*NEWS*THAILAND’s COUNTERFEIT PIPELINE

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Thailand’s counterfeit pipeline
Porous borders, government inaction allow bogus goods to travel the world
ARANYAPRATHET,
Thailand — If not for the deep-fried scorpions on the dusty food
court’s menu, you might think you were at Easton Town Center.The
sprawling, open-air Rong Kluea market has all of the familiar clothing
brands found at any top-flight U.S. mall: Abercrombie & Fitch,
Aeropostale, American Eagle, Gap, Hollister, J.Crew, Justice,
Victoria’s Secret Pink and more.But take a good look, because what you
see is rarely what you get in this backwater bazaar along Thailand’s
border with Cambodia.Over there, twisting on a hanger in a shop with
folding tables on a dirt floor, is a green Abercrombie hoodie. From a
distance, it’s unremarkable. But up close, it’s clear the garment has
no sewn-in labels and is finished with a Puma-brand zipper.”In this
whole market, there’s nothing legal,” says a woman hawking rack upon
rack of questionable Abercrombie & Fitch merchandise. As if to
prove the point, she’s wearing a baggy Gap T-shirt, an obvious no-no
for a real Abercrombie salesperson.

To lend an air of
authenticity to her wares, she keeps a loose-leaf binder with color
images printed from the Abercrombie Web site. They look good. Through
an interpreter, she says her merchandise is the real thing, stolen from
authorized Abercrombie factories in Cambodia.She could be telling the
truth, but none of these customers — a combination of Asians and
Western tourists — seems to know, or care.What’s undeniable is that
Thailand is awash in counterfeit goods, the production and sale of
which cost legitimate companies $600 billion a year in lost
sales.Experts consider Thailand, a country of 65 million, to be the
primary staging point for counterfeit goods produced in China, where up
to 90 percent of the world’s knockoffs are made. Organized gangs with
financial ties to Hong Kong and Taiwan are behind much of Asia’s trade
in fakes.Before communist China opened its borders to extensive trade
with the outside world, Thailand was a regional center in the
production of counterfeit goods, especially clothing. But
counterfeiters are subject to the same market forces that draw
legitimate manufacturers to China — low wages, a huge work force and
undervalued currency.With a central location and modern ports and
airports, Thailand remains an ideal transit hub for black-market goods.
It also helps that Thailand shares borders with countries that don’t
place a premium on intellectual property rights: Cambodia, Laos,
Malaysia and Myanmar, formerly Burma.

Observers said that
officials in Thailand’s military-led government are looking the other
way.”Stopping counterfeiting is a difficult proposition in any case,
but adding in corruption makes some producers virtually untouchable,”
said a Western diplomatic source in Thailand who asked not to be named
for fear of political retribution.Rong Kluea and similar markets in the
capital, Bangkok, cater to tourists and middlemen from Europe, Asia,
North America and elsewhere. What’s not purchased in Thailand is
shipped to distributors in third countries or sold piecemeal to
consumers over the Internet.Abercrombie & Fitch, which has no
stores in Asia and only one in Europe, is blatantly knocked off here.
The New Albany company, whose brands include Hollister and Ruehl, says
eight of the top 10 resellers of its goods on eBay are likely based in
Thailand, peddling fakes made in China.Thailand’s central role in the
fakes trade earned it a place of dishonor on the U.S. government’s 2007
survey of intellectual property-rights violators worldwide. After 14
years off the list, Thailand was labeled one of the world’s worst
offenders last spring, joining perennial pirates China and Russia, and
nine other nations.”We agree that we have a problem with intellectual
property; if you walk the streets, you can see it,” said Woranuj
Maneerungsee, a reporter with the Bangkok Post. Her newspaper
editorialized last spring that Thailand deserved its ranking and needed
to clean up the counterfeit markets.In Thailand’s huge open-air
markets, knockoffs aren’t even being swept under the rug, let alone
cleaned up.Rong Kluea rivals a state fair in scale, with hundreds of
vendors in semi-permanent stalls hawking clothes and household goods.
Farm animals and wooden pushcarts add ambience and serve as the primary
means for moving illicit goods in and out.There’s little pretense or
effort to create the illusion of legitimacy. In one vendor’s pushcart,
phony Rolex and Omega watches compete for space with dried mushrooms
and Thai spices.Ever wonder where a knockoff Burberry purse might come
from? Quite possibly this market, in stalls with tarps for walls, where
children eat lunch off mats on the ground while women sew copies of the
designer brand’s distinctive plaid fabric onto generic Chinese-made
bags.Prices are less than a fourth of what legitimate designer goods
would cost in the States. Tour buses from all over Thailand and
Cambodia — adorned with unlicensed Disney characters Mickey, Donald
and Piglet — ply the dusty parking lots on both sides of the border,
unloading eager bargain hunters.There’s no sign of Jiminy Cricket. He
could be among the bucketfuls of insects and small reptiles destined
for the food court’s deep fryer.

