Attitudes toward Piracy and Counterfeiting Among Foreign Consumers in Thai Markets Adam Richard Tanielian Abstract: A survey

helps answer questions about opinions among consumers regarding intellectual property rights and infringement. 196 foreign participants were recruited in Thai physical markets where counterfeit and pirated goods were sold nearby. Results showed that participants most often felt there was a high-medium infringement problem in both Thailand and ASEAN. Opinions also indicated high-medium levels of appeal to foreign tourists, purchases by foreign tourists, and losses to companies. Economic and public threat levels were evaluated as medium to low, and quality of infringing goods was considered low. Price was the dominant motivator of purchase of infringing goods. Differences between demographic groups were found using ANOVA. Pearson correlations and other statistics were calculated. A review of literature, legal framework, and statistics accompanies presentation of data. Better enforcement and broader public awareness campaigns are recommended. Introduction Commercial intellectual property (IP) infringement poses problems for proprietors, investors, businesses and states. Piracy (unauthorized reproduction, distribution and sales of copyrighted material) and counterfeiting (unauthorized use, reproduction, distribution and sales of trademarks) are considered criminal offenses in every World Trade Organization (WTO) member nation. However, theory and practice on this issue are divergent. Lax law enforcement regimes and a so-called development agenda (Helfer, 2009) contribute to widespread ignorance of commercial infringement. The importance of IP rights (IPR) is well-known among nations. World Economic Forum (WEF, 2010-2011) concluded that IPR protection is a fundamental concern in investment decisions leading to R&D spending and innovation. Nations with strong IPRs see comparative and competitive advantages in high-tech and cutting edge products and processes, in academic and research institutions, in technical literature, and in creative arts. WEF listed IP protection in the 1st pillar (institutions) and 12th pillar (innovation) in its annual Global Competitiveness Report. Competitiveness rankings of nations closely follow the level of IPR protection in the nation. For example, Singapore is consistently among the most competitive nations in the world due in large part to its focus on innovation and thus IPR protection. In contrast, Thailands falling competitiveness ranking could be partially due to its tolerance of widespread commercial IPR infringement.

Inclusion of IP theory in major international organizational reports warrants expansive research on the issue. Most studies about commercial infringement focus on the supply side. Relatively little is known about consumers of these illicit goods. A few studies found perceptions toward piracy and counterfeiting are subject to economic influences. Price and culture, among social and individual psychological factors have been found to influence purchases of infringing goods (Moores, 2003; Proserpio, Salvemini, and Ghiringhelli, 2005; Haque, Khatibi, and Rahman, 2009). Further study on the demand side of transactions is needed to understand various aspects of the behavior. Research Questions This study aims to answer several questions about foreign consumer attitudes toward pirated and counterfeit goods. Do consumers perceive there to be a problem with piracy and counterfeiting in Thailand? And in ASEAN as a whole? Do counterfeit and pirated goods appeal to foreign tourists? To what extent to foreign tourists estimate purchases of such goods among their group? What kind of public and economic threats to foreign tourists think are posed by infringing goods and the organizations which sell them? Do foreign tourists believe counterfeit and pirated goods cause direct losses to companies? What is the perceived quality level of infringing goods? Finally, what motivates purchases of these goods? Research Design A questionnaire is used to measure opinions among potential consumers. In the following section, a brief review of literature and statistics on piracy and counterfeiting is presented. Potential associations with organized crime are examined. Thailands role leadership role in ASEAN is considered important. A section on method precedes results, which illustrate various relationships and significant points of interest among the data. A discussion of the significance of results follows. Finally, conclusions Piracy and Counterfeiting in Physical Markets Between 5% and 7% of world trade may be in pirated and counterfeit products (Eisend & Schuchert-Guler, 2006; IACC, 2012; OECD, 1998). Including digitally pirated products, estimated values of counterfeit and pirated goods in 2008 topped US$650-$775 billion annually, forecasted to rise to US$1.77-$1.89+ trillion by 2015 (Frontier & BASCAP, 2011). Between 2000 and 2007, the volume of counterfeit and pirated physical products more

