Companies hired by western manufacturers produce their own counterfeits, present them as seized goods and collect big bounties, an investigation finds.
Multinational corporations doing business in China face a losing battle when it comes to keeping copies of their products off the market, with anti-counterfeiting investigators either collaborating with producers of the fake goods, or copying the goods themselves, according to a report.
The Associated Press said it had found that anti-counterfeiting investigators were widely involved in copying products of their own western customers so they could claim bounties for “seizing” them.
The 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 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 US borders.
One of the world’s largest consumer goods companies hired an investigator to track down counterfeit anti-dandruff shampoo in China, the AP said. 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.
Wang was convicted of fraud and is due to be released from prison in 2023, according to a copy of a judgment from Hefei intermediate people’s court in China’s Anhui province.
Chinese authorities have been getting better at fining counterfeiters and sending them to jail. But the momentum of reform has yet to reach the front lines of the fight against fakes, according to previously undisclosed material from legal cases and internal corporate investigations in China reviewed by the AP, lawsuits, and interviews with 16 private investigators, lawyers and law enforcement officials.
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.
Shanghai’s Public Security Bureau took the unusual step of warning foreign brand owners to be watchful of the investigators they hire. “We very much hope that brand owners will pay attention and devote more manpower and material resources to ensure that the fight against counterfeiting is healthy and orderly,” the bureau said in written response to questions from the AP.
With Associated Press