consumer brands

This page looks at questions about forgery, fraud and authenticity regarding consumer products such as accessories (the '$5 Rolex'), 'organic' food and clothing.

It covers -

• introduction
• complicity
• fashion
• food
• wine
• greenwash
• offers, tickets and tokens

The following page considers pharmaceuticals, publishing and the forgery of components such as replacement equipment in aircraft.

Questions about piracy of intellectual property are explored in the IP Guide on this site and the supplementary profile on trademarks.

     introduction

Preceding pages of this profile have suggested that misrepresentation by vendors and forgery are a feature of most markets, with prevalence reflecting factors such as potential returns, the cost of creating a fake, penalties for forgery and the likelihood of being convicted.

It is unsurprising that fake sportswear, watches, designer pens and handbags are found in Europe, Australia, China and other locations. For some people there is a reverse chic in buying - even flaunting - a fake or a knock-off. Attitudes about fraud in food products are less positive, although in advanced economies with strong traditions of consumer protection and consumer activism most people appear to believe that what they are getting is indeed what they asked for.

The International Chamber of Commerce argues that counterfeiting accounts for around 5% to 7% of world trade, with a higher figure in sectors such as the music and computer software industries -

Industries that find themselves competing with counterfeiters suffer a direct loss in sales. Some markets are even dominated by counterfeiters, creating barriers of entry for the producers of the genuine product. Consumers, who are deceived into believing that they bought a genuine article when it was in fact a fake, blame the manufacturer of the genuine product when it fails, creating a loss of goodwill.

Countries also suffer from the consequences of counterfeiting and some of the harmful effects include loss of tax revenues, loss of job opportunities and the use of proceeds of counterfeiting to fund other crimes. In countries where counterfeiting is rife there may be a lack of much-needed foreign investment and subsequent foreign know-how because IP rights are not being adequately protected.

The World Customs Organization estimates trade in 'fakes' as US$512 billion; other organizations put the proportion of global trade in fakes as over 10%.

Academic comments are provided in The Economics & Management of Global Counterfeiting (PDF) by Derek Bosworth & Deli Yang. Susan Scafidi's cogent 2006 Written Statement on H.R. 5055, 'The Design Piracy Prohibition Act' (PDF) and Alexandra George's E-shopping for Fakes: The Internet Business in Trademark Counterfeits (PDF).

There is a more popular treatment in Knockoff: The Deadly Trade in Counterfeit Goods (London: Kogan Page 2005) by Tim Phillips, Deluxe: How Luxury Lost Its Luster (New York: Penguin Press 2007) by Dana Thomas, the fervent Illicit: How Smugglers, Traffickers and Copycats are Hijacking the Global Economy (New York: Anchor 2006) by Moises Naim and Bee Wilson's Swindled: From Poison Sweets to Counterfeit Coffee - the Dark History of Food Cheats (London: John Murray 2008). For a Canadian view see the 2007 Counterfeit Goods: A Threat To Public Safety report by the national parliament's Standing Committee on Public Safety & National Security

     complicity

Some consumption of forgeries is innocent: we assume that few people would knowingly buy vodka that includes methylated spirits, fake pharmaceuticals or ersatz aircraft parts.

Other consumption involves user complicity. Surveys by UK pollster MORI revealed that 40% of British consumers admit that they would knowingly buy counterfeit products "if the price and quality were acceptable". 76% of that group would buy fake clothing or footwear (it is claimed that up to 11% of 'famous brand' clothing and footwear in circulation is illicit), 43% watches, 38% perfume and 22% electrical goods.

A 1998 New Zealand government report suggested that piracy and faking of goods will increase worldwide because of the -

• growing cost of development of more sophisticated software and other products
• reducing cost of replicating sophisticated products
• globalisation of brands and the desire of consumers to have (in particular to be seen to have) goods bearing such brands
• globalisation of entertainment and the desire of consumers to experience such entertainment
• reducing cost of international trade, and the reduction in restrictions in international trade
• globalisation of the underworld because of the ease of travel and communication
• continual periodic breakdown of law and order in various regions through political unrest and economic recession
• ability to sell via the net means greater opportunity to purchase without prior inspection, and from sources less easily traced.

     fashion and accessories

Some sense of faking of fashion items is provided by reports in 2006 from the German Customs agency that over the preceding six months it had seized 117 shipping containers that contained nearly a million pairs of fake Nike trainers, toys and watches - with a street value of US$490 million if the goods were legitimate.