than doubled worldwide and the market share of counterfeit/pirated products increased by about 10% (OECD, 2009). Empirical evidence on the market volume of infringing goods is in short supply, but a variety of sources offer estimates of impacts. Job losses due to piracy and counterfeiting could exceed 2.5 million in G20 nations (BASCAP, 2011; Frontier & BASCAP, 2011). Industries which trade in optical discs music, film, and software are impacted most and offer the bulk of statistics on the issue. BSA estimated worldwide software piracy rates of 42% for 2011, when monetary value of unlicensed software topped US$63bn (BSA, 2012). Between 2003 and 2010, global top 50 debut album sales fell 77%. Between 2004 and 2010, the total value of the global recorded music industry fell by 31% (IFPI, 2011). Worldwide, MPA & LEK (2006) estimated film industries lost US$18.2 billion to piracy in 2005 alone. Although the validity of estimates are sometimes questioned, and the substitution rate for pirated/counterfeit goods unknown, it is clear that media industries are threatened by unlicensed copies. We cant compete with free. Thats an economic paradigm that doesnt work, said 20 Century Fox Films Co-Chairman James Gianopulos (Smith & Telang, 2009). Organized Crime Studies have reported links between IP infringement, organized crime, and terrorism (UNAFEI, 2000; IFPI, 2004; Treverton et al. 2009; UNODC, 2011). UNODC (2010) reported counterfeiting as one of the main activities of organized crime, among trafficking in persons, smuggling of migrants, cocaine, heroin, firearms, environmental resources, maritime piracy, and cybercrime. IIPA (2012) found vendors of pirated DVDs in Bangkok frequently engage in other crimes such as selling child pornography. Among emerging concerns is the fact that traditional organized crime syndicates appear to be playing a dominant role in the production and distribution of certain types of hard goods piracy, such as optical disks. This problem seems particularly prevalent in Asia and parts of the former Soviet Union, said US Deputy Assistant Attorney General Malcolm (2003) before the House of Representatives. He continued, These groups will not hesitate to threaten or injure those who attempt to interfere with their operations. Throughout Asia,
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organized crime groups operate assembly lines and factories that generate literally millions of pirated optical discs. Violent tendencies of people selling counterfeit and pirated goods were seen in Public Prosecutor v. Midy Multi-Media (2000) when Thai enforcement authorities were assaulted during a raid at Pantip Plaza, a notorious physical market in Bangkok. Authorities in Indonesia found that pirate and counterfeit gangs had broad public appeal and support when a VCD raid at the notorious Glodok market resulted in severe rioting, burning and looting in the area (Kusumadara, 2000). IP crime has been called a contender for the preferred method of financing some terrorist groups (OECD, 2007). Counterfeiting has become the preferred method of financing for terrorist organizations, said European Commission Customs Officer Christophe Zimmerman (Baguioro, 2003). Terrorist groups worldwide have funded operations with piracy and counterfeiting (Noble, 2003; Union des Fabricants, 2007). Notwithstanding cases and theory available on the subject, Pollinger (2008) found the relationship between counterfeiting and acts of terrorism inconclusive. Links between piracy, counterfeiting, and international organized crime, however, are indisputable. Thailands Part Thailand is a member of the WTO, obligated to implement provisions of the TRIPS Agreement. Thailand is also a state party to the Berne Convention, Paris Convention, and Patent Cooperation Treaty (WIPO, 2013). Domestic statutes such as the Copyright Act, Trademark Act, and Patent Act protect the three basic forms of IP under the law. Except for the three least developed countries in ASEAN Cambodia, Laos, Myanmar comparable domestic statutes exist which theoretically protect IPRs in the region. Minor differences between ASEAN members and the United States are found in exceptions to infringement, such as the private domestic use exception found in Article 32 of Thailands Copyright Act, but commercial infringement is wholly prohibited as per the TRIPS Agreement. Criminal penalties for counterfeiting are available under both the Trademark Act Chapter VI and Criminal Code 271-275. Despite the proscription of certain offenses under law, commercial infringement persists.