Dangerous products
Counterfeiting
does more than rob companies of sales and support organized crime,
child labor and terrorism.Knockoffs also can damage brand images and
hurt consumers.Fakes sold as real products frequently are made from
outdated, dangerous, leftover or stolen components that convey just
enough legitimacy to fool unwary — or indifferent — consumers.And
while it’s one thing for a pair of fake Nike shoes to fall apart
prematurely, the stakes are much higher when products can harm
consumers.”It’s a real problem when you’re talking about safety,” said
Robert Crane, lead enforcement specialist of anti-counterfeiting
operations for Underwriters Laboratories Inc. in Chapel Hill, N.C.”You
can be electrocuted or your house can burn down,” he said. “You can
die.”Underwriters Laboratories, a nonprofit testing service known by
its UL mark on a variety of electrical products, maintains a force of
1,800 inspectors who do nothing but monitor factories around the
world.Their weapon of choice is a high-tech tag, and all Chinese-made
lighting products sold in the United States, including extension cords
and holiday light strands, must have one affixed to the product
itself.The tags are made in one secure U.S. location, display a
hologram and have other internal security features, said Brian Monks,
UL’s vice president of anti-counterfeiting operations.Even so,
counterfeiters slap phony UL labels on electrical products made with
insufficient amounts of copper. Fake circuit breakers look like the
real thing but may not trip when overloaded. All of these products can
and have burst into flames, Crane said.While consumers may not be able
to tell a real label or product from a fake, he said, be wary of:
• Any product that mentions UL on the carton or product but gives no company name or address.
• Any product with UL on the packaging but not the product itself.
• Shoddy workmanship or cheap packaging.
• Any electrical product significantly marked down and sold by street vendors or at flea markets and deep discount stores.

Counterfeiters
also knock off millions of batteries in China for export around the
world, said Donna Frazier Schmitt, senior trademark counsel for
Energizer, based in St. Louis.They frequently contain high levels of
mercury, and many don’t have the built-in ventilation that keeps
branded batteries from overheating or exploding, she said.The logo on
Energizer’s popular Eveready brand is a black cat jumping through a 9.
The company has been fighting a Chinese imitator using the Everpower
name. Its batteries feature a skinny black jaguar jumping through an
8.A busy consumer might not notice the difference.Most Everpowers are
sold in Asia and the Middle East, but some reach the United States
every year.”It can be really hard to tell a real from a fake, but we
pursue counterfeits wherever we find them,” Frazier Schmitt said.
“Consumers can be disappointed with counterfeits, and that translates
to disappointment with our brand.”

Wild West of fakes
Rusty
Lerner is one of Southeast Asia’s top private eyes and an expert on
counterfeiting. The former Houston resident, who has an Asian studies
degree from Yale, has lived in Bangkok for 18 years. Today, he runs
Quantico Ltd., one of the largest private investigation shops in the
region.With 35 employees, his business is booming.”China has taken over
most of the manufacturing (of legitimate and illicit goods) because the
labor there is just so cheap,” he said.While Cambodia, Laos and Myanmar
have plenty of factories, those countries increasingly serve as
conduits for Chinese-made goods pouring into Thailand.Ray Tai, a Hong
Kong-based lawyer responsible for policing adidas brands in Asia, can
attest to the recent change. “They all have their counterfeit goods,
but in the past couple of years, the Chinese counterfeiting machine has
basically wiped them off the map.”Lax border controls and little or no
enforcement of intellectual property rights by Thailand’s neighbors
ensure a steady supply of goods. Lerner says dozens of rural villages
make their living from the counterfeit trade.

Quantico advises
companies with factories in the region on “supply-chain management.” It
involves knowing who makes your product, their suppliers and anyone
involved in distribution. Mattel’s recent problems with lead paint on
Chinese-made toys underscored the need for strict controls of supply
chains.In addition to apparel, Quantico tracks fake food products, cell
phones, printer components and auto parts.Criminals
throughout Asia fool consumers by filling used Ink cartridges with
generic ink and putting them in Hewlett-Packard boxes.”The profit
margin on ink cartridges is better than heroin,” Lerner said.And
they’re a safer bet for criminals. Counterfeiters in Thailand, China
and other parts of Asia rarely get jail time.”The penalty is often
death for narcotics, whereas if you’re a counterfeiter, people say,
‘OK, you’re just a businessman,’ ” said Daniel C.K. Chow, an Ohio State
University law professor and a counterfeiting expert. The lack of
enforcement is the main reason the trade flourishes as never before, he
said.In an effort to boost tourism, Thailand has liberalized visa
procedures, allowing foreign nationals from 154 countries to easily
enter the country without a visa or to obtain one on arrival.

People
certainly come and go with ease along the Thai-Cambodian border, and
they know how to work the system.”It’s like a flow of ants,” Lerner
says. “People cross the border all day with two fake cell phones at a
time. Two phones are considered personal use.”For those who want to
minimize trips, it’s not hard to slip through holes in the border
fence. Conveniently, border guards patrol the area just twice a
day.”People know when that is,” he said, “and they just go back and
forth.”Lerner can make the drive from his office in Bangkok to the Rong
Kluea market in just over three hours. On one recent visit, he was
flagged down for speeding and solicited for a bribe by the police
officer. Lerner declined to pay. After some back and forth, he was
allowed to proceed without a ticket.”He didn’t want to do the
paperwork,” Lerner said.That attitude is typical of what Western
companies face in the fight to protect intellectual property in a
country where law enforcement can be sporadic and arbitrary.”We don’t
expect piracy to be wiped out overnight; however, we would like the
Thai government to have a plan for how to better protect intellectual
property and make a greater effort to enforce their laws,” the Western
diplomatic official said.

On the return trip from Rong Kluea to
Bangkok, Lerner pulled off the highway to see what two smiling boys
were cooking up in their pushcart: grilled field rat.”It tastes better
than chicken,” one said. Lerner politely passed.Not far from the boys,
in the middle of rice paddies and forests in Thailand, he happened upon
a little restaurant in the courtyard of a private home. On the other
side of a dirt road, two oxen lounged in a bog.A waitress approached,
wearing a Louis Vuitton fanny pack. Either tips are quite good in this
remote outpost, or it’s a fake.Abercrombie & Fitch, which has no
stores in Asia and only one in Europe, is blatantly knocked off in
Asia. The New Albany company, whose brands include Hollister and Ruehl,
says eight of the top 10 resellers of its goods on eBay are likely
based in Thailand, peddling fakes made in China.

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November 26, 2007 at 12:34 PM