Attack of the clones

Attack of the clones

Joanna Sze

IMITATION may be the biggest form of flattery, but brand-owners are far

from amused.

A visit to the Kuala Lumpur headquarters of the Ministry of Domestic

Trade and Consumer Affairs reveals that just about anything can be

counterfeited. So long as a product has an established name, is popular

and fast moving, the copycats are fast on its trail.

`Counterfeit products are available widely and involves many consumer

items – garments, electrical items, pharmaceuticals, shoes, bags, leather

goods, branded watches, cigarettes, and detergents,’ says Abdullah Nawawi,

the ministry’s director-general of enforcement.

It’s difficult to quantify how widespread the market for imitation goods

is. In 2002, the total value of counterfeit products seized in raids

amounted to RM19.34 million. Besides optical discs, which made up the bulk

with a value of RM13 million, the top three counterfeit products seized

were apparels (RM587,349), leather goods (RM338,651) and electrical items

(RM308,180).

Although exact figures are unavailable, a big proportion of imitation

goods is believed to be manufactured abroad. `Many (imitation products)

have been found to be imported although there are some that were locally

assembled; many were of unknown country of origin,’ says Datuk Mustafa

Mansur, president of the Federation of Malaysian Manufacturers (FMM).

`In the beginning, we were very sure that imitation watches were either

imported from Taiwan or Thailand. Now, we believe China is a big player,

too. These “good” fakes will penetrate the country under the convincing

disguise of “parallel imports”,’ says a spokesperson for the KL & Selangor

Watch Trade Association (WTA). `Whether Malaysia is producing any of these

fake watches, we really do not know as there were not many cases of

successful raids to prove it.’

According to Abdullah, imitation products such as beer and garments are

brought in from neighbouring countries. Electrical goods and watches

usually come in parts and are assembled and affixed with `brands’ here.

Pharmaceuticals, liquor and detergents are mostly locally manufactured.

Manufacturers of imitation products specialise in counterfeiting a

specific product range, say, watches or garments. Their operation bases

are usually in shophouses, warehouses or fenced-up areas, usually small

and discreet enough to escape attention.

`It’s easy money, easy profit,’ says Abdullah. `Plundering is easy. When

you use someone else’s formula or ingredient mix, you do not incur as much

cost as the product-owner, who has to bear the research, promotional and

tax costs.’

`The level of watch imitations in the country is considered large scale

and very active; those traders selling imitations have been enjoying very

good sales and lucrative returns and it has been such since more than 10

years ago,’ says the WTA spokesperson. `There is really a lack of reliable

statistics for reference. However, we believe the sales turnover of a

small mobile unit or stall may not be lower than a traditional watch shop

occupying 300 sq ft or more of space.’

`The size of the imitation goods market is estimated to be 5% to 20% of

the sales turnover of genuine goods,’ says Cesarine Lim, brand manager of

FJ Benjamin Fashions (M) Sdn Bhd, which markets brands such as Guess?,

Gucci and Fendi.

Generally, roadside sales of imitation goods and the like are perceived

as harmless by many. In fact, some even seek out such products. After all,

there’s nothing like impressing your friends with your RM20 fake Rolex or

Louis Vitton handbag.

`Imitation goods only appeal to people who are generally bargain

hunters, and they will continue to be around,’ says Lim. `To date,

imitation goods have yet to pose any direct threat to our business as our

target customers are people who know our brand and appreciate the

authenticity of the product.’

The WTA spokesperson agrees. `Serious buyers of brand watches can easily

distinguish the difference and will not waste their money purchasing

them,’ he says. `Only non-serious consumers who will never invest in

branded watches in the first place may buy a fake just for the fun of it.

`Therefore, contrary to popular belief, imitation watches actually

affect the business of smaller watch shops selling non-branded watches

more than they do prestigious watch shops selling branded items,’ he adds.

`Due to this, most of the imitation-goods traders seldom aim their

business at the serious buyers. In other words, these traders usually do

not hide the fact that their products are fake.’

The manufacture and distribution of imitation goods, however, poses a

greater problem when counterfeit products are sold as originals.

`Technology developments have enabled high-quality copycats,’ says

Abdullah. `The watches look like originals, while the counterfeit liquor

tastes good; some say even better.’

`There is a very obvious difference between counterfeit and original

watches; however, you will need to compare the two side by side,’ says the

WTA spokesperson. `Those who have owned a branded watch before will be

able to notice that the quality of the fakes is far from good. However,

there are more and more very good fakes in the market.’

In January, for example, enforcement officers seized some RM100,000

worth of imitation goods from a factory sale at a high-end hotel. Flyers

distributed in the area claimed that the products were originals with

slight defects, and offered discounts up to 90%, `for a limited time

only’. Brands on sale included Mont Blanc, Gucci, Omega, Longines, Chanel,

Franck Muller, IWC, Tudor, Corum, Guess?, Fendi, Versace, Bvlgari, and

Christian Dior.

