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May 2015 - Surelock
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Monthly Archives: May 2015

Jailed: Dudley Man Ran £250k Fake Clothing Racket

  • May 30, 2015
  • A man who ran a worldwide £250,000-a-year fake clothing racket from the garage of his home has been jailed for two years.

    Father of three Ian Guy ignored repeated warnings to halt the massive counterfeit trade by which goods were sold throughout the globe via the internet.

    The 38-year-old’s copy cat business Guy Tees cost major companies such as Porsche and Yamaha together with a host of top pop singers and bands over £500,000 in two years in potential losses by printing their copyrighted logos and images on T-shirts and hoodies, Wolverhampton Crown Court heard.

    guy1Sales of the fake goods on ebay between 2010 to 2012 topped £250,000, revealed Mr Mark Jackson, prosecuting, who said: “The operation was professional, well organised and extremely profitable, selling literally worldwide.”

    Guy started a small scale legitimate enterprise in 2005 but five years later was using state-of-the-art copying equipment in the garage of his home in John Corbett Drive, Stourbridge, to churn out vast amounts of counterfeit clothing.

    Solicitors for companies hit by the racket told him to stop in December 2011 and July of the following year but he carried on regardless while claiming child tax credit and never declaring his true earnings to the authorities, said Mr Jackson. But a tip-off triggered an investigation by Dudley Trading Standards culminating in a September 2012 raid on Guy’s home that revealed counterfeiting equipment, hundreds of blank T-shirts, dozens of goods packaged for dispatch and a sheaf of tell tale documents.

    Analysis of computer equipment disclosed 2,500 files of trademark images and details of over 300 T-shirts and hoodies together with links to the state of the art printers that copied the counterfeit images onto blank clothing.

    Mr Stephen Hamblett, defending, said: “This was not fraudulent from the outset. He saw what others were doing on eBay and ventured into it himself. He has brought ruin on his family. There are no winners in this case.”

    Guy admitted seven specimen charges including knowingly carrying on a business for the fraudulent production, sale and supply of counterfeit goods and their packaging.

    He was sent to prison by Judge Martin Walsh who told him: “This business undermined the integrity of legitimate commercial practice. It was significant in scale, displayed a high degree of professionalism but was run from your garage.”

    Guy was given six months to pay £130,000 agreed to be the benefit from his crime or face a further two years in jail and pay £18,500 costs to Dudley Council. He will have to sell or remortgage his house.

    Dudley Express and Star, May 29 2015,









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    by dave

Counterfeits Seized and Nine Arrested at Bourn Bank Holiday Market

  • May 26, 2015
  • Surelock, together with other trade mark representatives / members of the Anti-Counterfeiting Group, http://www.a-cg.org assisted Cambridgeshire County Council Trading Standards and Police in a major enforcement at Bourn Bank Holiday Market, where stall holders were observed selling counterfeit merchandise during the day, then vans were stopped and searched at the end of the day. Many thousands of pounds worth of counterfeits were seized and 9 men arrested.


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    by dave

Warning on Fake Make-up Tainted by Cyanide and Other Dangerous Chemicals

  • May 18, 2015
  • Surelock, on behalf of its clients, continues to assist the Police Intellectual Property Crime Unit (PIPCU) to remove counterfeit cosmetic products from sale

    • Dangerous levels of lead, mercury and cyanide found in the fake make-up
    • Bogus MAC, Benefit and Urban Decay products sold via eBay and Amazon
    • Buyers risk severe allergic reactions as well as long-term health problems
    • Officers suspended 5,500 sites for selling fake goods in past 18 months

    Fake make-up loaded with toxic chemicals is flooding into Britain, police warned last night.

    Counterfeit versions of leading brands such as MAC, Benefit and Urban Decay have been found with dangerous levels of lead, mercury and even cyanide.

    Criminal gangs are using squalid underground laboratories to make huge quantities of the bogus cosmetics, which are then sold through websites including eBay and Amazon.

