Russia

Russia's Track-and-Trace System Will Make Consumer Goods More Expensive

This new system won't benefit consumers, it'll just cause prices to increase and allow purchasing activity to be tracked by the government.

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Russia's digital track-and-trace system already includes identification measures for some products, such as pharmaceutical drugs and alcohol. The government now intends to expand it to almost all common goods.

Launched in 2018, the Chestny ZNAK system is designed to authenticate merchant transactions by assigning unique IDs to physical goods—sometimes with a QR code, sometimes with a radio-frequency identification (RFID) tag, sometimes both. The code is scanned when the product is purchased, and the transaction is then registered in a government database. If a product is mislabeled, the business owner can be held criminally liable.

Russia isn't the only country with such a system. But the Russian approach stands out in that the government wants it to cover all products eventually, from medicine to tobacco to clothes to groceries. Authorities claim this will combat the distribution of counterfeit products.

Whether or not it will do that, it will certainly burden businesses. "Russia's dairy industry will have to pay around 20 billion rubles ($319.6 million) per year," writes Julia Osipova, managing partner at Uvarovsky, one of the largest dairy producers in the Moscow region. That amount is greater than the subsidies the industry receives from the state.

Artem Belov, general director of the milk company Soyuzmolok, argues that the dairy market doesn't have a contraband problem. The real issue, he says, is if the dairy products don't contain the ingredients outlined in the label.

Alexander Afonin, deputy director of the Saratov pharmacy chain, also bemoans mandatory labeling's expensive process—for example, the cost of buying multiple code scanners. One scanner costs approximately 7,000 rubles ($111), and businesses like pharmacies typically require several. The mandates are also a problem for small town businesses with limited internet access.

And while Chestny ZNAK's defenders claim the labeling will benefit consumers, it could easily cause price increases for basic goods such as food and clothing, as businesses try to cover their higher costs. The government's attempt to crack down on counterfeit goods is not only burdening consumers with expensive prices, but also confusing them about the effectiveness of the labels. Whether they have significantly reduced the amount of counterfeit goods in circulation is yet to be determined.

Moreover, the system's ability to trace products from manufacturing to point of sale makes it easier for the state to monitor consumer activity under the guise of promoting market transparency.

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  1. You’d think that if businesses thought it were cost-effective, they’d implement it themselves.

    “We’re from the government, and we’re here to help.”

    Or maybe so many businesses are counterfeiting each others’ products that no one wants to rock the boat — except the government tax bureaus. “You counterfeit our products, we’ll counterfeit yours, and the government won’t be able to tell who to tax how much.”

  2. In Mother Russia, the consumer goods track-and-trace YOU!

  3. OK wise guys. How do you address counterfeiting? And not just Gucci purse knock-offs. How about counterfeit drugs and aircraft parts?

    1. You can’t.

    2. If you can’t tell the difference, does it matter as far as end use?

      Reputations matter, and most businesses try to maintain theirs. If all you care about is saving a few bucks, then your reputation is all about low prices. If you care about a reputation for quality, you won’t buy from companies with a reputation for low prices over quality.

      1. After the most recent revolution, there was a gigantic amount in Russia of counterfeit and fraudulent goods sold. Businesses seemed to have no interest in their reputation. They’d been told free enterprise was all about cheating everybody, so they lived up to what they’d heard. I don’t know to what degree that problem has subsided, but I could easily believe it’s a big enough problem to warrant this type of tracing.

    3. Gucci knock-offs are a problem for Gucci, not the government. Some police activity is warranted, but not to the extent that a national database of very purchase ever made. That’s just stupid. People knocking off Gucci aren’t above “fixing” the bar codes along with it, so the system won’t do a damned thing except put the government in charge of everything. Which is probably the purpose of this whole thing.

      1. Also, people buy Gucci because it is expensive in addition to its claimed quality (I have no idea if they really are better made of better materials). A few years ago, someone claimed to have a new automated procedure for making Gucci-quality goods for much lower prices (10%? 25% I do not remember) and found no one wanted them. Too cheap for the ritzo crowd; they wanted to be seen with expensive stuff. Too expensive for the cheap crowd, who just wanted cheap Gucci knockoffs. He eventually started selling more product only after he doubled or tripled his prices.

        Generally a lower price increases demand. But not always so with luxury status symbols.

  4. I’m so glad to live in a free country where this sort of thing can not possibly happen. /sarc

  5. OT: Drag queens to make historical debut — during Super Bowl LIV

    Somewhat incredibly, it’s *not* during the Bloomberg political ad.

    1. Are they going to read us a story at halftime?

    2. another reason to watch the puppy bowl instead or anything but the Niners are playing so….

  6. counterfit my as they want to shut down sales between private parties by keeping track of every penny spent. they are doing it this way while others are going cashless and letting the banks track everything while the government looks innocent by looking only at the bank. the purpose is to get every tax dollar they can and to shut down things like gun sales between private parties. Never go cashless

  7. Oh No! The Russians are now using Reason to interfere in US elections! Raskalnikov!

  8. Will this program help trace products in case of food poisoning? That’s what I’d see as its primary benefit. Monitoring consumer activity? I could understand why businesses might want to do that, but not why government would want to.

  9. Google pay 350$ reliably my last pay check was $45000 working 9 hours out of consistently on the web. My increasingly youthful kinfolk mate has been averaging 19k all through continuous months and he works around 24 hours reliably….. Read more

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