Sun | Sep 24, 2017

Who's investigating fake Chinese goods? Fake investigators

Published:Friday | December 11, 2015 | 12:00 AM
US Customs and Border Protection officer Jerome Bria, foreground, carries a cache of counterfeit designer bags found in a shipment at H&M Warehouse in Kearney, New Jersey. Counterfeiting today is a multibillion-dollar business in China, which produces nearly nine of every 10 fake items seized at US borders.

SHANGHAI (AP):

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 (AP) 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 US borders.

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.