    The gangs use squalid underground laboratories to make huge quantities of the products, which are then sold through websites including eBay and Amazon

    Buyers risk suffering severe allergic reactions as well as long-term health problems. Over the past 18 months investigators have suspended more than 5,500 websites for selling fake luxury goods.

    In one shipping container police found more than 4,700 counterfeit versions of MAC products including foundation, bronzer, lip gloss and eye shadow.

    Senior detectives at City of London Police are so alarmed they have issued a national alert.

    One victim was left fearing for her eyesight when she bought cosmetics from an online company she later discovered was based in China.

    Within minutes of applying the fake Urban Decay eye shadow Katie Brown from Cheshire found her eyelids had swollen and her eyesight became so blurry she feared she was going blind.

    ‘I realised it was fake as soon as I opened it,’ she said. ‘The package looked slightly different and the mirror was a bit wonky, like you might see in a fairground.’

    Customers are buying the fake products because they cost a fraction of the genuine article. But trading standards officers have discovered they contain high levels of lead, arsenic, mercury, copper and cadmium.

    The heavy metals have been linked to health problems ranging from allergic reactions and skin sensitivity to nerve disorders and even death.

    Excessive levels of lead can cause high blood pressure, fertility problems, memory and concentration problems and increased risk of harm to the foetus during pregnancy.

    The fraudsters are also producing sun cream, which looks exactly like the real thing but, shockingly, offers no protection against harmful UV rays.

    Detective Superintendent Maria Woodall, of the Police Intellectual Property Crime Unit, said: ‘Criminals are exploiting every opportunity to fool customers into buying counterfeits in order for them to make some quick cash – putting people’s health, homes and lives at risk.

    ‘Beauty products are meant to enhance your features, however, the fakes can in fact do quite the opposite.

    ‘Not only could these products have serious implications for your health and wellbeing but by simply going online and buying from a rogue site or dealer, your personal and financial information is at risk.’

    Made in China and Eastern Europe, the fake cosmetics are shipped into the UK in plain containers and packaged by illegal immigrants in sweatshops in the North East. They are typically sold online, on market stalls or in temporary high street shops selling household items at knock-down prices.

    As well as top cosmetic brands, other popular counterfeit items are Christian Dior face cream, Estee Lauder night cream and Dove soap and shower gel.

    Fake versions of cosmetics by MAC and Benefit have been found to contain up to 19 times the legal level of lead.

    In one shipping container police found more than 4,700 counterfeit versions of MAC products including foundation, bronzer, lip gloss and eye shadow. They are shoved into the boxes like this (pictured)

    Pregnant women and their unborn babies are particularly vulnerable to some of the dangerous chemicals, which include cancer-causing compounds. Dermatologists have reported a rise in the number of women with skin conditions triggered by use of the counterfeit cosmetics.

    Police, who have confiscated products worth £3.5million over the past 18 months, advise customers to check the spelling and grammar on websites and to identify where a seller is based.

    They said legitimate luxury brands are very rarely sold at heavily discounted prices, meaning ‘great deals’ are probably too good to be true. Officers also highlighted the dangers of buying other counterfeit goods, including electrical items such as hair curlers and straighteners.

    The fake cosmetics trade costs manufacturers more than £300million a year.

    Chris Greenwood, Crime Correspondent for the Daily Mail

    For the full article: http://www.dailymail.co.uk/news/article-3085665/Warning-fake-make-tainted-cyanide-dangerous-chemicals-Counterfeit-versions-leading-brands-cooked-criminals-squalid-underground-labs.html#ixzz3aTOZpH11

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    by dave

One Direction Merchandise Forger Ordered to Pay Back £140k

  • May 17, 2015
  • The successful prosecution of Gary Simpson followed investigative work carried out by Surelock.

    Gary Simpson made copies of bands including One Direction, Justin Bieber and JLS and made counterfeit prints onto clothing he then sold via eBay.

    A forger who sold thousands of items of fake One Direction merchandise has been ordered to pay the state his £140,000 ill-gotten gains.

