 | | |  | Fakes!
The
global counterfeit business is out of control, targeting everything from computer chips to life-saving medicines. It's so bad that even China may need to crack down.
A
year and a half ago, Pfizer Inc. (NYSE:PFE
- News)
got a disturbing call on its customer hotline. A woman who had been taking its cholesterol-lowering drug Lipitor complained that a new bottle of tablets tasted bitter. She sent the suspicious pills to the company, which tested them at a lab in Groton, Conn. The white oblong tablets looked just like the real thing -- and even contained some of the active ingredient in Lipitor. But Pfizer soon determined that they were counterfeits. Over the next two months, distributors yanked some 16.5 million tablets from warehouses and pharmacy shelves nationwide.
An
isolated case? Hardly. Last October, Brazilian police got a tip-off about a hoard of bogus Hewlett-Packard Co. (NYSE:HPQ
- News)
inkjet cartridges and seized more than $1 million worth of goods. Chinese police last year conducted raids confiscating everything from counterfeit Buick windshields to phony Viagra. In Guam, the Secret Service in July uncovered a network selling bogus North Korean-made pharmaceuticals, cigarettes, and $100 bills. In June, French customs seized more than 11,000 fake parts for Nokia Corp. (NYSE:NOK
- News)
cell phones -- batteries, covers, and more. In January, U.S. Commerce Secretary Donald Evans blasted the Chinese on a visit to Beijing, demanding they step up efforts to police intellectual-property violations. Evans singled out the case of a General Motors Corp. (NYSE:GM
- News)
subsidiary that is suing Chinese carmaker Chery Automotive for ripping off the design of its Chevrolet Spark minicar. The uncanny resemblance between the two cars, said Evans, "defies innocent explanation."
Critical
Mass
Kiwi shoe polish, Callaway Golf (NYSE:ELY
- News)
clubs, Intel computer chips, Bosch power drills, BP (NYSE:BP
- News)
oil. Pick any product from any well-known brand, and chances are there's a counterfeit version of it out there. Of course, as anyone who has combed the back alleys of Hong Kong, Rio, or Moscow knows, fakes have been around for decades. Only the greenest rube would actually believe that the $20 Rolex watch on Silom Road in Bangkok or the $30 Louis Vuitton bag on New York's Canal Street is genuine.
But
counterfeiting has grown up -- and that's scaring the multinationals. "We've seen a massive increase in the last five years, and there is a risk it will spiral out of control," says Anthony Simon, marketing chief of Unilever Bestfoods. "It's no longer a cottage industry." The World Customs Organization estimates counterfeiting accounts for 5% to 7% of global merchandise trade, equivalent to lost sales of as much as $512 billion last year -- though experts say this is only a guess. Seizures of fakes by U.S. customs jumped by 46% last year as counterfeiters boosted exports to Western markets. Unilever Group says knockoffs of its shampoos, soaps, and teas are growing by 30% annually. The World Health Organization says up to 10% of medicines worldwide are counterfeited -- a deadly hazard that could be costing the pharmaceutical industry $46 billion a year. Bogus car parts add up to $12 billion worldwide. "Counterfeiting has gone from a local nuisance to a global threat," says Hanns Glatz, DaimlerChrysler's (NYSE:DCX
- News)
point man on intellectual property.
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