Most of us know at least one person who went abroad during summer holidays and returned f launting his/her Gucci bag and Prada glasses. Often there would be a clique, green with envy touting it all to be ‘duplicate maal’ (fake products). They weren’t always far from truth considering how rampant counterfeiting is, globally, when it comes to luxury products. India is one of the hotbeds for the same with every city boasting of at least one popular destination for premium brands at non-premium rates.
Buying fake luxury products happens at a consumer’s volition when he wants to meet his esteem needs but not pay the price. It’s called ‘willful counterfeiting’ in industry parlance. And consumers in India can easily get away with it since we don’t have laws that can get one arrested for purchasing fake premium products (unlike France and Italy).
The kind of counterfeiting that’s cause for concern however is daily use products such as food, beverages, medicine, auto parts, beauty products, and software. Almost a third of each of these categories is plagued with fakes, giving market leaders always soft targets for counterfeiters sleepless nights. Here’s why:
-FMCG and Packaged Food: In 2015, FICCI CASCADE (Committee Against Smuggling and Counterfeiting Activities Destroying the Economy)released a study that says the government lost nearly Rs 6,000 crore to the grey market of FMCG personal goods. The report also mentioned that 31.6 per cent of FMCG personal goods space is several shades of grey. The number is 21.7 per cent for the packaged foods industry. Which means roughly 1/5th of all the packaged food you’re buying may well be counterfeit and posing a serious threat to health and safety.
-Auto: 20 per cent of road accidents in India are attributed to fake automotive components, says a study by Nielsen and ACMA (Automotive Component Manufacturing Association Of India). The auto aftermarket is worth Rs 40,000 crore, as per the same study. Fakes account for 36 per cent of the pie.
Amid the loss to the government exchequer Rs 2,700 crore per annum – is the incomputable value of the loss of life.
-Pharma: India is one the biggest markets for drug counterfeiting, says Zaheer Khan, chairman of EIPR (Enforcers of Intellectual Property Rights) an anti-piracy wing that specialises in conducting raids to bust these rackets. Khan and his team conduct two to three raids every day, across the country. In one of these, they found lifesaving drugs being produced in a cement mixer. “The level of hygiene was deplorable. Later we found the drug had salt at 100 times its recommended value. You often find such cases in baby products as well,” says Khan.
-Beverages: Be it alcoholic or non-alcoholic, the death toll due to fake products in both categories is alarming. “About a decade ago, when returnable glass bottles used to be the primary package for the beverage industry, it was grappling with the manufacture and sale of spurious products. It’s relatively easy to fill and seal fake beverages in glass bottles,” says Arvind Varma, secretary general of IBA (Indian Beverage Association). With consumer preference shifting to PET packs (they are now 65% of the market), the issue is more of counterfeit rather than spurious products, he adds.
You can’t even expect consumers to catch the fakes. Often packaging material gets leaked out of the company’s own supply chain. “The dubious manufacturer picks original packaging from the recycled market and refills it with substandard liquid. Bottle caps are easy to imitate anyway,” says Anurag Kashyap, partner – fraud investigation & dispute services at EY (Ernst & Young). Some Chinese counterfeit imports contain addresses of Baddi (Himachal Pradesh) or Haridwar (Uttarakhand) on their packaging instead of ‘Made in China’.This ensures the consumer doesn’t get suspicious given these are popular manufacturing destinations in the country.
Apply this methodology to any branded commodity and you have a ready reckoner on ‘How to make a successful fake’.
-Tales of Online Fakery: Several reports have indicated how counterfeiting has been spreading to the online luxury space. But with the ecommerce #BigSaleDay hysteria, several other product categories have also come under the grey cloud. “25% of all the products available online would be counterfeit,” says Dinesh Anand partner and leader of forensic services at PwC India. But that’s just his personal assessment, he’s quick to add. Drugs, electronic appliances, and tech products are the worst affected.
