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Fake luxury goods rampant in Hong Kong despite clampdown

Fake luxury goods rampant in Hong Kong despite clampdown
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First Published: Mon, Jan 14 2008. 11 06 AM IST
Updated: Mon, Jan 14 2008. 11 06 AM IST
HONG KONG: The only evidence that fake designer goods are still for sale in one Hong Kong market are the tatty photographs of the must-have handbags de jour that are laid out on a rickety stall.
It is only when you ask about the pictures that a tout will lead you along a dingy Kowloon hallway, into a creaky elevator and up to an apartment where shelves are crammed with fake Chloes, Pradas and Louis Vuittons.
While law enforcement clampdowns on the border with China and in Hong Kong markets mean the sight of cartloads of designer fakes are a thing of the past, the illicit trade is still rampant, analysts say.
“It’s a war, not just an infringement situation,” said former senior Hong Kong police superintendent Steve Vickers, now head of Hong Kong-based corporate security firm International Risk.
Talking about the overall trade in counterfeit goods, from the relatively small accessories market to huge scams involving high-tech products such as cars and parts for planes, he praised the “credible prosecutions” of recent years.
But, he told AFP, the illegal trade remains endemic.
The International Anti-Counterfeiting Coalition (IACC), a group of brand-owning companies, said annual global trade in fake goods has risen to approximately $600 billion, from $5.5 billion in 1982.
That accounts for 5-7% of world trade, the group says, and China is the biggest transgressor.
“China remains top priority in addressing global product piracy and counterfeiting,” the IACC says on its website. “It continues to be the single biggest source of counterfeit products worldwide.”
This comes despite the authorities’ success in clamping down in Hong Kong, traditionally one of the centres of a trade driven in large part by organised crime.
Hong Kong customs and excise said they intercepted $35.7 million worth of fake watches, garments and leather goods crossing the border from mainland China in 2005 and 2006.
Last month, mainland customs officers said they smashed a watch-smuggling ring that had smuggled more than 35,000 fake brandname watches into the territory, worth around $27.4 million.
Dealers in counterfeit goods now face prison sentences of seven years and fines of up to HK$2 million.
But claims by a Hong Kong customs spokesman that counterfeiting has shrunk are greeted by the experts with skepticism.
“Top-end counterfeits have grown incredibly over the last five years. And they have improved in quality over this period,” said Scott Warren, managing director with corporate security specialists Kroll.
Warren said tougher street-level enforcement has, counter-intuitively, led to an improvement in the quality of the goods as obvious fakes have become more of a liability for hawkers.
And consumers, who buy the more affordable fakes to obtain the social and fashion status the brand names bring, are willing to pay more for the improved copies, he said.
Clandestine retailers are now selling fake handbags in Hong Kong at $150 or more each to knowing buyers.
“Sometimes the fakes are so good that even people in the company can’t tell the difference between them and the real thing,” said Warren.
While a large network of often well-funded crime syndicates in China are involved in the manufacture, smuggling and distribution of the fakes, the forgeries often start from within or very close to the company making the genuine products, said Vickers.
“Corrupt employees, ex-workers and untrustworthy distributors -- those are the people who do the most damage,” he said.
“Profits from the low end of the counterfeiting trade go to unscrupulous factory owners in China,” he said. But at the higher end, “the money goes to organised crime syndicates, both off-shore and in mainland China”.
Experts say the profits from the sale of counterfeit goods worldwide often fuel more pernicious criminal activities, such as drug manufacturing, money laundering, people trafficking and child labour.
The biggest barrier to stopping the production, distribution and sale of counterfeit products remains insatiable demand as well as the widespread perception that, unlike pirated pharmaceuticals and foodstuffs, knock-off luxury brand goods are a victimless crime and therefore fair game.
“People don’t really appreciate the work that goes into creating a product. It’s hard to make them understand the crime,” says Warren.
Warren added that while China has undoubtedly made progress towards taking on the counterfeiters, the huge developing country still has a long way to go.
And the criminals behind the scams seem undeterred, despite customs’ success.
“Profits far outweigh the penalties,” said Vickers.
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First Published: Mon, Jan 14 2008. 11 06 AM IST