Counterfeit Sting by Outlook

Every member in circle go through this, get enlightened and share ideas on how to fix this. This is dangerous for us and our families.

Up a narrow street in one of the shanty colonies in East Delhi, we are on the top floor of an unassuming, three-storey building. It’s a decent-sized hall, about 700 sq feet, the size of a compact 2BHK. Two people, both in their 30s, are stacking empty packets in neat piles on a large table. Nescafe 500 gm, one of the top coffee buys in the world. You still can’t smell the coffee…it’s empty, remember?

Well, figuratively speaking, you can. It’s a stiff concoction. Before Nescafe, they’d just finished stacking empty 200 gm packets of Tata Tea, India’s top tea brand. Besides, one can see bundles of several other big brands strewn around the hall: things you wash with (Surf Excel, Tide); things you put in your food (Maggie Masala, Tata Salt); things you put on your body (Sunsilk, Dove, Pantene). All empty…. The maal is elsewhere.

So what exactly is happening here? Well, this is a superbazaar of another kind, and we’re at a point high up on its invisible production chain. With a 10-colour rotogravure printing machine, these men are printing the packaging materials of over 100 top brands: processed food, dairy products, auto spare parts, what have you. It’s off the radar and totally illegal, of course. But you don’t even realise it when these labels quietly come out of the dark and join the well-lit racks of the real superbazaar.

Exercise Caution

“Except for four or five hours when we stop it to put on the printing rolls or cylinder, it works round the clock,” says one of them, about the machine’s workload. Reluctant to prolong the conversation, they get back to their jobs. The factory worker’s stoic face is back. Outlook got this sneak peek into the inner chambers of India’s vast counterfeit goods market with the help of a source who facilitates the sale of these packaging materials to wholesalers. The first nodal point in an ecosystem that runs parallel to the legal supply chain.

Nothing very fly-by-night here. The printing is so precise that it blurs the line between original and fake. The machine prints about 3 lakh pieces of wrappers of one brand in a day. “As far as I know, there are 30 such rotogravure machines—each worth between Rs 80 lakh to Rs 1.5 crore—operating in various parts of Delhi,” says the source. That’s almost 30 crore fakes with this kind of packaging entering the market in just a month. And that’s just from these shanty East Delhi hubs, where the majority of these printing machines are whirring away: places like Seelampur, Maujpur, Gokulpuri, Shahadra. The overall scale is near-unimaginable.

Just a mile or so away from that building, there’s another four-storey building where, in a one-room apartment, a couple of hands are busy printing thin cardboard-based packets of spices (MDH, Everest, Catch); top ghee brands (Mother Dairy, Amul, Milk Food); besides toothpaste, shaving creams, what not. This is an offset press that prints only thin card-type packaging material. (Outlook collected some samples—packets of Mother Dairy, Milk Food, Amul, Tata Tea, Tata Salt, MDH spices, Surf Excel, Tide—from the two sites.)

These packets and pouches go to wholesale dealers. Just these hubs in East Delhi supply over 70 per cent of wholesalers within a 400-500 km radius, say those engaged in the investigation and surveillance of product counterfeiting. That would mean Delhi NCR and other cities in UP, MP, Himachal, Haryana, Punjab. Sleuths claim the ambit of operations includes Bihar and Gujarat. Toss in the East, South, Bombay, and the mind boggles at the size. One estimate of India’s total counterfeit market is Rs 1 trillion.

It starts with these small packets in a grubby part of town. A wholesaler who deals in FMCG products buys smaller packets on a per kg rate and bigger packets on per piece rate. “One Nescafe 500 gm packet will cost about Rs 15,” says Suresh Sati, a private detective. Per kg rates of smaller packets range between Rs 350-600. Next step? There’s of course a natural interface with adulteration here: wholesalers stuff these packets with substandard stuff that resembles the original in look, feel or taste. These dubious goodies then travel down the chain to your local retailer—and then, if it’s a food product, down your gullet. Alimentary, dear Watson.

The dummies are often mixed up with originals at the delivery point to escape easy detection. “Let’s say one carton of Tata Tea will have 70 per cent fakes and 30 per cent original,” says Sati. Companies are often reluctant to go public with the fact that the bazaar could be awash with fakes of their brands, though it’s ubiquitous and affects all brands. Interviews with dozens of brand surveillance officials of top companies reveal an estimate: some 25 to 40 per cent products of every available brand is allegedly counterfeit. Tea consumption makes for an astounding Rs 1.8 lakh crore market in India, for instance—the branded segment within it is smaller, but still runs into thousands of crores, in which big brands command upwards of 20 per cent share.