    Gary Simpson worked as an amateur football club kitman and used equipment intended for printing numbers on strips to turn out bogus boy band tops. Simpson, 56, of Walkden, had no licence to use popstars’ branding, but fans snapped up £16.99 items bearing crude copies of logos belonging to idols One Direction, Justin Bieber, JLS, The Wanted, Olly Murs and Westlife.

    Gary Simpson, left, and a One Direction hoody he produced


    A Manchester Crown Court proceeds of crime act hearing was told Simpson made just short of £140,000 from his illegal sideline. He has now been ordered to give up the profits after an investigation into his assets.

    They include his home, £50,000 equity in a property bought by his wife, the contents of his bank account, a Citroen Berlingo, his business equipment and a health insurance policy.

    He made the kit on equipment intended for printing names and numbers on football strips


    He made the kit on equipment intended for printing names and numbers on football strips

    Judge Andrew Blake told him he must pay within six months – or face 27 months in jail.

    Last year Simpson was has given a 16-month sentence, suspended for two years, after admitting eleven trademark offences over two years.

    His sentencing hearing was told he was a ‘decent’ man who turned to counterfeiting as his legitimate industrial workwear business faltered and debts piled up.

    He was caught out after a representative of the firm which owns JLS’s copyright made a test purchase from Simpson’s eBay page, and found the hoodie he received was counterfeit and poor quality.

    Salford trading standards started an investigation, leading to a raid in February on Simpson’s address at Fairfield Road, Walkden and his Worsley warehouse.

    He made the kit on equipment intended for printing names and numbers on football strips
    Some of the kit peddled by Mr Simpson


    During the search, Simpson admitted he printed the fakes at Swinton’s Moorside Rangers.

    Nicholas Courtney, prosecuting, said: “He admitted he had been using equipment at the football club to apply bands’ logos to clothing. He would find the relevant logos on the internet and download them as templates, and send them to the cutting machine at the football club.

    “The counterfeit goods part of the business had been extremely busy – £15,000 in the three months prior to Christmas. Blank hooded tops cost £5.70 plus VAT, and he was able to use the club’s facilities rent-free as he worked there as a volunteer assisting with the kit, so overheads were very limited, selling 25 garments a day. It seems clear, on any basis, the defendant was doing a substantial trade.”

    Manchester Evening News








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    by dave

Social Media Advertising Warning from Trading Standards

  • May 16, 2015
  • Once again people who are using social media to advertise their businesses are being urged to do it legally after Trading Standards in Swansea has achieved another successful Prosecution.

    The call follows a latest court case at West Glamorgan Magistrates Court in which a Swansea man received significant fines for advertising services which he was not entitled to offer.

    The offences related to a credit brokerage and debt advice business operated by David Sean Govier from Loughor, Swansea.

    Mr Govier was advertising the company via the popular social media website Facebook as well as running his own website.


    The offences related to advertising services such as debt management, debt counselling and brokerage without authorisation from the Financial Conduct Authority.

    Mr Govier pleaded guilty to an offence under the Consumer Protection from Unfair Trading Regulations 2008 and two offences under the Consumer Credit Act 1974. The Magistrates imposed heavy fines totalling £3,850.

    Swansea Council Trading Standards has stated that anyone seeking to advertise a business in this way should seek proper guidance and advice from the relevant regulatory body before they do anything.

    Mark Child, Cabinet Member for Wellbeing and Healthy City, said: “Our Trading Standards Team is using social media more and more to look at businesses that are advertising services to see if they are doing it legally.

    Consumer Credit and Debt advice is a specialised service which because of it’s nature requires businesses to be fit and properly authorised to carry out those services in a professional manner.

    Written by Surrey Trading Standards


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    by dave

Counterfeit Merchandise Seized

  • May 15, 2015
  • Surelock, acting on behalf of TRAP http://www.trapworldwide.org , assisted Milton Keynes Trading Standards and local Police to carry out an enforcement at Boston Chimp / Air Raid Clothing, Unit 7 Centurion Court, Brick Close, Kiln Farm, Milton Keynes, MK11 3JB where numerous music artists’ counterfeit merchandise was seized.

