No more faking it

The Dubai-based Brand Owners Protections Group is taking the fight to counterfeit goodstraders operating in the UAE.

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By  Ronan Shields Published  December 31, 2006

The Brand Owners Protection Group (BPG) spearheads the fi ght against counterfeit goods trade in the UAE. Launched in May, the BPG has lobbied UAE lawmakers to implement new strategies to safeguard intellectual property rights (IPRs) and protect against copyright infringement.

Omar Shteiwi, the BPG’s regional intellectual property adviser, believes the UAE government’s partnership with the BPG vindicates its message on the adverse impact of counterfeit trade on the consumer electronics industry.

“The government is working with us after realising the impact counterfeit goods trade is having on various industry sectors, including the consumer electronics market,” he says. “The government is also acting on its legal obligation to implement international, regional and local law.

“The UAE government is taking a very methodical approach to tackling the problem and is in the process of putting together an anti-counterfeit team under the guise of the Ministry of Economy.”

However, Shteiwi also notes the relatively light penalties that exist for copyright infringement. He says the BPG is urging officials to come down harder on offenders.

“I believe the penalties are rather minimal considering the crime committed,” he says. “There is very little to deter offenders.

“The BPG is strongly urging the courts to impose the highest penalties available under law against counterfeiters, including imprisonment.

Shteiwi says the BPG has not detected the presence of counterfeit goods manufacturers in Dubai, but stresses that the emirate’s status as a major logistical centre makes it especially vulnerable to counterfeit goods imports.

“Dubai’s status as a global redistribution centre places heavy demands on the customs authority,” he says.

“The extraordinary rate of growth has made it difficult to keep track of all of the goods for re-export.

“It presents a huge challenge for customs officials. As far as the BPG is aware there is no counterfeit goods manufacturing occurring in Dubai so it’s safe to assume the amount of imports is a major contributing factor to the problem.

“The knock-on effect is that counterfeiters have relatively easy access to the Dubai market,” he adds.

Shteiwi considers the UAE government’s decision to intensify its efforts against counterfeit goods trade as recognition of the scale of the problem. He warns of the potential damage ongoing trade could have on the country’s reputation internationally.

“The government has also recognised this issue and its potential impact on economic growth,” he says.

“One potential result is that it could deter foreign investment in the UAE.“

Given the huge number of imports entering Dubai, customs officials are often reliant on vendors to provide them with tip-offs regarding the activities of counterfeit goods traders.

The BPG believes its campaign benefits brand owners by offering vendors the opportunity to coordinate their efforts in the fight against counterfeiters and uncover the true cost of counterfeit goods trade.

“It’s near impossible for customs officers to check every container passing through the region,” he says.

“This means brand owners have to brief customs officials on any illicit cargo passing through the ports.

“Ensuring the smooth passage of this information is key to the BPG’s activities. Many multinational companies conduct their own investigations into counterfeit goods trade in conjunction with local partners. One of our main tasks is to oversee these operations.

“If we are aware of a shipment of fake goods departing China – where many counterfeit goods are produced – we help intercept it as it enters Dubai by passing on this information to customs authorities.”

The BPG recently launched three cluster groups that will undertake research, along with consultancy fi rm KPMG, to assess the extent of the economic damage caused by counterfeit goods trade.

While the impact study is set for publication in the first quarter of 2007, the BPG currently estimates the financial cost of counterfeit trade to be in the tens-of-millions of dollars per year.

“It’s diffi cult to fully ascertain the financial impact of counterfeit goods trade,” says Shteiwi. “However, I am aware that in June 2006 alone the Dubai Customs Authority seized almost US$2 million worth of counterfeit consumer electronics goods.”

Dutch-based electronics giant Philips represents the interests of consumer electronics vendors within the group. Louis Hakim, CEO of Philips Electronics Middle East claims that the company’s BPG membership strengthens its position in the fight against counterfeit goods trade. “We are working to curb such trade as swiftly and permanently as possible,” he says .

Hakim says that entry-level consumer electronics goods are particularly vulnerable to counterfeiters.

“Philips regularly confronts issues in the entry-level product categories. Philips-branded counterfeit goods impact our hard earned reputation for quality and reliability in addition to our turnover and profi t,” he says.

Atsushi Hinoki, the general manager of Panasonic Marketing Middle East’s corporate communications department, says the Japanese consumer electronics giant’s strategy of pitching its business at the premium end of the market means it rarely encounters issues with counterfeit goods.

