Cablegate: Pirated Goods Dominate Northern Thai Markets

DE RUEHCHI #0086/01 1561115
P 041115Z JUN 08



E.O. 12958: N/A

CHIANG MAI 00000086 001.2 OF 003


1. With sales of licensed intellectual property dropping 50
percent so far this year, pirated goods are deepening their
stronghold in the Chiang Mai and upper northern Thai markets.
Risks remain low for merchants to engage in the piracy business;
thus, the legal market for DVDs, CDs, and software is
disappearing as legitimate merchants struggle to remain
competitive. Production bases in Burma, legal complexities in
Thailand, and growing but price-conscious demand limit the
success of Thai law enforcement's good efforts to eradicate
pirated products from the market. Legal reform within Thailand
could allow for more efficient seizures of pirated goods and
arrests of producers, raising the risks and costs of engaging in
this illegal business. End Summary.

Profits Outweigh Risks for Pirates

2. Selling pirated goods remains a profitable business for
northern Thai merchants. Despite efforts among local law
enforcement officials to supplant the pirated goods market in
northern Thailand, sales continue to rise. In 2007, the total
value of seized pirated products in Chiang Mai, Chiang Rai,
Lamphun, and Lampang provinces - known collectively as Police
Region 5 - was 112,900 USD. The Chief of the Crime and
Investigation Center reported that the value of pirated products
seized in Chiang Mai Province alone from January through March
2008 was over 45,000 USD (based on the value of the pirated
rather than the legal product), already a third of the value
seized in 2007 across the entirety of region 5.

3. While the potential for revenues grows with greater demand in
the north, the risks of engaging in the pirated goods market
remain low. Fines for convicted pirates range from 3,200 USD to
12,900 USD or six months to four years imprisonment. These
penalties are risks seemingly worth taking, given that legal
requirements for declaring a merchant guilty of piracy are so
complex that such convictions are rare (see para 9). In
addition, with the vast majority of piracy cases being solved
with compensation payments outside of the Thai legal system,
pirates can simply factor such payments into their cost
structure, allowing them to revive and maintain their illegal

The Disappearing Legal IP Market

4. Despite the Chiang Mai economy growing more sophisticated,
access to legal and licensed intellectual property remains
disturbingly low in local markets. In a series of interviews
with local DVD, CD, and software merchants, we discovered that
purchasing legal IP products in Chiang Mai is nearly impossible.
A merchant from one of Chiang Mai's largest CD retailers said
that "few legal shops remain in Chiang Mai." The merchant said
many entrepreneurs will begin with a legitimate business;
however, almost all will shift to selling pirated goods in order
to remain competitive. According to one legal CD and DVD shop
owner, sales volumes for his legal products dropped 50 percent
in the first quarter of 2008. He attributes this to the
ever-growing number of illegal shops and increasing demand for
CDs and DVDs locally.

5. Our investigation revealed that the supply market for pirated
products is widespread and complex. In the traditional pirated
goods markets, such as Chiang Mai's Night Bazaar, street
merchants serve as middlemen between the customers and the
suppliers, who remain hidden in nearby buildings. Displaying
only a catalog of DVDs and CDs to choose from, police cannot
seize the pirated goods unless they locate the hidden supplier.
Moreover, legal barriers such as difficulties in acquiring
arrest warrants and court orders for seizures make merchants
nearly invincible to law enforcement at their street-side stalls.

6. Aside from the traditional pirated goods markets, major
retailers and seemingly legitimate businesses also sell pirated
goods. We discovered that the licensed software market is
non-existent in Chiang Mai. The major software and IT retailers
of Chiang Mai - Sony Center, IT City, and iStudio - upload
unlicensed software onto newly purchased computers to entice
customers to buy the hardware. The sales clerk of the recently
opened iStudio, a licensed reseller of Macintosh products,
admitted that his store sells new computers pre-loaded with
unlicensed Microsoft and other software not produced by
Macintosh. All of these IT merchants said that their businesses
cannot be competitive if they sold licensed or no pre-installed
software. In the DVD and CD markets, even major retailers such
as Tesco Lotus sold products that seemed to be pirated based on

CHIANG MAI 00000086 002.2 OF 003

packaging and price (for example, DVDs costing $.60). The sales
clerk at Tesco Lotus said, however, that the goods are licensed
but deeply reduced in price for clearance.