     Blog Photo


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    by dave

Avoid and Report Internet Scams and Phishing

  • May 14, 2015
  • Report misleading websites, emails, phone calls or text messages you think may be suspicious.

    Don’t give out private information (such as bank details or passwords), reply to text messages, download attachments or click on any links in emails if you’re not sure they’re genuine.

    Misleading websites

    Some websites can look like they’re part of an official government service or that they provide more help than they actually do.

    This might mean you pay for services that you could get cheaper or for free if you used the official government service, eg renewing a passport.

    Search on GOV.UK to find official government services – eg if you want to apply for a driving licence or a European Health Insurance Card (EHIC).

    Contact Action Fraud to report misleading websites. You must include:

    • the website address or URL
    • how you found the website
    • why you thought it was an official government website

    You can report misleading adverts on Google if you’ve clicked on a URL that appears above the normal search results.

    HMRC phishing emails and tax scams

    HM Revenue and Customs (HMRC) will never use texts or emails to:

    • tell you about a tax rebate or penalty
    • ask for personal or payment information

    Forward any suspicious emails to phishing@hmrc.gsi.gov.uk or check HMRC’s guidance on recognising scams if you’re not sure.

    Report a disclosure of personal details to HMRC

    Contact HMRC at security.custcon@hmrc.gsi.gov.uk if you think you’ve given any personal information in reply to a suspicious email or text.

    Include brief details of what you disclosed (eg name, address, HMRC User ID, password) but don’t give your personal details in the email.

    Visas and immigration

    You’ll never be asked to pay for a visa using:

    • cash
    • money transfer

    Contact Action Fraud to report visa and immigration scams. You should include:

    • a copy of the suspicious email you received, the sender’s email address and the date and time it was received
    • details of what you sent in a reply, if you replied – eg whether you sent your bank details, address or password

    You can also report suspicious emails, letters or telephone calls to the police through Action Fraud.

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    by dave

The Golden Thread – Intelligence, Evidence-based Policy and IP Enforcement

  • May 12, 2015
  • In the past year the EU Observatory on IP Infringements has published two key studies on intellectual property and the way that it is generally perceived. The studies aim to provide much-needed independent evidence to help form a basis for a new narrative that will raise awareness about the global value of intellectual property.

    The first report provides compelling evidence about the vital role and contribution that IP-intensive industries make to economic performance and employment within the European Union (https://oami.europa.eu/ohimportal/en/web/observatory/ip-contribution). In brief, these industries directly account for 26% of employment in the European Union; in real terms, this means around 56 million jobs. A further 20 million jobs are generated in businesses that rely on IP-intensive industries. In total gross domestic product (GDP) terms, this corresponds to €4.7 trillion and 90% of trade with the rest of the world. Directly and indirectly, trademarks alone account for over 63.1 million EU jobs and a 34% share (the highest of all IP rights) of the €4.7 trillion GDP figure.

    The second report provides a complementary analysis and assessment of how European citizens view and understand intellectual property (https://oami.europa.eu/ohimportal/documents/11370/80606/IP+perception+study). It also reveals the relevant drivers of consumer behaviour in relation to IP-related products, from the physical goods that consumers buy every day to the services and content that they access online. As one might expect, the results reveal sometimes contradictory views. For example, 96% of Europeans believe that intellectual property is important because it supports innovation and creativity by rewarding inventors, creators and artists. What is more, over 86% agree that protecting intellectual property contributes to improvements in the overall quality of genuine products and services. However, the results also show that 10% of all Europeans admit to having engaged in IP infringements over the past 12 months and more than 33% tolerate this behaviour, feeling that breaking the rules can be justified if people have limited buying power or are protesting against economic models driven by a market economy and premium brands. Moreover, 26% of citizens between 15 and 24 years old report having downloaded or accessed copyright-protected content illegally over the last 12 months.

