Fake Blackmores and Swisse supplements seized in major China crackdown on counterfeits

China's latest crackdown consisted of two operations, one of which resulted in the confiscation of counterfeit Blackmores and Swisse supplements, among other products.

According to Guangdong police, the investigation into fake supplements had taken place over the last two months, during which they exposed 22 suspects, all alleged members of four criminal groups.

Among the suspects in question, 12 have been charged, with further investigation ongoing.

The other operation saw approximately A$2m worth of Australian wine seized, including cases of Penfolds wine; the alleged criminal group responsible has since been shut down.

Profits from piracy

Guangdong police also revealed that the fraudulent retailers attracted sales using tag lines such as "overseas direct sales" ​for counterfeited Australian products, and "direct postage from overseas and franchise stores"​ for other products.

Some of these items were said to have generated around 1000% in profits, despite being purportedly sold as 50% cheaper than the real thing.

Can tech and traceability fight fakes?

Supplement firms may also turn to technology to protect themselves against counterfeiting activity.

Though Blackmores declined to comment in detail on the counterfeit products seized in China as the investigation is still ongoing, its secretary and corporate affairs director Cecile Cooper told NutraIngredients-Asia​: "​Blackmores is aware of media reports regarding raids on alleged counterfeit products in China.​

"We use a range of techniques to reduce the risk of counterfeiting. These include proprietary packaging materials and designs, as well as technologies that sit more in the background and assist us with supply chain traceability.​

"We currently use the China Association for Quality Inspection (CAQI) hologram on select products, and recently commenced a pilot of blockchain technology with Alibaba and Australia Post."​

Sarah Chibnall, Swisse's group director of communications, said, "We are very focused on ensuring that our brand integrity is maintained — we have a detailed programme of anti-counterfeit measures in our whole process, including using the latest security scanning technology, where consumers can use an app to scan our vitamin products.​

"We also work closely with the authorities, who are as keen as we are to prevent any counterfeit product getting to the market, such as in this case, where such products were stopped before they got on the market and to consumers."​

Alibaba Group subsidiary Taobao, a major e-commerce firm, has also been taking steps to tackle counterfeiting.

According to its Annual Report of Intellectual Property Protection 2017​, the group had assisted Chinese police in the arrest of over 1,600 counterfeit manufacturers and sellers.

Additionally, it had helped with the destruction of 1,300 counterfeit manufacturing sites, and shut down 240,000 web stores suspected of selling fakes.

Class, copyright and counterfeiting

This latest wave of counterfeiting in China occurred just as the country's growing middle class has caused a surge in demand for Australian foods and supplements.

We recently reported on the 'daigou ​phenomenon​', which continues to drive Australian supplement sales in China. The CMA estimates that the value of 'unofficial' exports from Australia to China to be A$800m, far beyond the official figure of A$320m.

It is believed, however, that many of these daigou​ shoppers sell counterfeit products, which also carry falsified documentation claiming they were purchased overseas.

The issue of registering and protecting intellectual property​ for foreign firms in China is a tricky one whose loopholes and blind spots have been repeatedly exploited by counterfeiters — any trademark, copyright, patent or even trade secret left unregistered with relevant Chinese agencies can be stolen.

Furthermore, if a company does not also register a suitable Chinese version of each of its product names as early as possible, trademark 'squatters' can jump in and register their own Chinese names for such products, allowing them to profit from selling fake products while the company suffers commercial losses.

A 2016 US Chamber of Commerce report, Measuring the Magnitude of Global Counterfeiting​, stated that China was the world's top producer and exporter of counterfeit goods. It estimated China was responsible for over 70% of global physical trade-related counterfeiting, generating profits upwards of A$3.8bn.