearly 750,000 legitimate jobs each year.” I love that “nearly”: it makes it seem as though the number wasn’t completely invented.

The fact is that the cost of counterfeiting is almost certainly orders of magnitude lower than the insane numbers being bandied around by people who genuinely consider themselves numerate financial journalists at CNBC — indeed, it might even be negative. And every scaremongering journalist who uncritically parrots those numbers is part of the problem, not part of the solution. Carl Quintanilla, and your producers — shame on you all.

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