    The reports provide food for thought and give a clear indication of where legitimate business and policy makers might need to focus their attention. However, they also provide indisputable signals for counterfeiters. First, they confirm that IP-protected products continue to provide a valuable and constantly developing avenue for their insidious business models. Second, while consumers are now beginning to understand the true value of intellectual property, they still have an insatiable demand for counterfeits, regardless of how dangerous some of the fakes might turn out to be. As a reminder, in an updated report in 2009 the Organisation for Economic Cooperation and Development (OECD) estimated that the worldwide trade in counterfeit goods was probably worth up to $250 billion (www.oecd.org/industry/ind/44088872.pdf), and that the range of fake goods being produced crossed every conceivable product sector. The growing problem today is that while fake designer clothes, watches and accessories cost industry and the economy millions in lost revenue and jobs, the emergence of far more dangerous counterfeits – such as alcohol, food, medicines, chemicals, pesticides, perfume, cosmetics and body care products, plus fake power tools and household electrical appliances – is now endangering society as never before.

    Operation Pangea, an Interpol-led initiative involving 13 countries, resulted in the seizure of 9.6 million fake and illicit medicines worth over $32 million, including slimming pills, cancer medication, erectile dysfunction pills, cough and cold medication, anti-malarial pills, cholesterol medication and nutritional products (www.interpol.int/Crime-areas/Pharmaceutical-crime/Operations/Operation-Pangea) – a stark reminder of the scale of dangers that we now face and a clear warning to anyone reckless enough to consider buying medicines over the Internet. A further warning – a joint venture between Interpol and Europol, Operation OPSON III, led to the recovery of more than 131,000 litres of oil and vinegar, more than 80,000 biscuits and chocolate bars, 20 tons of spices and condiments, 186 tonnes of cereals, 45 tons of dairy products and 42 litres of honey (www.europol.europa.eu/content/thousands-tonnes-fake-food-and-drink-seized-interpol-europol-operation). Further, the most recent European Commission report on EU customs highlights that in 2013, almost 87,000 detention cases were registered across EU borders. This high number of detentions was caused by the rise in volume of small parcels in express and postal traffic. This is further proof of the ingenuity and development of counterfeiters’ business models, and that people are increasingly taking the risk of using the Internet to buy potentially dubious products from overseas. Worryingly, of the 36 million articles detained, products for daily use – such as body care articles, medicines, toys, electrical household goods – accounted for 25.2%.

    There is little doubt that counterfeiting is continuing to spread and cause damage around the world. Those engaged in IP crime are now highly organised in powerful international criminal syndicates which have the funding, resources and links to move massive shipments of goods quickly and effectively across the world in order to raise massive sums of money to fund other criminal activities. So we are not only in a battle to prevent counterfeiting from depriving creators and inventors of their just rewards and destroying brand trust, jobs and much-needed revenue to public finances; we are now engaged in a crusade to dismantle organised criminal networks from threatening the health and safety of consumers across the world.

    To help fight this pernicious form of criminality, strong legislation has been put in place across the European Union. This is often complemented by hard-hitting, practical measures taken by both public and private sector bodies at national and international levels. However, with resources stretched, enforcement is under pressure. As a result, despite many remarkable successes, as highlighted above, the volumes of counterfeit goods being discovered are still immense and ever more menacing.

    Despite open recognition of the problem and increasing attention paid by Europol, Interpol, the World Customs Organisation, the European Commission and national authorities, there are clear and growing challenges to effective enforcement. Many of these appear to relate to a lack of understanding and knowledge. For example, despite efforts by organisations such as the OECD, it is still not possible to calculate the true scope, scale and impact of the problem. This makes it extremely difficult to focus resources correctly or to influence political and sometimes institutional will in order to take decisive action. While there is continuing and growing pressure on enforcement authorities, again the lack of data does not help us to influence enforcement agendas and key decision makers. Diverse legal frameworks across the world also contain obstacles that affect practices used in enforcement and information exchange. In addition, the fact that penalties differ between jurisdictions has an effect on the courts and the mind-set of the general public in disparate ways. Finally, we can ill afford to ignore the apparent and unquenchable consumer demand for all types of infringing products.