The French Customs agency more graphically supplied the BBC with film of a seizure where its officials discovered enough fake Louis Vuitton fabric to cover 54 tennis courts. In 2002 the International AntiCounterfeiting Coalition (IACC) argued that some 18% of counterfeit products seized by US Customs were up of fashion and related items: clothing, handbags, watches and sunglasses.

Works on law and practice include 'The ethics of counterfeiting in the fashion industry: Quality, credence and profit issues' in Journal of Business Ethics by Brian Hilton & Stephen Chen, Julie Tsai's 2005 'Fashioning Protection: A Note on the Protection of Fashion Designs in the United States' in 9 Lewis & Clark Law Review 447, Anne Briggs' 'Hung Out to Dry: Clothing Design Protection Pitfalls in United States Law' in 24 Hastings Communications & Entertainment Law Journal 169, Mary Lynn Stewart's 2007 'Copying and Copyrighting Haute Couture: Democratizing Fashion, 1900-1930s' in 28 French Historical Studies 1 (PDF), Safia Nurbhai's 2002 'Style Piracy Revisited' in 10 Journal of Law & Policy 489 (PDF), Jonathan Barnett's 2005 'Shopping for Gucci on Canal Street: Reflections on Status Consumption, Intellectual Property, and the Incentive Thesis' (PDF) in 91 Virginia Law Review and thinner 2005 Between the Seams, A Fertile Commons: An Overview of the Relationship Between Fashion and Intellectual Property (PDF) by Christine Cox & Jennifer Jenkins.

     food

The number of food and beverage items sold under forged labels or where sale involves mis-representation (for example that a commodity is 'organic') is unknown.

In 2006 the UK Food Standards Agency gained attention with a claim that around 10% of "our weekly shopping may be counterfeit". That claim reflected indications in the UK, Australia and elsewhere that

• battery-farmed eggs were being labelled as the more expensive free-range variety
• 46% of bags labelled as basmati rice had been diluted with inferior varieties, some by as much as 60%
• false claims about the organic status of fruit, vegetables and meats
• labels on some wine bottles were counterfeit; others featured legitimate labels but had been filled or refilled with inferior wine or wine adulterated with nasties such as antifreeze
• misrepresentation of commodities ostensibly with a protected designation of origin (PDO) status, eg prosciutto di parma that came from Bulgaria
• repacking of imported and/or non-organic honey as the local and organic, with honey from India, China, Tanzania, Argentina and Moldova found to be contaminated with antibiotics banned in food production
• illicit use of health marks (eg the symbol signifying that eggs came from hens vaccinated against salmonella)
• mislabelling of farmed fish (including species such as salmon, trout, sea bass and bream) as the more expensive wild fish
• labelling non-premium species as their more desirable cousins (for example bonito becomes tuna)
• use of traditional deceptions such as inclusion of colouring and water to mislead consumers about weight, quality and other attributes (one UK survey indicated around 40% of frozen chicken breasts had a meat content of between 26% and 5% less than appeared on packaging)
• inclusion of genetically modified organisms in what are claimed to be GMO-free products.

Mechanisms to identify food fraud now include DNA testing (a unique signature for species), testing of isotopes (useful for high-value PDO items), physical inspection (marks made by wire racks on newly-laid battery farm eggs are discernable under ultraviolet light) and inclusion of markers (eg in high end beverages such as Gordon's gin).

As in the past, consumers rely on retailers as a guarantee of quality, although it is clear that some vendors have been misled about the authenticity of particular items and others have turned a blind eye to potential problems. Promoters of some high end products have foreshadowed mechanisms such as online verification by consumers of specific items, for example an online register that features a unique number for each bottle of burgundy.

Some 'fraud' is simply exploitation of consumer naivety. Coca-Cola was questioned by the FSA in 2004 over labelling of its Dasani "pure, still water" - "as pure as bottled water gets" - alas merely a filtered version of the wet stuff that came out of the taps at its factory in Sidcup, Kent. Thames Water, which supplies homes in the area where the product is sourced and bottled, sells water at the equivalent of 0.03p per 500ml. Coca-Cola offered Dasani for 95p per 500ml. "Pure" did not mean lovingly extracted from a pristine mountain spring.

     wine

Unsurprisingly, when a bottle of premium wine can retail for US$15,000 or more (the record is £105,000 for a bottle of the Lafite 1787) - and collectors lust after vintages supposedly from the cellar of Napoleon I, Thomas Jefferson, Tsar Nicholas II but provenance is fuzzy - there is a trade in counterfeit wine. In the first century AD Pliny the Elder lamented that "not even our nobility ever enjoys wines that are genuine". More recently it has been claimed that more bottles of 1982 Petrus are consumed in Las Vegas and Hong Kong every year than ever produced by the Bordeaux estate, which currently ships around 2,500 crates in a good year.