“In the past we did experience issues with fake products such as cassette players and electric irons, but I’ve generally found that the more highly specified the product, the less vulnerable it is to counterfeiters,” he says.

The BPG also warns consumer electronics vendors of the potentially devastating damage imitation goods can have on brand equity.

“Low-quality, and potentially dangerous, goods can destroy the reputation of a brand among consumers,” Shteiwi says. “Many consumers are unaware if a certain product is the genuine article, so when it fails they associate ‘brand X’ with poor quality.”

Shteiwi claims that raising awareness of the key issues among consumers is hugely important to combating the problem at a grass-roots level.

“Companies need to educate consumers about how best to detect fake products and raise awareness of the very real dangers these products often pose,” he says.

Leading mobile handset vendor Motorola is embracing this challenge, says Harout Radossian, the company’s product marketing manager for the Middle East and Africa.

“Our marketing campaigns aim to showcase to consumers the dangers posed by counterfeit goods,” he explains. “The company advises consumers about the correct markings on its products and how to verify the authenticity of a particular item.”

Radossian says Motorola also also works closely with the industry body The Bluetooth Association to tackle counterfeit mobile accessories trade.

“Motorola works closely with other bodies to specifically tackle this threat by raising customer awareness,” says Radossian. “If they [consumers] stop purchasing these products, then the problem will disappear.”

Shteiwi confirms that the BPG has identified mobile accessories as a major target of counterfeit goods manufacturers.

“Counterfeiters often study the market to identify which product categories are enjoying strong consumer demand. They often target mobile accessories because they do not have the technology to replicate more substantial products,” he explains.

“Mobile accessories are relatively low-spec compared to mobile phones,” Radossian confirms.

“It is also easier for counterfeiters to reproduce high quality branded packaging and that’s essentially what tricks consumers into believing they are purchasing a genuine product.”

Radossian also highlights the increasingly sophisticated manufacturing techniques employed by counterfeiters, and concedes that many vendors have difficulty distinguishing their own products from fakes.

“Sometimes our own technicians can’t tell the difference between original Motorola accessories and counterfeit goods solely from a visual inspection,” he says.

“As a result, we often have to strip down a product to ascertain whether it is genuine or not.”

Radossian also calls for greater cooperation between agencies to combat counterfeit goods trade, highlighting the benefits of previous initiatives.

“Earlier this decade, major handset vendors operating in the Middle East were suffering badly as a result of counterfeit mobile handset and accessories trade,” he says. “As a result, Motorola teamed up with both Nokia and Sony Ericsson to tackle the problem on an industry wide basis.

“This approach proved extremely effective as through our combined efforts, we were able to provide the police and Ministry of Economy with information pertaining to retailers trading in fake goods.

“This campaign resulted in several offending retailers being fined and shut down.”

Radossian says that counterfeit goods trade also diminishes vendor-profits by forcing them to continually invest in new product development.

Accessories manufacturer Belkin was forced to overhaul its product line after it detected imitation products in the marketplace.

“The company was made aware of imitation Belkin iPod FM tuners being sold by a number of retailers,” explains Stephen Hoare, senior product manager with Belkin. “As a result, we developed the IP Creations range of products and worked hard to ensure the technology we employed was far more difficult to replicate.

Our strategy is based on keeping one step ahead of the counterfeiters in terms of product design.”

Hoare says Belkin has also shifted its strategy from simple ‘box-pushing’ to taking a more service-oriented approach to the market. “We are working closely with our channel partners to ensure we provide our customers with high levels of service in a bid to further enhance the Belkin brand. This is key to combating the threat of counterfeit goods,” he says.

Shteiwi says that UAE authorities are ramping up their approach to tackling counterfeit goods trade, with the Ministry of Economy allocating additional resources to policing the Dubai market in particular.

The BPG believes that its efforts in the UAE will help insulate the emirate from the threat of counterfeit goods, benefiting vendors, consumers and retailers alike.

It is also encouraging channel players to redress their strategies to combat the problem, with improved customer service, competitive pricing strategies and fast product turnover at the top of the agenda.

These measures, combined with the increasing popularity of legitimate hypermarket and power retailers among local consumers, should result in a steep reduction in the level of counterfeit goods trade in Dubai.

"Counterfeiters often study the market to identify which product categories are enjoying strong consumer demand. They often target mobile accessories because they do not have the technology to replicate more substantial products." Omar Shteiwi

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