    The Anti-Counterfeiting Group (ACG) was set up to help counter many of these problems (www.a-cg.org). Launched in 1980, the ACG is a not-for-profit trade association, recognised as a leading authority on the worldwide trade in fakes. The group represents the interests of over 140 UK and international companies which manufacture practically everything from toothpaste to mobile phones, from chocolate to car parts. Our membership provides a singular platform of experts, including lawyers, trademark agents, policy experts, enforcers and brand protection specialists. As a result, the ACG creates a unique environment in which anti-counterfeiting interests can flourish and collaborate.

    Through our lobbying, networking and awareness activities, and in partnership with government, law enforcement agencies and other rights organisations, the ACG campaigns against the trade in fakes on behalf of consumers and legitimate business interests.

    Recently, the ACG has also turned its attention to filling the gap on intelligence sharing, to help facilitate more effective enforcement cooperation on behalf of our members. Our intelligence coordinator provides a key link between our members and local and national enforcement authorities. By collating, analysing and developing tactical information and producing specific intelligence packs, he helps to drive more focused individual and joint operations throughout the United Kingdom. This “centred and evidential based approach” is a novel and effective driver in bringing together a range of experts to tackle counterfeiters on the ground.

    An example of the success that such an approach can bring is Operation WATCH, a two-pronged programme launched in December 2013 and involving 17 of our members collecting intelligence on the scope and scale of product counterfeiting on Facebook. This work was analysed by our intelligence coordinator, who identified around 30,000 individual listings and hundreds of traders as selling counterfeit goods on the platform. Following this, in an operation guided by the ACG intelligence coordinator, our members carried out administrative takedowns of traders on Facebook which resulted in 650 traders and 2,500 listings being subject to takedown action – this included the removal of infringing images and profiles.

    Phase 2 of Operation WATCH took place in June 2014. On this occasion 20 ACG member brands identified a top 20 trader list, some of which were offering for sale several thousand illicit and counterfeit articles and products, ranging from electrical goods to luxury products, clothing, footwear, perfume and fitness DVDs. All 20 were referred to national police and trading standards units for further investigation and a further 179 were subject to administrative takedown activities, with just over 3,000 individual listings and images being removed. In fact, 60% of the traders targeted in this action had their entire Facebook profiles closed down.

    Facebook was extremely supportive in this initiative, which was hailed as a significant success by enforcement, government and industry sectors.

    To sum up, the ACG exists to represent the voice of business in shaping an effective deterrent to counterfeiting in the United Kingdom. Through our continued participation in political and policy-level debates and our collaborations to help empower multi-agency partnerships and cement international relationships, we help our members and consumers to build safer communities for businesses to flourish. The group is determined to achieve this by helping to:

    • enhance understanding and awareness of the criminal, economic and public harm associated with counterfeiting;
    • create an environment to change opinions and stimulate greater respect for IP rights;
    • encourage more effective government action and the allocation of enforcement resources;
    • foster constructive relationships, collaboration and joint actions between business and law enforcement;
    • provide customised, multi-agency training for those engaged in combating counterfeiting; and
    • develop an inclusive response to counterfeiting by promoting and sharing information, intelligence, best practices, expertise and experiences.

    Our ultimate aim is to change society’s perception of counterfeiting as a harmless activity by exposing its worldwide economic and social harm. As explained, we already have over 140 members which are actively engaged. However, we need to ensure that all business sectors are represented. Only by joining together can we continue to ensure that we have a strong single voice to influence those who might still have some doubt about the growing threat of this dark and dangerous crime.

    By Alison Statham


    The Anti-Counterfeiting Group

    PO Box 578

    High Wycombe


    HP11 1YD

    United Kingdom

    Tel +44 1494 449165

    Fax +44 1494 465052

    Web www.a-cg.org

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    by dave

Oxford Street Raids

  • May 10, 2015
  • Surelock on behalf of its clients TRAP http://www.trapworldwide.org and working with Westminster City Council Trading Standards and the Immigration Service, carried out a series of raids on retail outlets in Oxford Street, central London, seizing hundreds of counterfeit music artists’ merchandise and other products.  One man was arrested and other prosecutions will follow.