Says Rajesh Gupta, country manager – India and SAARC for SanDisk: “Counterfeit products were typically sold at known hot spots in each city: outside railway stations or weekly markets, where consumers are in a hurry and it is not easy to trace back the seller. Now counterfeiters are also becoming active on e-commerce.
Some unmanaged online marketplaces are abused by counterfeiters where they exploit anonymity to sell with sense of impunity.” Sites ending with url extensions like ‘.tld’ and ‘.brand’ are usual suspects we hear easy to go unnoticed by an ordinary user. No wonder all the major ecomm brands are devising measures to check the penetration of fake sellers on their sites. Delisting is common. Amazon does it regularly. Flipkart apparently delisted 100 sellers as of last October. They also have a ‘mystery shopping’ activity where employees buy products to check how fake-proof the system is.
-Who Will Bring On The Counter Strike? It’s a hard task considering this mammoth industry grows irrespective of the mini holocausts it’s subjected to by way of raids and arrests. As EY’s Kashyap says, “These are not entrepreneurs who want to grow in one line of business. They switch to producing whichever brand’s packaging material is readily available.” Every day 100 websites shut down but 100 others mushroom as well, adds PwC’s Anand; a given in a huge margin and extremely low risk business.
It’s not that we don’t have adequate laws in place. “But stricter enforcement has always been the problem,” says Dipankar Barkakati, additional director and head – IPR & FICCI CASCADE at FICCI. Factors like resource crunch, the lack of enforcement officials and IPR infringement cases not being a priority have also been a problem area, he adds. “Moreover, India lacks deterrent punishments in IPR violation cases; hence offenders are not intimidated enough.” Basically, if things go awry, the punishment is not even a patch considering the gravity of the offense and its implications. With a new IPR policy in the offing, Barkakati and the FICCI CASCADE team hope that the situation will improve.
What Are The Marketers Doing? As a part of its Combating Unfair Competition (CUC) program, Hindustan Unilever (HUL) applies a three pillar strategy to fight counterfeiters: building a dedicated team with ample money and resources; educating consumers about IPR; and finally working with the government on regulation and enforcement. Dev Bajpai, executive director – Legal and Company Secretary, HUL, agrees with FICCI on the IPR issues. “There are still rough edges in IPR related legislations that need to be corrected,” he says.” These come in the way of effective actions on the field and HUL is working through industry associations to have these dealt with by the government, he adds.
The onus is not on the government alone, which is why every year, HUL commemorates World IP Day and World Anti-Counterfeiting Day, to propagate knowledge about IPRs. As Mohit Bahl, partner and head – forensics at KPMG India, explains: “Creating awareness about genuine and fake products by educating consumers is of paramount importance since more than the top line it hurts the brand value. Consumer trust once lost can be difficult to regain.”
Brands have started waking up to online counterfeiting as well. “Pharma companies, for instance, now use digital authentication apps,” says Anand of PwC. The app allows users to send images of a medicine available online and detect whether the seller is genuine.
In fact, brands aren’t the only ones embracing tech solutions. Two government sector undertakings have adopted Onspot solutions a unique QR code that’s integrated in product packaging which can be scanned using either the same app or a regular QR code scanner, to verify product authenticity in real time. “In a scenario where it’s so easy to copy holograms, cause pilferage in the supply chain, and dupe consumers this technique proves really helpful in detecting counterfeiting,” says Rajiv Hiranandani, executive director, Onspot Solutions.
Several other market leaders employ investigative agencies that conduct raids on counterfeiters. But raids don’t ever nip the evil in the bud, feels EY’s Kashyap. Often the dealers have a nexus with the police, he further adds. Liaising with the likes of FDA (Food and Drug Administration) to conduct raids and deal with manufacturers, wholesalers, and retailers is a better option, he feels.
To settle the debate between raids and investigation, PwC’s Anand rightfully concludes: “At this point, everybody is in a reactive mode than a preventive one. I don’t think anybody knows what the right solution is, but every unit is doing its bit to check it to the best of their ability.” You, dear reader, should do your bit too, no matter which side you’re on. Kevin Klein Womens JerseyShare This