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. Last Updated: 07/27/2016

Executives: Pirates Cost Legal Economy $450Bln

DAVOS, Switzerland -- Company executives Sunday called for the launch of a global coalition against fake products, which they estimate are hurting businesses and national taxes to the tune of $450 billion a year.

At a company level, losses ran into hundreds of millions of dollars.

"We conservatively estimate our own foregone revenues at $200 [million] to $250 million," John Pepper, executive board chairman of U.S. consumer goods maker Procter & Gamble said at the World Economic Forum. The company had total revenues of $40.2 billion in its last fiscal full year to June 30, 2002.

P&G shampoos such as Pantene and Head & Shoulders were most often targeted by producers of fakes, Pepper said.

"They are the easiest to manufacture, they can be made with low capital investments and command high margins," he said.

Pepper invited businesses in many different industries, including food, clothes, car parts, pharmaceuticals, software and music, to participate in the coalition.

"We hope to get a formal industry-wide coalition that can be a single body to talk to government institutions," said Stuart Eizenstat, a former senior U.S. State Department official who was expected to chair an anti-counterfeiting workshop Monday.

The industry of fakes has become huge as organized crime has discovered it as an easy and low-risk way to make money. "Some countries don't even rate it as a crime," Eizenstat said.

Last year authorities seized one billion counterfeit cigarettes with brand names owned by British American Tobacco such as Lucky Strike, Kent, Dunhill and Pall Mall, said the company's chief executive, Martin Broughton.

"In U.K. terms, that represents ?250 million [$408 million] in revenues, ?200 of which is lost state revenues."

Broughton estimates it is just the tip of the iceberg because BAT believes counterfeits are as big as 3 percent of its sales, or 25 billion cigarettes a year.

The coalition is to push for a new study, preferably by a neutral agency like the Organization for Economic Cooperation and Development, which estimated the $450 billion a year damage, Eizenstat said.

"We also want this to be a priority for law enforcement agencies. Plus we have to create consumer awareness," he added.

Efforts have already been made to organize the fight against fakes in China, which is seen as a severe counterfeit hotspot and where P&G has helped organize a coalition of 80 producers in the last five years.

The software industry, led by Microsoft, has been fighting against illegal copies for 10 years.

Piracy in Europe, which was 70 percent of all software 15 years ago, has been reduced to 35 percent today, said Bradford Smith, general counsel for Microsoft.