According to BSA (2012), sales of pirated software in Thailand for 2011 exceeded 2 times the value of legal software, amount to more than 0.24% of GDP. Within the ASEAN group, only Indonesia surpassed Thailand in monetary value and rate of software piracy. However, Indonesias per capita and per GDP rates were lower than Thailand. IIPA (2012) found nearly every Thai film made in 2010 was pirated, most within days of release. In 2011, 33 illegal camcorder copies of MPAA films were sourced to Thailand. Both Thailand and Indonesia remained on the US Trade Representatives Special 301 Priority Watch List for 2012 due to ubiquitous copyright infringement. One physical market in Indonesia and thirteen in Thailand were listed in the Out-of-Cycle Review of Notorious Markets (USTR, 2012). Thailands sales of pirated and counterfeit goods has grown to such epic proportions that Lady Gaga was inspired to Tweet, I wanna get lost in a lady market and buy fake Rolex upon arrival in Bangkok for a concert, prompting brazen government officials and citizens to demand an apology (Dempsey, 2012). Thailands managerial role in the trade makes it a pivotal market for organized criminal groups. Normalization of physical market infringement throughout the ASEAN can be accomplished through exposure of significant portions of the 22 million and more foreign tourists that reach Bangkok annually (Thai Department of Tourism, 2013). Those tourists stroll through tourist districts and malls containing primarily infringing products, and the law takes a back seat to culture. A market phenomenon completely outside of regulatory boundaries exists, which is then perfect for study. Method Instrument The research instrument was a survey questionnaire. Eight questions featured a five point Likert scale, which respondents used to quantify opinions. Potential responses ranged from 1 = lowest to 5 = highest with 0 = no opinion and a midpoint 3 = medium. Question number nine was used to gather categorical data on perceptions of motivating factors for consumption of infringing goods. Demographic data about age, nationality, gender, occupation, education, religion, and first language were also collected. Sampling Procedure

196 participants were recruited over several days in both Bangkoks Kaosan Road district and Chiang Mais Thapae Gate. In this study, due to the diverse citizenship among participants, the convenience sample more resembled a cluster sample. Individuals were approached based upon their likelihood of being adult foreigners. Potential respondents were asked Do you speak English? Those who spoke English were asked to complete a survey questionnaire. Participants were informed of the purpose of the study and were aware of the voluntary nature of their participation. Analysis All questionnaires were numbered and data was entered into SPSS. Demographic data were translated into descriptive statistics. Distribution, central tendency, and dispersion statistics were calculated for ordinal and scale data. One-way ANOVA tests were used to assess differences in means between demographic groups.Pearson product-moment correlations were calculated to assess relationships between responses on survey questions. Results Cronbachs alpha was calculated to assess the reliability of the data ( = .705). Descriptive Statistics 195 participantsreported ages ranging from 18 to 77. Mean age was 32.6, median 28, mode 23, standard deviation 12.71, and skewness 1.27. Table 1: Age Group Distribution Percent N of Total 18-24 61 31.1 25-30 52 26.5 31-45 45 23.0 45+ 37 18.9 Missing 1 0.5 100 Total 196 Age Group Ages were reported as scale data, which were split into groups for comparisons using ANOVA. Table 1 features frequencies and distributions of ages. Of the 196 participants, 95 reported being male and 94 reported being female. 132 participants reported English was their first language

and 63 reported speaking English as a second or foreign language.

Table 2: Nationality of Participants Percent of Total 16.3 26.5 8.7 16.3 27.1 4.6 0.5 100 Of the 196 participants, 1 did not report origin. Distributions of nationality can be seen in Table 2. 117 respondents did not report a religion. Christian was the most frequently reported religious group (26), followed by Catholic (17), Protestant (16). Other religious affiliations included atheism, Gnosticism, Agnosticism, Buddhism (2), and Jedi (1). Bachelors degree or equivalent (93) was the most commonly reported level of education among participants, followed by high school (47), master (18), certificate (16), and doctor (4). Participants reported employment in fields of business (46), services (27), education (24), engineering and technology (17), health care (16), and government (4). 44 respondents reported being a retiree, student, or unemployed. Means and Distributions Participants generally found piracy and counterfeiting problematic, as shown by negatively skewed distributions of data. The problem was perceived slightly greater within Thailand than in the ASEAN region, which reflects Thailands leadership role in the trade. Appeal to tourists was found slightly lower than level of purchases, which may suggest that tourists who do make purchases often purchase multiple items. Appeal to tourists and levels of purchases remained above the midpoint despite the low perceived quality of the goods. Participants rejected the purported high threat level of piracy and counterfeiting organizations, but some threat was recognized. Losses to companies were perceived as being greater than economic threat levels, which may suggest that participants were aware of potential local benefits that come with retail sales of infringing goods.