Some contemporary observers have claimed that fakes account for one in 20 upmarket bottles; as with the sale of antiquities investigators have questioned whether leading auction houses have turned a blind eye. During 2007 the FBI thus sent subpoenas to major auctioneers, dealers and collectors.

Christie's, which sold $58m (£31m) of rare wine in 2006, responded that it does not sell any lot known or suspected to be inauthentic -

We take appropriate steps to establish authenticity, and work with the leading experts, authorities and institutions in the relevant field to research the property that we sell.

That is consistent with claims noted earlier in this profile. Scams are highlighted in The Billionaire's Vinegar: The Mystery of the World's Most Expensive Bottle of Wine (New York: Crown 2008) by Benjamin Wallace, discussing controversy over sales by Hardy Rodenstock (aka Meinhard Goerke).

In Australia one gang was caught in 1998 selling fake 1990 Penfolds Grange. The Italian mafia more industriously unloaded over 16,000 bottles of 1994 and 1995 Sassicaia. In France during 1983 leading dealer Remoissenet was found to have used falsified papers in selling what were purported to be 500 cases of Meursault Les Genevrières premier cru, Puligny-Montrachet and other treats. Bouchard Père & Fils, the largest vineyard holder in the Côte d'Or, paid fines of US$400,000 after being found in 1987 to have been mislabelling or doping 23,000 cases.

Misrepresentation and adulteration is evident in other products. In Europe, for example, there have been recurrent scandals regarding labelling of olive oil, with dealers passing off sunflower and hazelnut oil as premium oilive oil or exploiting EC production subsidies by relabelling non-EU oil as coming from Italian farms. That led one EC fraud investigator to comment "it is as profitable as cocaine but without the risk".

In 2007 the New York Times questioned claims that upmarket sportswear from Lululemon Athletica contained seaweed, with the fabric supposedly releasing "marine amino acids, minerals and vitamins into the skin upon contact with moisture" to reduce stress and provide "anti-inflammatory, antibacterial, hydrating and detoxifying benefits". Its lab, alas, could not find any sign of seaweed or of marine amino acids.

     greenwash

Claims that products/services are 'ethical' or 'green' have a commercial value and are thus susceptible to fraud.

Critics, including 'environmental marketers', have expressed concern regarding 'greenwash' - essentially efforts to mislead consumers, journalists and regulators about a vendor's ethical or environmental bona fides.

Explicit misrepresentation or elision includes -

• disingenuous vagueness, eg promotion of a product (including insecticides) as "chemical-free", "eco-friendly", "green", "all-natural" (just like arsenic, cobra venom and deadly nightshade?) or "non-toxic"
• fictive certification, eg where a product is falsely claimed to have been certified by a legitimate body, where there is no certification ("certified organic" but not by any discernable entity) or where certification was provided by a subsidiary/affiliate
• misrepresentation of offsets, eg "from sustainable harvesting" but without an indication of the impact of shipping the product across the globe or the environmental impact of production (sustainable timber processed in a worst practice way)
• irrelevance, eg indications that no animals were used in product testing and production or that a product is CFC-free.

     offers, tickets and tokens

In practice most scams are limited by the perpetrators' ingenuity and the consumer's credulity or lack of resources for verification. In 2005, for example, one Australian internet scam saw consumers receive a fake Hoyts media release by email. That message promoted a supposed deep discount offer on tickets for the national cinema chain. The scam has been attributed to a disgruntled former employee amid ructions over the group's latest restructure, which saw departure of around half the staff in the Hoyts' HQ.

In 2009 NSW Police reported that fake department store gift cards had been used to acquire electrical goods, with over $750,000 of those items then being sold on eBay.

A raid on the apartment of Andrew Sun allegedly found 41 iPods, 180 laptop computers, eight personal computers, 42 mobile phones, 64 PlayStation consoles, 201 GPS navigation units, 113 cameras, 18 PlayStation portables, 12 Nintendo Wii consoles and 220 Myer gift cards.

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