Labeling Children's Toys to Calm Down Parents and Bring 30 Billion Rubles to Legal Firms

Labeling Children's Toys to Calm Down Parents and Bring 30 Billion Rubles to Legal Firms

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The Ministry of Industry and Trade has addressed the Association of the Children's Goods Industry (ACGI) with a proposal to conduct an experiment on the labeling of certain types of children's goods and creativity products, the media reported.

According to ACGI, the volume of counterfeit goods in the segment of licensed children's toys, particularly those using animated images, exceeded 43% in 2021.

In this regard, the decision to experiment with the labeling of some children's goods looks quite logical and expected, given the accumulated positive experience with other goods and the fact that the project is implemented exclusively through private investment.

The Center for Development of Advanced Technologies established based on public-private partnership, is the operator of labeling in Russia. The amount of private investment in the project is 250 billion rubles ($2.88 bln.) The state money is not used for the introduction of labeling. The Honest Mark project creates a digital twin of each labeled product and allows it to be traced from production to sale.

For example, since the introduction of labeling of footwear products, the footwear market in Russia became more legalized by 35%. The volume of seized counterfeit shoes rose by 70% to 600,000 pairs. As a result, the volume of legal trade in footwear grew by 21% in volume terms. That is, a fifth of the shoe market was in the shadow economy. Now, the volume of shadow turnover is being redistributed among legal market players.

In the tobacco industry, after the introduction of labeling, the number of counterfeit products was reduced by 10% for the first time in several years. It did not only help the market to get rid of fakes but also brought tens of billions of rubles to the budget.

The same situation is typical for pharmaceuticals. The introduction of labeling made it possible to effectively detect and suppress counterfeiting, as well as to identify attempts to double-sell medicines. Most importantly, it prevented shortages of medicines and vaccines against COVID-19.

The increased profits of legal manufacturers are another important advantage of labeling. Indeed, counterfeit products have a price advantage over legal products, but often the consequences of their use are quite deplorable. For example, the news of fatal cases of poisoning by counterfeit alcohol alone.

However, it would be a mistake to think that toys cannot be dangerous. Doctors annually report chemical burns and allergic reactions in children due to the use of counterfeit toys.

Products, made of low-quality plastic, as well as violations during the manufacturing process often lead to the release of poisonous substances. People rarely think that a cute snowman sprinkled with glitter, or a singing snowflake wishing all the best for the New Year, can be poisonous.

The introduction of labeling for children's products will solve the problem of counterfeit goods that are often dangerous in a civilized manner. It will also significantly increase the profits of legitimate Russian businesses. Those 30 billion rubles ($345.12 mln) of illegal turnover will simply flow into the coffers of conscientious manufacturers and retailers that will not only increase profits but also reduce prices. At present, companies have to charge high prices on their products so that the consumer can understand that this is not counterfeit. The government, in its turn, will be able to control the whole chain from producer to seller without fear of another scandal in the child poisoning case. Experts of the Higher School of Economics also said that one of the unobvious effects of labeling is price stabilization.

The State Duma also paid attention to the fact that goods subject to labeling grow in price more slowly than unlabeled. It was even proposed to control the prices of some goods with the help of the 'Honest Mark' system. According to the research by Gorodissky IP Security, it is simply impossible to recognize low-quality goods in almost half of counterfeit in children's goods for toys, and 60% of cases.

According to BrandMonitor, illegal products account for almost a quarter of Russian children's goods turnover, and the financial turnover of this sector is about 30 billion rubles annually. According to the Federal Customs Service of Russia, more than 5% of all counterfeit products are counterfeit children's brands.

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