The logic behind counterfeiting is simple enough. Branded turmeric power, say, costs about Rs 250 per kg, while you can score loose powder at Rs 90 per kg. It’s the same thing with tea. That’s why adulteration of branded spices and edible oil is very common across India. While India has banned unpacked spices, this food law is most commonly flouted in every weekly bazaar.

Food is where this gets most dangerous, but not singularly so. Think cement. Noida police recently busted four factories that were manufacturing fake cement: they would get the cement sacks of top brands like ACC, JK Cement etc from another unit, fill them with their own grey powder—and then, heave ho! To market, to market!

The span of fake branded goods takes in a wide variety—besides tea, salt, spices, ghee, paneer and the like, and toothpaste, shampoo, hair oil, conditioner, bathing soap, there’s mobile phones, computer hardware, apparel—and yes, liquor. And most dangerously, pharmaceuticals. Here, the story also gets entangled with a concerted attempt by foreign MNCs to run down India’s industry, so the trail is murkier (see ‘How About the Pill You Pop?’ p.43). The surveillance mechanism is often inadequate to deal with the sheer scale of it.

And the legal framework is a bit messy. The food safety departments of various states, for instance, are not concerned with fake branding per se—only with the food safety standards. Even so, they conduct raids in collaboration with companies, who keep their own investigations private. Several instances have been unearthed of poor quality products stuffed in branded packets. In August, Punjab food safety officials raided a shop in Ludhiana and seized packets of Tata Salt. A private detective firm that works for Tata Chemicals in Ludhiana said the packets were filled with locally available salt that’s used in the ice-cream industry. “The salt lacked in iodine and carried impurities. We traced the wholesaler to Barnala and got an FIR registered,” an officer from the firm said.

Sati, who runs the NGO Fake Free India with two partners, has collected a whole gamut of products—Colgate, Eno, Tata Tea, Boro Plus, Revlon, Vicks Vaporub, Iodex—from counterfeit manufacturers. Outlook surveyed various wholesale points in Delhi NCR and found a wide variety of products available at less than half, or even 30 per cent of the listed price. A wholesaler readily parted with a packet containing 12 pieces of Lakme lipstick for Rs 960. Actual MRP? Rs 5,000.

Who, What, Where?

Paradoxically, as India’s formal market matured in recent decades, counterfeiting too has increased manifold. And grown in sophistication. “If some product requires a particular tag, hologram or label, a separate set of people are engaged to produce that,” says Ajay Jasra, Sati’s partner. Different places act as hubs for different products. Tank Road in Delhi has earned the infamy of figuring among the world’s top 25 physical markets for counterfeiting in the Office of the US Trade Representative’s report, ‘2018 Out-of-Cycle Review of Notorious Markets’. It’s a den that churns out, along with the textile hub of Ludhiana in Punjab, fakes of top apparel brands like Adidas, Nike, PUMA, just to name a few. These travel down to those shopping hubs…in Delhi, count Palika Bazar, Sarojini Nagar Market, Gaffar Market, all those.

“It’s a complete network. One party will supply buttons and tags, another will make labels, a third provides packaging and so on,” says a police official in Karol Bagh, central Delhi. With fake liquor, scrap dealers become a part of the supply chain: used bottles come from them. For the NCR market, the bottle caps and excise stickers are made in Anand Parbat and Shastri Nagar, Delhi. The liquor itself is brewed in UP, Punjab and Haryana. Anand Parbat and Karol Bagh also figure big in the manufacture of duplicate auto spare parts, as do Noida and Hapur in UP and Dharuheda in Haryana. The supply lines run from the retail points at Kashmiri Gate and Mori Gate to right across the country.

E-commerce offers no immunity. Many reports point towards large-scale presence of counterfeits in onl­ine buying. The authorised attorneys of some top companies admit some 40-50 per cent products sold online via top e-commerce sites are fake. They declined to be quoted officially. Smuggling, especially from China, is another route for supply of counterfeits in India. Cameron Walker, a reg­ional brand protection manager with Beiersdorf, the German company that makes Nivea cream, admitted in a recent Delhi conclave that China is a major source of cheap cream in India.