Attacking Supply

7. The Special Force Subdivision of Police Region 5 is the
primary local law enforcement body that seeks to reduce the
supply of pirated goods in the market. The main objective of
this group of police officers is to locate and seize pirated
goods; without judicial intervention, the group is relatively
powerless to arrest merchants. One of the Center's officers
claimed that although piracy problems are widespread in Chiang
Mai, "we can control it." In addition to these local efforts,
the RTG's National IPR Suppression Commission surveys the Chiang
Mai market two to three times a week and has undertaken 152
successful seizures so far this year.

8. Despite these efforts to attack supply within Thailand, the
source of the supply chain remains untouched with much of the
production of illegal products centering in Burma. Law
enforcement officials told us that Burma is a manufacturing
center for pirated products all the way down to the raw
materials that produce the physical discs. Most of these discs
are transported from Burma into Thailand as blank discs at the
border point of Mae Sai/Tachilek in Chiang Rai province.

Legal Complexities Limit Law Enforcement

9. Besides the challenge that production in Burma presents,
Thailand's domestic legal system severely limits the power of
law enforcement officials to eradicate the pirated goods market.
Local police said that before an investigation and a raid can
take place, the police need to secure a report from the IP
owner, a court order to investigate the suspected retailer, and
an arrest warrant. The arrest warrant is the most difficult to
acquire, as the courts tend to protect Thai business owners. By
the time the police locate a pirated goods supplier, request the
court's permission, and await the long process for court orders
and arrest warrants, the pirated goods supplier has relocated to
another secret location. In addition, because of the long and
costly legal process, IP owners will most often reach a
settlement with the pirated goods retailer outside of the legal
system, leaving the merchant free to continue his business.

Growing Demand

10. As a result of these complexities and the low level of risk
to venders of pirated goods, demand for pirated goods continues
to flourish. While income, education, and quality of life
increase over time in Chiang Mai, so does the demand for
entertainment and software. Youth is the base market for much
of these goods; and with relatively low incomes, these consumers
are highly price conscious. A local university student pointed
out that while a legal VCD costs the equivalent of seven to ten
USD (and is difficult to find), a pirated version is only two to
three USD, a 70 percent savings. The ratio of legal and pirated
CD prices is comparable, and the pirated products are of similar
or superior quality when compared to the legitimate ones because
of RTG censorship that might edit violence or sexual content or
because of the lower quality of VCDs compared to DVDs.
Meanwhile, the price of licensed software is so far beyond the
unlicensed versions' prices that the market for legal software
is nearly non-existent. Local police said that while
suppression of pirated goods helps, the significant price
difference makes demand the driving force behind the dominance
of pirated goods.


11. The resilience of the pirated goods market in Chiang Mai
comes from production in Burma instead of Thailand, a long and
costly legal system that limits suppression by law enforcement,
and an economic environment that allows demand to flourish.
Thailand seems to have made significant progress in preparing
its law enforcement bodies to combat piracy, but these officers
still lack the legal instruments to conduct their work
efficiently and more frequently. While IP owners will remain
targets as the cause of the market's sustainability because
legal goods are so highly priced, Thailand could still advance
its IPR regime with legal reforms making engagement in the
pirated goods market more costly for local merchants; namely, by
making the process for arrest warrants and court orders for
seizures more efficient for law enforcement officers.

CHIANG MAI 00000086 003.2 OF 003

12. This cable was coordinated with Embassies Bangkok and

© Scoop Media

World Headlines


Werewolf: Gordon Campbell On North Korea, Neo-Nazism, And Milo

With a bit of luck the planet won’t be devastated by nuclear war in the next few days. US President Donald Trump will have begun to fixate on some other way to gratify his self-esteem – maybe by invading Venezuela or starting a war with Iran. More>>

Victory Declared: New Stabilisation Funding From NZ As Mosul Is Retaken

New Zealand has congratulated the Iraqi government on the successful liberation of Mosul from ISIS after a long and hard-fought campaign. More>>

Gordon Campbell: On The Current US Moves Against North Korea

If Martians visited early last week, they’d probably be scratching their heads as to why North Korea was being treated as a potential trigger for global conflict... More>>


Gordon Campbell: On The Lessons From Corbyn’s Campaign

Leaving partisan politics aside – and ignoring Jeremy Corbyn’s sensational election campaign for a moment – it has to be said that Britain is now really up shit creek... More>>


Another US Court: Fourth Circuit Rules Muslim Ban Discriminatory

ACLU: Step by step, point by point, the court laid out what has been clear from the start: The president promised to ban Muslims from the United States, and his executive orders are an attempt to do just that. More>>