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Fake Investigations of Fake Products Made in China



source: detroitnews.com

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 to reach consumers, an Associated Press 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 9 of every 10 fake items seized at U.S. 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.

Shanghai’s Public Security Bureau took the unusual step of warning foreign brand owners to “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.

One of the world’s largest consumer goods companies hired an investigator to track down counterfeit anti-dandruff shampoo. 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 who spoke on condition of anonymity.

It wasn’t the first such factory Wang founded. It was the fourth.

Wang was convicted of fraud and is due to be released from prison in 2023.