Nayantara Demy, a Bangalore-based private detective who lodged an FIR on behalf of Nivea in Delhi’s Sadar Bazar police station in January 2019, says over 5,000 pieces of Nivea and Lakme products have been recovered—cream, foundation, eye make-up, lipstick et al. A tip of the iceberg, though, she admits.

“Earlier, it was more smuggled products. Today, major manufacturing takes place in Delhi and elsewhere,” Demy says, adding that FMCG counterfeiting happens in the South as well, but on a lower scale. “In Kerala, these counterfeit products are sold as Gulf imports.”

Partha Pratim Sanyal, a private detective in Calcutta, has conducted a dozen raids in the past few months as an authorised representative of top apparel and shoe brands. Outlook has accessed FIRs lodged by Sanyal in Delhi and Bengal. These documents suggest large-scale manufacturing of shirts and trousers of Allen Solly, Louis Philippe, COBB, Van Heusen; Relaxo and Sparx footwear; the popular Bajaj almond oil; and VIP bags in Calcutta. Says Sanyal: “In a raid in Delhi’s Rohini, we recovered 10 lakh pieces of the paper used for wrapping shoes inside the shoe box, besides shoes and packaging material. You can imagine the extent of counterfeiting.”

How Big is the Menace?

No government initiative has yet embarked on any attempt to make a comprehensive estimate of the market size of counterfeits. In 2011, industry body FICCI formed CASCADE (Committee Against Smuggling and Counterfeiting Activities Destroying the Economy) for such an endeavour. The latest CASCADE report, released on September 26, 2019, says the twin evils have caused a loss of Rs 1.17 lakh crore to the Indian economy in 2017-18 in five key industries—textiles, readymade garments, tobacco products, capital goods (machinery and parts), and consumer durables (electronics). Titled ‘Invisible Enemy: Impact of Smuggling on Indian Economy and Employment’, the report also estimates that about 16.36 lakh jobs were lost in these five sectors due to counterfeiting in 2017-18. Capital goods suffered the most, with a Rs 52,511 crore loss that rendered 6.12 lakh workers jobless. Consumer durables was next with Rs 21,452 crore losses.

In 2014, CASCADE had studied seven sectors: FMCG packaged and personal goods, automobiles, computer hardware, mobile phones, tobacco, alcohol, broadcasting and motion pictures. It estimated a 44.4 per cent leap in losses in just two years—from Rs 72,969 crore in 2011-12 to Rs 1,05,381 crore. The Automotive Component Manufacturing Association Of India (ACMA) estimates 35 per cent of auto parts in the market are fake. The Authentication Solution Providers’ Association, (formerly known as Hologram Manufacturers Association of India) claims a total loss of Rs 1 trillion due to counterfeiting in India.

On the food segment alone, sample surveys by state food safety departments compiled by the FSSAI offer a partial sense of the scale involved. In 2018-19, out of 85,172 samples collected from all over India, 22,441 (or 26.4 per cent) failed to conform to set standards. Still, it’s hazy. “We can’t say all those samples were fake products. Often genuine products fail for several reasons,” says a senior FSSAI official.

The food safety regulatory mechanism has its own challenges. An acute dearth of food safety inspectors has been a perennial problem. In Delhi, for instance, 34 such posts were created in the late ’70s. Not only has the number stayed static, most of these posts have been lying vacant for several years. Presently, only 22 food inspectors are there to serve a population of over 1.25 crore. UP, with its 20 crore-plus population, has only 750 food safety officers. Other states too don’t have much to cheer about.

Who are the Victims?

Both government and companies claim losses on account of counterfeits, but the biggest losers are consumers. Sandeep Kumar, a farmer from Yamunanagar, Haryana, bought Ferterra brand insecticides, but it proved spurious and destroyed his crop. “I’d bought it from a local shop. I have lodged an FIR,” Kumar says. A Congress leader from Kota, Rajasthan, Indermohan Singh, even lodged an FIR against Snapdeal for getting a counterfeit wristwatch delivered. “Police are investigating, but are yet to file a chargesheet,” Singh says. The online shopping site, in a press release, claimed to have removed over 8,000 sellers from its website.

