Fake Goods Driv Fake Economy

Its the simple adage where we need lies to cover lies and soon, we can;t even tell what is real or truth. This story from Yahoo by Erika Kinetz (Associated Press)

Multinational corporations doing business in China face a losing battle when it comes to keeping copies of their products off the market: The anti-counterfeiting industry they rely on is plagued with fraud, making it that much easier for potentially dangerous fake goods — from air bags to Christmas lights — to reach consumers, an Associated Press investigation has found.

Most Western companies subcontract anti-counterfeiting work to private investigators paid on commission. More seizures mean higher fees, creating powerful incentives to cheat in an industry with little oversight. As a result, money spent fighting counterfeiting often doesn’t make things better, and sometimes makes them worse.

The AP found instances of investigative fraud involving products that could be hazardous: counterfeit auto parts, pharmaceuticals, personal care products and electrical components.

The wrongdoing took many forms:

— Western firms paid investigators who were themselves manufacturing or selling counterfeit versions of their clients’ own goods.

— Investigators doctored documents, fabricating raids that never took place.

— Investigators colluded with factories to make counterfeit goods they could “seize” and present to their Western bosses for payment.

As counterfeiting has flourished in China over decades, a lucrative, parallel industry has blossomed to fight it. Counterfeiting today is a multibillion-dollar business in China, which produces nearly nine of every 10 fake items seized at U.S. borders.

All described a broken system, beset by endemic and underreported fraud, made worse by Western companies that have a poor command over how to successfully fight fraud.

One of the world’s largest consumer goods companies hired an investigator to track down counterfeit anti-dandruff shampoo. But instead of finding real counterfeiters, the investigator, Wang Yunming, set up a factory to produce counterfeit shampoo himself, which he then “seized” and billed to the firm as a successful raid, according to two employees involved in the investigation who spoke on condition of anonymity for fear of losing their jobs.

Swiss power technology giant ABB Asea Brown Boveri found that one of the investigators it was paying to hunt counterfeiters was herself selling fake ABB circuit breakers. ABB sued the firm she worked for, the China United Intellectual Property Protection Center, which was one of China’s oldest and largest investigations companies. ABB lost its case in Beijing, despite the fact that the investigator, a woman who called herself Flaming Lee, was convicted of selling ABB counterfeits by a court in Dubai, where she lived.

ABB, a $40 billion company whose products range from simple switches to sophisticated industrial robotics, declined to comment. But in court filings, the company said it was astounded to learn that its exclusive brand protection agent in China had itself “directly participated in infringing acts against the ABB trademark.” They accused China United of protecting a factory that produced ABB fakes and of engineering its work to maximize billing, rather than truly solve ABB’s multimillion-dollar counterfeiting problem. In one case, ABB said it ended up paying China United $5,000 for a raid that uncovered $1 worth of fakes.

Read the full article here

[dealy +215 days]

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