Phoney wars

The police swoop on an importer of fake Mitre-branded World Cup footballs, announced last week by Devon County Council, may on the surface sound like good news for Mitre Sports International president Roger Holmes. But his problems do not end there.

Devon County Council’s trading standards office seized the 3,000 fake Mitre footballs, complete with three lions insignia, from an Exeter importer. A further 500 balls were taken from local stores.

The event highlights a quandary faced by manufacturers. While Mitre is pleased that 3,500 poor quality balls retailing for between 5 and 8 – about a third cheaper than the genuine item – have been taken off the market, the publicity surrounding the seizure can make consumers fear buying a Mitre World Cup ball in case it is fake.

A spokeswoman for Mitre says: “It’s a difficult problem, but we would much rather people knew what to look out for than be duped into buying fakes.”

John Anderson, executive secretary of the Anti-Counterfeiting Group (ACG), which counts Nike, Adidas, SmithKline Beecham and Glaxo Wellcome among its members, says manufacturers are not keen to publicise counterfeit scares.

“Pharmaceutical giants and car makers are reluctant to publicise the fact that one of their products is being counterfeited because it will mean the real thing will be damaged,” he says.

He says it is the middle management, trademark managers and brand securities managers who subscribe on behalf of their companies to the ACG and who “have to jump through hoops” to push any anti-counterfeiting campaign within their companies.

The ACG was set up in 1981 to lobby for tougher legislation against counterfeiters. The organisation and its members have their work cut out: the global counterfeit market is estimated to be up to ten per cent of world trade – about 200bn. In Britain, 2bn of legitimate sales are lost to counterfeit traders.

It is now lobbying the Government to make the knowing purchase of counterfeit products illegal, though Anderson admits this may be impractical.

The extent to which consumers are complicit in this illegal trade is highlighted in a new survey by intellectual property specialist CDR International. The survey – released exclusively to Marketing Week – finds that about a third of consumers don’t see anything wrong with counterfeit trading. This backs up an earlier Mori report which showed that 40 per cent of respondents would knowingly purchase a counterfeit product. Of that 40 per cent, 76 per cent would buy clothing or footwear, 43 per cent would buy watches and 38 per cent would buy perfumes.

But even though consumers may relish buying fake brand names on the cheap, the counterfeiter’s job is made easier by shoppers’ ignorance of branded logos. Nearly all respondents in the CDR survey showed no ability to distinguish between a genuine brand name or logo and an imitation.

Doctored versions of well-known brand logos were shown to 300 consumers, and the majority accepted the identities as genuine. Ninety-six per cent accepted the fake BT logo, 91 per cent accepted the Visa version and 89 per cent did not smell a rat with the Virgin adaptation.

The company also asked respondents if they had heard of “Royal Alliance Insurance” – 80 per cent said they had. Seventy per cent claimed to have heard of “Halifax & General” and “First Line Direct”.

Patrick Grayson, chairman of CDR, says the counterfeit business is growing as technology enables a better standard of fakes. “There is almost certainly more counterfeiting than before as modern production techniques have made it easier,” he says. Now it is possible to reproduce logos using personal computers, and the skills involved in stitching an emblem onto a polo shirt have got simpler.

And counterfeiters are being given an ever-growing choice of media through which to contact consumers. The rise of home-shopping through the Internet, catalogues and soon interactive television, gives counterfeiters the opportunity to capitalise on the consumers’ inability to distinguish between doctored company names and logos. Anderson says: “I suspect home shopping will be a major area of work in the next two years.

“There is ten or 20 times as much counterfeiting now compared with ten years ago. Partly it’s due to the rise of fashion brands, but other factors like the globalisation of the economy means, for example, that once the goods get into the EU they can move around freely within Europe,” he adds.

Many people assume that fake branded goods can only be bought from market stalls and illegal street traders. But according to Grayson much of the business is conducted from well-known high street retailers.

“Consumers believe it’s all back-of-a-lorry stuff, but we know it gets into high street stores. Sometimes the imitations are so good we have to go to the manufacturer to identify if the product is false or not.

“Some chain stores are alert to it, but with the enormous levels of buying by big stores, they can’t police it all the time,” he says. He declines to name any high street retailers which he has discovered selling counterfeit goods.

“We do test purchases on the high street and we come across what is apparently the genuine article and is not,” says Grayson.

Gordon Powell, deputy head of trading standards for the borough of Westminster in London, says: “We do find counterfeit products in shops. There were outlets on Carnaby Street selling counterfeit baseball caps. We have prosecuted them.”

The stores Chamskin and Oak Leaf Trading stocked fake Timberland, Calvin Klein and Nike-branded baseball caps and their owners were fined about 1,000.

Manufacturers can turn to local trading standards authorities when they see rip-off versions of their products, and they can go to the ACG for advice. They can also hire private investigators to track down supply chains of counterfeit goods.

Intellectual property advisers, such as CDR, are another option. They advise companies on how to protect their brands from counterfeiting and tampering. From a product’s conception they will advise on how to create a brand which is difficult to reproduce, making rivals a better target; they promote tamper-proof packaging and will police and prevent the imitation of a brand.

Grayson says CDR organises public burnings of fake merchandise it seizes for one of its clients in Moscow.

With big money to be made, and the involvement of sophisticated criminal gangs, brand owners are being forced to look more closely at their logos – and the products themselves – to see how they can cheat the fakers.

But with top brands charging premiums on the market of 30 per cent and more for their goods, it is little surprise that consumers are eager to take advantage of the cheaper products the fakers supply. In the end, it is poor quality products that will deter consumers from buying counterfeits. If the products turn out to be of comparable quality, consumers will wonder why they should pay extra for the real thing.

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