Swiss Watchmakers Fear Counterfeits Will Damage Industry

For the Swiss watchmaking industry it’s the best of times—and the worst of times.

“Swiss watch manufacturers have never had it so good, especially the major prestigious brands,” says veteran Swiss watch executive Jacques J. Duchêne, president of the Exhibitors’ Committee of BaselWorld, the international trade show in Basel, Switzerland, the world’s largest watch and jewelry show. “2006 was a record year in every respect,” for the third consecutive year. Exports rose 10.9 percent to 13.7 billion Swiss francs (about $11.3 billion).

However, “record numbers of counterfeits are now being made,” he says, at a rate and quality that could at some point threaten Swiss watches’ worldwide success: The Swiss produce about 25 million watches a year. The number of counterfeits of Swiss watches, however, number about 40 million annually.

“Our industry can become vulnerable at any time,” Duchêne recently told journalists at the show. “After all, we export 95% of our production, so we are therefore totally dependent on the international environ­ment.

“The statistics speak for themselves: the situation is becoming really dangerous,” he said. Duchêne, who is also vice president of the Federation of the Swiss Watchmaking Industry and Rolex’s representative on its board, estimated the damage caused by “this illegal trade” is around 800 million Swiss francs (about $656 million).

Aggravating this is the fact is that counterfeits are increasingly a matter for specialists. “The days of cheap imitations are over,” Duchêne said. “The technical skill of the counterfeiters has increased considerably, and [fake[ products are becoming more difficult to detect. Only experts are in a position to tell the difference” between some fakes and the genuine article.

Because of this growing threat, he said, some companies, especially smaller ones, face the prospect of laying off employees due to the decline in work, “a totally unacceptable situation” in a small industry and one which is a major contributor to the Swiss economy.

Because watch counterfeiting is a massive worldwide operation, “a considerable economic commitment has to be made for measures [against it] to be really effective,” declared Duchêne to the international journalists. “Without the help of governments, we will continue to lose ground in the battle against this plague.”

Some are reacting. In February, Switzerland launched the “Stop Piracy” campaign to raise public awareness of the damaging effects of product piracy, and the third World Congress against Counterfeits and Piracy was recently held in Geneva, Switzerland, by the World Intellectual Property Organization in cooperation with the World Customs Organization, Interpol, and the International Chamber of Commerce. “This Congress was a significant step, because it brought together government representatives and authorities responsible for intellectual property rights,” said Duchêne.

In addition, a new Swiss patent law allows its customs authorities to seize any merchandise in transit that contains counterfeits, as well as counterfeit copies intended for private use. (However, the Swiss law contains no criminal penalties, unlike France or Italy which impose heavy ones.)

The Federation of the Swiss Watch Industry also battles the threat with an anti-counterfeit group, including a team which daily goes on line seeking to identify copies and imitations on the Internet.

At the BaselWorld, its anti-counterfeiting panel, in existence for over 10 years, has had great success in identifying counterfeits at the show itself. Last year, two companies were expelled for selling fakes. (Ironically, while watch counterfeits there have sharply declined over the years, jewelry counterfeits are increasing.)

Despite such efforts, the biggest obstacle remains the watch consumer. “I am afraid that despite all the efforts to raise awareness, the overwhelming majority of the public still isn’t aware that purchasing imitation watches is supporting the [worldwide] expansion of mafia-style structures and money laundering,” said Duchene.