Another question is, who will compensate a consumer if he/she buys a product that turns out to be fake? Consumer activists say the company should compensate the buyer. “Unfortu­nately, legal lacunae allow a manufacturer to get away saying the product is counterfeit and doesn’t belong to the company,” says Bejon Misra, a consumer activist. “But it’s the manufacturer who must ensure that I as a buyer get the promised quality.” Some activists even allege that, in many cases, companies themselves have stakes in the illegal supply chain. A consumer activist narrates an incident in which an online shopping portal announced a discount sale and a company overwhelmed by the unanticipated hike in demand had to approach a counterfeiter to meet the supplies! “They deliberately allow counterfeit manufacturing, because they grow big as a brand, but fail to meet the demand. They don’t want their consumer to go to other brands,” says another activist.

Not all companies. Some corporates hire private detectives or surveillance firms for field investigation. “It carries risks, so companies don’t utilise their own manpower and outsource it with a confidentiality clause that they would not reveal their brand name in case of counterfeit seizures, since that can create a negative image,” says a senior brand manager of a garment company. On record, all big brands maintain they have a ‘zero tolerance’ approach.

When Outlook sent pictures of counterfeit packaging material of Nescafe and Maggie Masala to Nestlé, its official spokesperson for India said, “We ensure that necessary civil and criminal actions are undertaken as part of enforcement mechanisms across all Nestlé markets.” Nestlé also initiated a consumer awareness campaign called ‘Har Peela Packet Maggi Nahin Hota’. “This was focused on informing people about the presence of fakes in the market, and also to help consumers distinguish between real and fake,” he added.

Sharad Singla, brand marketing director, Adidas, admits counterfeits “derail the complete value chain for consumers looking for quality and elevated functionality”. Adidas too has always endeavoured to educate consumers and guide them to authorised channels, he says. “We also have a robust legal team that works with the authorities to intercept fakes.”

Hindustan Uniliver Limited has adopted a “three-pronged strategy” to ensure on-ground actions against counterfeiters are effective, says its spokesperson—“a dedicated internal team of brand protection specialists as part of the legal function to prosecute and restrain counterfeiters from manufacturing and selling; effective advocacy to deal with this menace and creating awareness about the issue of counterfeits among stakeholders; promote an enabling regulatory regime.” It entails working with the government to constantly review laws and make appropriate representations seeking changes and modifications to aid in creating an effective enforcement environment.”

“Counterfeiting of agricultural products is one of the major reasons for farm distress. We are making all efforts to address the issue,” admitted Bakul Joshi, brand protection leader of Du Pont, which makes Ferterra insecticides, when presented with duplicate packaging material. The Mother Dairy spokesperson too made similar averments when presented with fake ghee packaging. Ghee is artificially made from palm oil, animal fats and chemicals.

And yet, the ecosystem thrives all over India—typically as a loose network of small players, says private detective Shivendra Pratap Singh, who provides product intelligence. In some cases, when a small-scale unit comes to the verge of failure, it imitates established brands to remain in the supply chain. “I remember we had cracked a case in Uttarakhand, in which a small bulb-making company, which had failed to clock profits, decided to produce bulbs for another small firm, which would put a top label on them,” he says. In a funny case, a group engaged in illegally printing packaging material from a small room in Delhi shifted the whole unit onto a truck so they wouldn’t be doubted. “We cracked that case and got them arrested,” Singh says.

Says Harminder Singh, another leading private investigator with vast experience in intellectual property rights (IPR), “As a rule of thumb, counterfeiters prefer to churn out those brands that dominate the market as it ensures higher profits and all­ows them to easily palm off the fakes, given the sheer volumes.” The website of his organisation, Intelligence Network Agency, contains pictures of hundreds of raids across the country. “Clandestine production at dispersed sites, near-perfect printing, mixing of fakes with originals…this is their scheme of deception,” he says. Enforcement action, he says, carries on at twin levels—through raids at source sites, “to nip the problem in the bud”, and raids on wholesalers and retailers, so that the “supply chain gets disrupted”.

What’s the Law?

This is a hazy trail with many alleys and byways. The basic law against counterfeiting is the Trademark Act, 1999, under which a company cannot manufacture products or offer services in the name of another company. Similarly, under the Copyright Act 1957, a company cannot imitate artistic work like the font style/design used by another company’s logo. These two laws only impose fines, though. However, in case they are infringed, the police also invoke sections of the IPC and CrPC relating to fraud, cheating, criminal conspiracy, forgery et al which enhance the fine and bring in imprisonment. In addition, for food products, the Food Safety and Standards Act 2006 (FSSA) also comes into the play. Unfortunately, it prescribes only a monetary fine for adulteration unless it causes injury to someone’s health—and often a violator is only tried under the Trademark Act.