Nationality USA UK & IRE CA AUS & NZ European Other Missing Total

N 32 52 17 32 53 9 1 196

Table 3: Distribution, Central Tendency, and Dispersion of Survey Responses Problem Problem TH ASEAN N Mean Median Mode Std. Deviation Skewness 196 3.13 4.00 4.00 1.61 -0.83 196 3.04 4.00 4.00 1.65 -0.81 Appeal Public Economic Level of Losses to to Threat Threat Purchases Companies Tourists Level Level 196 3.46 4.00 4.00 1.25 -1.16 196 3.62 4.00 4.00 1.27 -1.53 196 2.67 3.00 3.00 1.38 -0.46 196 3.36 4.00 4.00 1.37 -0.83 196 3.02 3.00 3.00 1.25 -0.41 Level of Quality 196 2.27 2.00 3.00 1.14 -0.19

Table 4: Reasons for Purchases Percent N of Total 10 5.1 171 87.2 2.0 ANOVA 0.5 Normal Q-Q plots were assessed to determine that 5.1 100 there was no violation of assumption of normality. A Levenes test showed homoscedasticity among the data (p > .05). A one-way ANOVA showed no significant difference in opinions on questions 1-8 between gender, nationality, occupation, and education groups (p > .05). Statistically significant differences between age groups were found using a one-way ANOVA test, relating to the question of whether or not piracy and counterfeiting are a problem in Thailand (F(3,191) = 3.745, p = .012). A Tukey post hoc test revealed participants from the 18-24 age group (3.62 1.16) perceived piracy and counterfeiting in Thailand as a greater problem than the 45+ age group (2.57 1.83). This may be due to changes in education paradigm between generations and greater awareness of IP issues among youth participants. No statistically significant difference was found between those groups on the question of problems in ASEAN, which is shown below to have been correlated with the question about Thailand. Opinions about the main motivating factor behind purchases of pirated and counterfeit goods were not evenly distributed. The overwhelming majority of participants perceived the lower price of the goods as the primary motivator. Table 4 contains distribution statistics.

Survey Response

No Opinion Lower Price Support Lower Class 4 People Destabilize 1 Markets Convenience 10 196 Total

ANOVA showed significant differences between language groups on questions two (F(1,193) = 5.042, p = .026), four (F(1,193) = 5.438, p = .021), and six (F(1,193) = 5.113, p = .025). Participants whose first language was English perceived a greater piracy and counterfeiting problem in ASEAN (3.21 1.61) than did participants whose first language was other than English (2.65 1.67). Native English speakers estimated levels of purchases among foreign tourists (3.77 1.16) as higher than non-native English speakers (3.32 1.42). Native English speakers also perceived piracy and counterfeiting as representing greater losses to companies (3.50 1.30) than non-native English speakers (3.03 1.47). There was a statistically significant difference between religious groups as determined by a one-way ANOVA on the question of levels of purchases among foreign tourists (F(6,188) = 2.745, p = .014). A Tukey post hoc test revealed that participants who did not report religion estimated higher levels of purchases (3.74 1.15) than the Catholic group (2.65 1.80). Pearson Product-Moment Correlation A Pearson test showed significant positive correlations between most survey points. Correlation coefficients greater than 0.40 were considered meaningful to this study. The problems of piracy and counterfeiting in Thailand and ASEAN were shown to have very strong, positive correlations (r = .745, n = 196, p < .0005). Public threat levels and economic threat levels were moderately, positively correlated (r = .448, n = 196, p < .0005). A moderate, positive correlation (r = .430, n = 196, p < .0005) was also found between economic threat level and estimated losses to companies. Discussion Mean responses from questions one through four corroborate anecdotal and qualitative evidence on the prevalence of counterfeit and pirated goods in physical markets in Thailand and ASEAN. Foreign tourists play an important role in normalizing and sustaining the illegal activities. When national economies are partially dependent upon foreign tourism, accommodating those travelers is a priority. When foreign tourists enjoy some specific activity and engage in it frequently, if that activity is not found to have immediate and direct negative effects on persons or society, then regardless of the written law, that activity may easily remain acceptable. Small businesses selling unlicensed copies of goods generate

