EC Seeks Crackdown on Bogus Auto Parts

The European Commission is trying to defeat criticism of a proposed multilateral treaty opposing counterfeiting through a high-stakes legal maneuver, with officials saying the outcome is of critical importance to the European Union’s powerful automotive sector.

The EC has referred the Anti-Counterfeiting Trade Agreement to the European Court of Justice, which will determine whether the treaty complies with the basic legal principles of the European Union.

The Commission says in a statement it believes ACTA is legal and does not interfere with EU citizens’ “fundamental rights of freedom of expression and data protection.”

The EC wants backing against critics of the treaty who say it invades freedom-of-speech rights protected by EU laws. The Court of Justice will provide an independent opinion on the agreement, which aims to establish a legal framework for stemming the flood of counterfeit goods entering Europe.

The EC’s decision to refer ACTA to the court will be filed officially in coming weeks.

The court’s ruling has huge ramifications for the automotive industry, which is among the most affected by the millions of knockoff products entering the market illegally.


“Europe’s economy – and the automotive industry is an important pillar of it – can only remain competitive if it can rely on innovation, creativity, quality and brand exclusivity,” an EC representative on trade tells WardsAuto.

“These are some of our main comparative advantages on the world market, our raw material, and they are all protected by intellectual property rights. Europe is losing billions of euros annually (because) we currently do not have the means to enforce IPR outside the EU.”

Business Action to Stop Counterfeiting and Piracy (BASCAP), an initiative of the International Chamber of Commerce, cites figures noting the global market for counterfeit vehicle parts was worth $16 billion as long ago as 2008 and since has grown 9%-11% annually, with more than $3 billion of industry losses occurring in the U.S.

IPR infringement includes abuse of patents, trademarks, copyright and design rights and covers everything from individual components to entire vehicles, although fake auto parts are the biggest problem.

The Economic Times of India last year claimed counterfeit auto parts cost Indian auto makers $1.9 billion, while authorities in France claimed 5%-10% of all spare auto parts in that country were fake; the list of statistics goes on.

With China widely regarded as the global counterfeiting capital, and Yonkany and Zhejiang provinces being established hotbeds, the European Association of Automotive Suppliers has formed a China IPR Helpdesk, supporting small- and medium-size enterprises dealing with Chinese IPR infringements.

India, the Middle East, Dubai, Turkey and Eastern Europe also are high-profile sources of faked goods, with many counterfeit products entering the European market through Italy, BASCAP says.

The impact of this shadowy trade is profound. Thousands of job losses have resulted from the reduced profits of genuine manufacturers, and knockoff parts also expose companies to erroneous product-liability suits.

“Even if a car part is found to be counterfeit after the fact, bad publicity about problems with a product can permanently hurt the auto manufacturer’s brand,” says Natalie Blazer, litigation associate at New York-based international law firm Weil, Gotshal and Manges.

“Negative publicity about one model inevitably spills over to the rest of the auto maker’s models, even if the other models never had any substandard parts installed.”

Anti-counterfeiting experts fear failure by big players such as the EU to endorse ACTA could give counterfeiters a green light. However, clear backing by the EU, U.S., Japan and others would be important.

ACTA “will allow countries to take a coordinated approach in addressing commercial-scale counterfeiting of consumer products of all kinds including medicines, automotive parts and toys,” says Candice Li, external-relations manager for BASCAP.

Adds the EC representative on trade: “What counts for us is getting other countries to adopt them (ACTA standards) so that European companies can defend themselves against blatant rip-offs of their products and works when they do business around the world.”