`Although we believe that serious consumers of branded watches will not

fall into the trap, there are two areas of concern to the watch industry

as a whole – the same watches sold in Petaling Street are being sold at 10

times the price or more here, and more and more tourists staying in the

hotels are beginning to fall prey to this trick, which is very bad for the

reputation of Malaysia as a holiday destination,’ says the WTA

spokesperson.

Even watch retailers fall prey to this scam. `The syndicate is selling

these “good” fake products to medium-sized watch shops that have failed to

be appointed authorised retailer of a particular brand or have been unable

to meet the requirements set by the brand-owners,’ he adds. `Some of the

traders could have believed that they were purchasing genuine watches at

very, very attractive prices.’

However, Abdullah points out that fake goods sales in hotels are

isolated cases. `So far in our records, there have been only two cases,’

he says. `Mostly, sales are conducted by authorised agents.’

He is also quick to point out that the issue of counterfeit products is

not out of control. `The situation in Malaysia is normal; it’s what you’d

find in many advanced countries.’ he says. `Though Malaysia may be known

for the manufacturing of pirated VCDs and CDs, it is not known as a haven

for counterfeit products.’

The ministry, though, is intent on combating this issue. `We take a

serious view of it; we’re concerned about copyright and counterfeit,’

Abdullah says. `If consumers support fake products, it will reduce the

profit of brand-owners and cause some disincentive for the investors. It’s

not good for the country, as we will lose investments in the long term,

and the Government loses revenue from sales and corporate tax.

Agrees Lim of FJ Benjamin. `While this does not have a direct threat to

the branded goods business for now, the long-term repercussion of the “get

imitation goods in Malaysia” is extremely damaging to the country’s

overall image and its ultimate objective in promoting tourism.’

The repercussions of the sale of imitation goods also reach the local

manufacturing industry. Manufacturers of genuine products are required to

undergo product testing and certification, meet international regulations

and standards, and invest time and resources to build up their brand.

`On the other hand, those manufacturing imitation goods and/or importing

lower quality goods are not subjected to rigorous testing and

certification for compliance with regulations and standards,’ Mustafa of

FMM says.

Some imitation electrical products even bear false SIRIM sticker labels.

`Consequently, imitation goods and/or low quality imports could be

marketed at comparatively lower costs than genuine products because of

lower overheads and investments. Manufacturers of genuine products are

therefore subjected to unfair competition.

`To aggravate matters, reports on product failures (mainly from

imitation goods) that make general references and are not thoroughly

investigated would also tarnish the image of similar but high- quality

locally manufactured products,’ he continues.

Some imitation goods are also downright dangerous, such as those with

medicinal properties. `For anything that is used on the body, such as

pharmaceuticals and food, we’re very serious. If possible, we will bring

to court and ask for the highest of fines,’ Abdullah says.

Individual offenders can be fined a maximum of RM100,000 and/or three

months jail, plus a compound of RM50,000, while corporations involved in

imitation goods face a maximum RM250,000 fine, plus a RM125,000 compound.

Product-owners are also encouraged to take civil action against offenders,

as compensation for damage claims could lead to the closure of the whole

factory involved, he adds.

To address the problem, the ministry has also set up a special task

force to combat counterfeit products, in collaboration with industry

players and government agencies. The task force has worked together with

brand-owners to investigate, raid and bring up for prosecution imitation-

goods manufacturers and distributors.

The ministry is also working with other agencies such as the Customs.

`The effort to combat and eradicate imitation goods is our purview,’ says

Abdullah. `However, the Customs is empowered to assist in acting on

counterfeit products. Often when the Customs take action, they would pass

over the case to the ministry for further action.’

The responsibility, though, lies on the brand-owners to provide specific

information on the shipment of the product and to provide samples of the

original product. `The Customs may not be well-versed with the product and

if they were to check each and every consignment, there would be

congestion and delay,’ Abdullah adds.

For the consumer, the general advice is to make one’s purchases from

reputable and authorised dealers. Many brands carry official product

descriptions and lists of authorised dealers on their websites.

`Most international brands are very selective in their appointment of

“authorised retailers”,’ says the WTA spokesperson. `These authorised

retailers are usually established watch retailers, and they will not risk

their reputation by selling imitation watches.’

Says Lim, `Consumers can be assured that discounted Guess? items during

FJ Benjamin sales are genuine products from Guess? USA.’

Consumer and distributor education is an ongoing process for the

ministry and brand owners, via flyers, seminars and exhibitions. Consumers

can also call a 24-hour hotline, 1800-886-800, to report counterfeit

products.

While the task seems uphill, the close partnership between the industry

and government has helped to curb the problem of imitation goods.

`Imitation goods are more of an imported problem,’ says Abdullah. `So far,

we’ve been able to control it.’

Copyright 2003

Provided by ProQuest Information and Learning Company. All rights Reserved.