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    by dave

Lessons From China’s Counterfeit Crackdown

  • May 8, 2015
  • Authenticity begins to trump price in the nation’s online marketplaces

    Beijing resident Wang Wenwen says she frequently trawled China’s online marketplaces for brand-name bargains, but grew tired of receiving obviously fake merchandise. The breaking point was a blue, floral-patterned dress she got for $32 that was advertised as a product of popular Chinese brand Five Plus. Not only wasn’t it a Five Plus dress, she says—no label to be found—it was made with “bad materials, unlike those claimed on the site.” Now Wang makes sure she can see and touch her clothes before she buys them.

    Photographer: Noel Celis/AFP via Getty Images


    Although China is well known as a paradise for consumers of cheap pirated goods—software, DVDs, clothing, makeup—that may soon change. At the same time that the government is taking a closer look at online counterfeits, shoppers are becoming more dissatisfied with the quality of their purchases. In April the State Council, China’s cabinet, announced what official news agency Xinhua called “a new round of crackdowns” against “Internet-based crimes” such as online piracy and fake goods. The wide-ranging campaign is said to cover everything from trademark violations and deceptive advertising to shoddy agricultural products and pharmaceuticals, with the government vowing that companies caught violating the rules “will be banned.”

    Product authenticity is the top concern for 91 percent of respondents surveyed in 15 cities by consultant RedTech Advisors, compared with 78 percent a year ago. The rising animus toward cheap fakes comes at an awkward time for China’s e-commerce leader, Alibaba. In January the State Administration for Industry and Commerce accused Alibaba’s primary marketplace, Taobao, of letting merchants sell fakes and infringe trademarks. Spokesman Bob Christie says Alibaba is working with Chinese agencies “to take the online fight against counterfeits offline,” including by conducting random checks. But about 8.5 million mostly local merchants sell products on Alibaba’s sites, so clearing them of knockoffs “is like trying to empty the ocean of water,” says Michael Clendenin, managing director at RedTech.

    91% of Chinese consumers say authenticity is the top factor in choosing a product

    Alibaba’s closest rival in online shopping, JD.com, has about 60,000 independent merchants on its marketplace. Unlike Alibaba, it generates 55 percent of revenue from direct sales of home electronics, appliances, and products such as iPhones, Coach bags, Ray-Ban sunglasses, and Reebok footwear. That makes knockoff products rarer, says spokesman Josh Gartner. “I don’t think anyone can say that it never happens, but we are very confident that we are ahead of the pack” in controlling the problem, he says.

    Jumei International, an online retailer in Beijing specializing in beauty products, may be taking the most extreme steps to win shoppers’ trust. Jumei built its business on both direct sales and commissions on merchants’ sales. Co-Chief Financial Officer Mona Meng Gao says it was difficult to guarantee that people buying from third parties would get what they paid for—cosmetics are relatively easy to fake. So in August the company deeply discounted products on its independent cosmetics marketplace, the source of 30 percent of its beauty business, and in September shuttered the marketplace entirely. Since then it’s shifted completely to direct sales of cosmetics from established brands such as L’Oréal and Max Factor. Jumei now also operates a lab that confirms brand-name products are legit and carry unique numeric codes that customers can cross-check on the brand’s website. “We have to go the extra mile with consumers,” Gao says, “to prove left, right, and center” that Jumei doesn’t sell fakes.

    The push for authenticity hurt Jumei’s sales at the end of 2014: Net income fell 44 percent, to $11.7 million, from the third to the fourth quarter. But the company estimates that sales in the first quarter of 2015 rose 45 percent to 50 percent, compared with the same period last year. Since Jan. 1, Jumei’s New York-listed shares have jumped 57 percent, valuing the company at $3.1 billion. Still, Gao says, it will take time to assure some skeptics that any Chinese site can be trusted to deliver authentic goods.

    Bruce Einhorn with Christina Larson







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