Once it may have looked like a crime whose only victims were the manufacturers of overpriced designer clothing and label-conscious consumers greedy for bargains. But counterfeit goods can be a life-and-death matter, and nearly everyone stands to get burned. Two years ago the U.S. International Trade Commission estimated that distribution of product imitations cost U.S. companies between $6 billion and $8 billion a year and contributed to the loss of more than 130,000 American jobs. With counterfeit goods running the gamut from birth control pills to aircraft components, consumers’ safety is at stake as well as their cash. James L. Bikoff, 45, first became concerned with the problem while serving as vice-president and general counsel of Cartier jewelers in New York. In 1978, along with representatives of 11 other companies, he helped found the International Anticounterfeiting Coalition. Three years ago he left Cartier to become president of the coalition, which now has 315 members and lobbies for stronger legal sanctions worldwide. Bikoff, who lives in Marin County, Calif., discussed the bogus-goods problem with San Francisco Bureau Chief Nancy Faber.
What products are counterfeited?
Everything from Prince’s latest album to Caterpillar farm machinery, Vuitton luggage, Mazola corn oil, Apple computers, Bell Helicopter parts, Chateau Mouton Rothschild wine, Ford transmission parts—there isn’t an industry in the world that hasn’t been touched by counterfeiting. It has become a multimillion dollar business which in many cases has ties to organized crime. It has the same kind of financial rewards as narcotics smuggling, gambling and prostitution.
When did counterfeiting mushroom?
In the mid-1970s, when designer names became a craze—Vuitton luggage, Cartier watches, Gucci handbags. People wanted to have prestige symbols and the brands associated with success, but often they couldn’t afford them. So counterfeiters began to provide these prestige brands at bargain-basement prices. Then the idea spread to the industrial sector. The motive that leads a person to counterfeit a Cartier watch also leads him to counterfeit a Ford voltage regulator. The profit margin is sky high.
Have counterfeit industrial goods caused any serious accidents?
One person died in Napa, Calif. in a 1975 crash that was traced to counterfeit Bell Helicopter parts. In 1980 Kenya’s coffee crop was severely damaged by the use of a counterfeit Chevron fungicide that did not protect the plants from disease. In the same year there was evidence that counterfeit air-brake components had been installed in buses in England. Fortunately the bus company discovered the fakes before the vehicles were on the streets. Rockwell International, a prime NASA contractor, discovered suspected counterfeit transistors that were scheduled to be used during a test of NASA’s prototype space shuttle, the Enterprise, in 1976. There have also been fake parts made for the pumps used in open-heart surgery. And people have died from taking fake pharmaceutical drugs.
How did more than a million bogus Ovulen-21 birth control pills enter the marketplace last November?
We don’t know yet. There’s an ongoing investigation by G.D. Searle, Ovulen’s manufacturer, the FBI and the FDA. The fakes were called to the firm’s attention by druggists who noticed something wrong with the packaging. Searle checked it out, then sent a Mailgram to every pharmacist in the country warning of the fakes and voluntarily recalling pills with the same job-lot numbers that the counterfeiters had used. When their chemists tested the returns, they found 1.26 million of the dangerously low-potency fakes.
Are most of the counterfeit goods sold in America manufactured abroad?
Approximately 75 percent are manufactured outside the U.S., and 25 percent are either made in this country or made elsewhere and then labeled here. The principal counterfeiting countries are in Asia: Taiwan, Indonesia, Thailand, Singapore, the Philippines, Malaysia and South Korea. Fake automobile parts, watches, wearing apparel, dolls, toys, sneakers, books and computer software come from that part of the world. There’s plenty of cheap labor there, and the governments are pushing exports. There doesn’t seem to be much effort made by those governments to stop the copying.
How is the U.S. fighting counterfeiters?
Last year three important pieces of federal legislation were passed. The Trademark Counterfeiting Act makes faking a trademark a criminal violation. A first-time violator in this country can now get up to five years in prison and $250,000 in fines. A first-time corporate offender can be fined up to $1 million. Second, the Tariff and Trade Act gives us leverage we didn’t have before. If a developing country continues to export counterfeit products to the U.S., our government now has the power to reduce duty-free imports from that country. A third law provides legal protection against industrial copying for the U.S. semiconductor industry.
How do counterfeit goods get into the U.S. from abroad?
There are various tricks. A container of genuine trademarked toys might have fakes in the middle, or goods are smuggled in containers with false bottoms. Often wearing apparel will come through customs with no labels. That way there is no risk. The illegal labels are put on in this country, in major ports of entry like Miami, Los Angeles and New York. Other goods get in because the U.S. Customs Service does not have the money or the manpower to inspect every commercial shipment from abroad.
What are legitimate manufacturers doing to protect themselves?
Anticounterfeiting technology is big right now. Levi Strauss, for example, uses a light to scan the unique fiber pattern on its labels. The results, as individual as fingerprints, are recorded on a computer and samples are purchased from retailers to see if the products they are selling are authentic. Another protection device is a hologram, a three-dimensional picture now incorporated on credit cards to make them more difficult to counterfeit. A third system features a small piece of embossed silver plastic affixed to the product or its label. When the plastic is tilted to catch the light, it reveals a trademark or symbol to verify authenticity.
How can the consumer protect himself?
The principle of caveat emptor—let the buyer beware—is still the main guideline. You can’t assume anything. The rules are: buy from responsible merchants—and this includes many discount stores. Examine a product before buying. Are the buttons sewn on properly? Does the emblem look right? Is the inside finished? When you buy an audio- or videocassette, are the cover photography and the printing sharp? Is the company label clear? Of course, there is no way of protecting yourself against all counterfeits.
What should the buyer watch out for?
If the price seems too good to be true, it probably is counterfeit. If you are offered a Rolex watch for $60, beware, even if it looks good and feels as heavy as the real thing. In fakes, the movement may stop after two days. So look for price discrepancies. And check for warranties that are supposed to come in the packages. Good stores will refund money when confronted with phony items that have not worn well. If you do buy at a flea market or swap meet, get an invoice with the vendor’s name, address, phone number and an exact description of what you bought. If the sales slip says “one shirt” and you thought you were buying an Izod, then he might say he sold you a shirt but not a specific brand.
But even the most demanding consumer isn’t likely to be able to examine a brake lining. How extensive is that problem and what is being done to combat it?
It is impossible to know how widespread counterfeit automotive and airplane parts are because it is all done sub rosa. The problem is that the fake and genuine parts all look the same and it takes an expert to pick out the fakes. But legitimate manufacturers are waging wars against the counterfeiters every way they can: by having people put in jail, by trying to get more effective legislation and by educating their own distributors.