Counterfeit culture

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LUCRATIVE BUSINESS: DVD’s, drugs, cosmetics, handbags and watches are some of a wide number of consumer goods that counterfeiters love to fake.

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The trade in fake goods in the region is now worth billions of dollars a year, with governments, law enforcement agencies and major companies battling to tackle a global problem. But can they ever succeed? Claire Ferris-Lay investigates.

Richard Partridge couldn't believe his luck. The London-based advertising executive had only been in Dubai for three hours, when his shopping spree started. "I got Paco Rabanne afershave for myself, Chanel perfume for my wife, and loads of Marlboro cigarettes. I don't even smoke, but at these prices I just had to buy," he says.

What Partrigde didn't know, and certainly didn't care about, is that in September last year Dubai Customs announced they had seized five million counterfeit tablets and expired food products from a warehouse belonging to Euro Gulf Trading in the Jebel Ali Free Zone.

The seizure wasn't unusual - every week millions of dollars worth of illicit goods are making their way around the world via a complex trading route. Counterfeit goods are not harmless; examinations have shown that they have a negative impact on the economy and the brands they fake.

And the trade is widespread. Arabian Business spoke to industry specialists in the cigarette, cosmetic, food and beverage and pharmaceutical trades who have all found their goods either smuggled into countries or counterfeited.

A recent report by KPMG shows that counterfeiters are not prejudiced about what is copied as long as a profit can be made. The study, Economic Impact Study Analysing Counterfeit Products in the United Arab Emirates, in association with Dubai's Brand Owners Protection Group (BPG), reveals that the value of fake goods in the UAE topped US$696m in 2006 with auto parts at the top of the list at 68.5%.

Counterfeit tobacco totalled 22.2%, while cosmetics reached 5.9%, food and beverage, 2.5%, household products, 0.6% and pharmaceuticals 0.2%. These goods won't be found in shopping centres and malls but can end up on the many street markets of the region. And it is there where they will find the most eager of buyers.

The report used only information given by members of the BPG, indicating that the problem could be much bigger. Omar Shteiwi, a regional intellectual property advisor and chairman of the group says it is impossible to know the extent of the problem.

The important issue is that we cannot know the true size of the problem because these are hidden activities and many of the products were imported from outside the country. It could be far bigger because the results are only limited to members of the BPG - the report doesn't even include information on the free zones," he explains.

While fake handbags and DVD's are considered "innocent" by many of the world's consumers, no counterfeit good is more alarming than the rising number of fake pharmaceuticals making their way into the marketplace.

The US-based Centre for Medicines in the Public Interest predicts that counterfeit drug sales will reach US$75bn globally in 2010 - up more than 90% from 2005. And in many cases these counterfeit drugs are fatal.

In 1999 at least 30 people in Cambodia died as a result of taking counterfeit anti-malerials prepared with an older less-effective antimalarial which were sold as Artesunate. In 1995 over 80 children in Haiti and 30 infants in India died after taking a paracetamol cough syrup containing a toxic chemical most commonly used in antifreeze products. These are not isolated cases.

"You can imagine the situation where the parent, who thinks their child has been protected from pneumococcal diseases, never finds out that in fact they were given a counterfeit that has no active ingredient," Robert Essner, CEO of Wyeth Pharmaceuticals tells Arabian Business.

Counterfeit cosmetics are also proving to be a growing market, and like medicine is a highly profitable trade with sometimes dangerous consequences. "It [the counterfeit cosmetic industry] is such a lucrative business because if you take any good brand and offer a product that looks the same but is cheaper then the product is good as cash.

One of the big problems today for us is with colour cosmetics because they are quite small, easy to move around and have a high ticket value per piece," says Robert Taylor-Hughes, managing director, Beiersdorf which represents brands such as Nivea.

One of the biggest problems is that both cosmetics and pharmaceuticals are being leaked into the marketplace without consumers realising they are fake. "People don't knowingly want to buy counterfeit cosmetics because ultimately they are applying it to the skin and the effects can be quite harmful.

The biggest issue with counterfeit cosmetics is microbiological contamination because they simply do not have the same high standard of manufacturing process or quality of raw materials that the branded companies use because these are factors which help keep the cost low," adds Taylor-Hughes.

The KPMG report reveals that the UAE does have a lower counterfeit trade than many other countries but that doesn't stop the products that do make it into the marketplace having a negative impact on the UAE economy.

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