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Counterfeiting is linked to organised crime | South Africa | Norton Rose Fulbright

Counterfeiting is linked to organised crime

1 May 2011


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This article was first published by

Nagagula went on to explain that most people associate counterfeiting with clothing or dvds, but the practice extends far beyond those items to encompass batteries, electronics, computer software and even pharmaceutical products. International trade in counterfeit goods is estimated to be in the region of $200 billion, which amounts to two per cent of world trade, according to HP's Nathan Nayagar.

Nayagar says, ‘Counterfeiting has a negative effect on our brand. We spend millions of rands on brand awareness and we need to protect that brand. The consumer often assumes he is buying an original product and when it doesn't perform as he expects it to, it causes a negative perception of the HP brand.’ He explains the impact of counterfeiting in the South African context. ‘Intellectual property (IF) rights are linked to investment and the development and protection of IF goes hand in hand with economic development and activity. While IF attracts investment and promotes research and development, thereby driving economic growth, counterfeiting impacts directly on employment growth in developing and developed countries.

'In addition, IF rights, especially trademarks and copyright, promote consumer trust and HP has spent a large amount of money building brand awareness. When the consumer buys an HP product, they expect it to perform in a certain way and if it doesn't, this obviously impacts on the consumer's perception of the brand. Counterfeiting directly undermines the quality assurance and accountability that consumers associate with branded goods.

'‘Many people still view counterfeiting as a harmless activity. This is evidenced by how readily people accept and support informal vendors selling counterfeit products at intersections. However, they have no idea of the impact that this has on the economy and even other factors such as job losses. While some people argue that if genuine goods were cheaper, there would be no need for counterfeit goods, such arguments are blind to the serious economic harm caused.

The counterfeiting business has become an extremely lucrative industry, not only are counterfeiters becoming better at producing products that closely resemble the genuine item, but consumers are more ready than ever before to support counterfeit goods. In addition, sometimes consumers buy a product and think that it's genuine, and that is where real problem can come in. 'Education plays a key role in this whole process, we need to educate at all levels, our partners, our employee and our customers,’ says Nayagar.

The seriousness of the trade in counterfeit items is evidenced by the involvement of international crime agencies such as Interpol. An array of stakeholders has partnered Interpol in its fight against counterfeiting, particularly manufacturers in assorted industries that include pharmaceuticals, clothing, computer software and electronics, to name a few.

Counterfeiting is a global problem and South Africa is not exempt. The Department of Trade and Industry says that South Africa loses in the region of R2 billion annually in revenue as a result of counterfeiting. However, this doesn't reflect the exact figure or represent the full extent to which it affects our economy and our community at large.

‘We should try not to put too much emphasis on figures, according to Nagagula, who adds, 'Counterfeiting funds a whole lot of other activities that are more sinister than just counterfeiting.’

One of the main drivers of counterfeiting is consumer demand. Consumers need to be educated about the ills of counterfeiting and the impact it has. Nayagar points out that there is a big difference between remanufactured and refurbished cartridges and counterfeit products. The former are legal products. It is only when the refills or remanufactured products are misrepresented in the eyes of the customer that they become illegal.

‘We are trying to educate our customers in terms of how the packaging should look on an original product. We do have specialised packaging features such as codes and dates that enables our channel partners to differentiate, but it is difficult for customers to tell the difference.’

HP's Martin Stevens explains the difference between an original cartridge and a counterfeit product: ‘For one thing, the printing quality won't be the same and the user will see print variation from page to page. One should also bear in mind that the printer's warranty won't be honoured if a counterfeit product is used.’

The toner in an original cartridge is smooth and won't scratch the imaging drum. Thermal inkjet technology heats up the ink up to seven times the heat of the sun. Cheaper toner tends to burn and form a crust on the outside of the cartridge. We find that customers who have been duped into buying cheaper counterfeit products generally don't do it again. We need to protect that customer from making the first purchase!'

HP has an anti-counterfeiting programme that it drives with its channel partners and employees and customers whereby suspicions about counterfeit products can be reported confidentially via email, the web or even via post.

To address the issue of counterfeit printing supplies, HP actively fights the manufacturing and HP's Nathan Nayagar fraudulent sales of printing supplies on a worldwide basis. In order to protect HP Partners and consumers, and to defend their trust in the quality and value of Original HP print cartridges, as well as the HP brand as a whole, HP is running the HP Anti-counterfeit (ACF) Programme EMEA. This Programme successfully combines the forces of an in-house team of anti-counterfeit experts, business and legal personnel with external investigation agencies, ACF experts, product inspectors and lawyers. Through the ACF programme, HP actively educates its customers and partners to be vigilant against fake printing supplies. It also cooperates closely with local and global law enforcement to detect and dismantle illegal operations that produce counterfeit HP printing components.