revenues, which positively impacts families and neighborhoods, so commercial infringement is supported by culture as a product of economics. Lack of significant differences between most demographic groups along with perceptions of higher problems, economic threats, and market activity in counterfeit/pirate goods suggests the average English-speaking foreign consumer in Thailand is probably aware of IP issues. The statistically significant, positive correlation between perceptions of problems in Thailand and in ASEAN across all groups minimizes the importance of the difference found between the oldest and youngest age group on problem in Thailand question. The difference on the Thailand question could relate to social issues among generations of foreigners not within the scope of the present survey. Differences in opinions between age groups regarding the problem in Thailand could also be a result of differences in the definition of a problem between groups. One or more participants remarked that the word problem could be defined subjectively. One or more participants also remarked that what is a problem to one person may not be to another, and still other participants questioned a problem for who? Participants were informed that the dictionary definition of each word was the default meaning, and that the word problem is not vague or ambiguous, but also that the instrument was an opinion survey designed to gather opinions, which are subjective in nature. By responding on the higher end of the scale on questions of economic threats, losses to companies, and appeal to foreign tourists, while reporting low on measures of perceived quality of the goods in question, respondents showed a tendency to engage in indirect selfharm, or in activity which they perceived harms companies, societies, and economies. However, these harms may not be consciously understood. Consumers may rationalize purchases by considering public safety threats low, and by relying on disconnection between the collective and individual between society/economy/group and self. This may indicate a failure by the bulk of respondents to perceive societies and economies as groups of individuals, the sum of whose actions results in larger-order impacts. Results from question nine confirmed previous studies on motivating factors for purchases. Low price was the dominant factor in motivating consumption of counterfeit and pirated goods. Those goods are presumably consumed by persons who also perceive the quality of the goods to be low. However, consumers probably also understand the quality of many optical discs containing pirated music and movies is comparable to the licensed

product. If this study were adapted such that different categories of counterfeit/pirated goods could be assessed separately, we might find higher perceptions of quality among pirated media and lower perceptions for apparel, with the lowest probably in medicine. Conclusion Both supply and demand sides need to be significantly impacted for any reduction in piracy and counterfeiting to occur. Until physical markets are more effectively regulated, online markets remain largely out of reach. On the government end, more ex officio enforcement is needed against commercial infringers, including sidewalk sellers, whose inventories can be seized at virtually no cost to police agencies. If sellers face consistent seizures, they will be compelled to stop selling. Increased enforcement will serve the short and medium term goals of reducing prevalence of infringing goods in physical markets. Consumers need to be handled differently, considering that they are not profiting from infringing activity. Treating consumers like criminals is too costly and does not directly address the problem. Reducing consumption of goods that are overtly sold in physical markets needs to be voluntary. Interest groups can engage the public through media and with education. Considering the apparent contradiction among consumers that purchases of infringing goods creates economic utility while sales of such items creates economic harms, some broader theoretical knowledge needs to be communicated to the public. Westerners should probably learn about connections between individuals and society, and Easterners should likewise learn to bridge the gap between individual and collective. These types of philosophical goals would be long-term aspects of a multifaceted strategy to improve economic and social conditions. IPRs are permanent components of our worlds economic and legal systems, so an ambitious set of long-term goals would not be inappropriate. In the present-tense, political will is still lacking. Perhaps in the longer-run more public support can be generated for enforcement, and thus political will can be created democratically by motivating a sect or majority of people to support IPRs more actively. Further study is needed on consumer psychology to more fully understand this phenomenon. More thorough analyses of surrounding and peripherally-related issues like historical colonialism, neo-colonialism, globalization, and foreign policy may prove insightful when searching for answers to questions of why laws are not enforced. Within ASEAN, market surveys collected at notorious markets in Indonesia, Philippines and

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