There’s also multiplicity of authorities. In Delhi, the police take instructions from the Centre and the food department obeys the state government—so the lack of coordination seems starker. A raid in August in Prem Nagar area of West Delhi, where a large quantity of ghee of all top brands was recovered, the Delhi food safety department refused to accompany the Delhi Police saying they were short-staffed. The fact has been recorded in the FIR. The differences also, cur­iously, reflect in variable lab results.

Industry: Silent Victim?

The biggest problem, legal experts feel, is that companies lose interest once counterfeits are seized, and are reluctant to go for trial. Normally a raid is followed by an FIR and arrest, but, in a majority of cases, bail follows soon. “Once companies lose interest in pursuing the matter, the case gets diluted,” says Joseph Koshy of Joseph & Joseph law firm, an expert on IPR. The lax regime makes for a high rate of relapse into crime. “We have several instances where the same counterfeiter was caught multiple numbers of times,” Koshy adds. Also, IPR protection laws are themselves quite stringent, but courts apparently tend to treat violations lightly. “Even if the case is in my favour beyond doubt, the courts often send the matter for mediation, which defeats the whole purpose of the law. Especially since companies hesitate to pursue the case,” says a legal expert.

Companies don’t want to get embroiled in legal hassles: they feel litigation bleeds them as much as the loss counterfeiting itself causes. Also, they think if the news spread, it brings a bad name to the company. That’s why often when the police raid a unit on the complaint of a company and finds counterfeits of other companies too, it doesn’t file a case on behalf of other companies. “We inform them, but some of them don’t want to pursue the case, so the violator is tried only for counterfeiting one product,” says a police official. Many corporate representatives, in turn, allege that often cops ask for a bribe to carry out raids because “they think we are the golden goose”.

Industry has its own perspective and puts the onus back on government. Anil Rajput, who chairs CASCADE, blames high taxes for product counterfeiting: “It’s common knowledge that a moderate tax rate will disincentivise illicit trade.” Many industry leaders feel product counterfeiting should be treated on a par with other heinous crimes for which police take swift action and courts show promptness. Everyone knows places like Palika Bazar have counterfeits, says Akshay Sangwan, brand protection manager, Puma. “If as a brand I have to investigate, go to the police station, go through the entire process, it makes no sense,” he said at FICCI’s conclave on counterfeiting.

The degree of crime is actually heightened with fake food products. Experts say present penal provisions are no deterrent. The FSSAI needs urg­ent revision, says Sanjeev Kumar of Luthra & Luthra Partners Law Offi­ces. “Its technicalities must be simplified, video recording of raids must be mandated so as to minimise corruption/manipulation, and adulteration must bring on stringent punishment,” he adds. It’s public health, finally, that we are talking about.

***

What Companies Say

“Like all major consumer products companies, Colgate products are sometimes illegally counterfeited, so protecting consumers against counterfeits is paramount for us at Colgate. Any instance of counterfeit product is immediately investigated, followed by an action against the counterfeit manufacturer / distributor / retailer, as appropriate, with the help of law enforcement agencies. We also conduct training sessions regularly with various agencies and trade partners across the country to assist their anti-counterfeiting efforts and to aid them in recognizing counterfeit products. Colgate is committed to protecting consumers and ensuring that they can rely on Colgate products for safety and superior quality.”

Official Spokesperson, Colgate-Palmolive (India) Limited

“The sale of counterfeit products affects consumers. Their interests are paramount and we will continue to educate them about authorised channels and genuine Casio products.”

Satoshi Yamazaki, Casio Computer Co Ltd

“We regularly undertake quality checks of our products with the help of consumers, local authorities and our distribution network. Recently, we worked with the Telangana and Andhra police.”

Sunil Kataria, Godrej Consumer Prod Ltd

“We periodically collect samples from the market for testing. Wherever required, we investigate in partnership with the government to address an issue and prevent its recurrence.”

Spokesperson, Tata Global Beverages
***

Counterfeit Sector-Wise Status

30% FMCG
35% Auto
60-70% Nutraceutical
60-70% Fertilisers/Pesticides
25-30% Liquor
25-30% Apparel and footwear
3% (govt), 10-30% (others) Pharmaceuticals
***

Cost Of Cut Price

Losses to five sectors of the Indian economy due to counterfeiting and smuggling

Textiles Industry Rs 12,636cr
Readymade Garments Industry Rs 14,516cr
Tobacco Products (Cigarettes) Rs 16,138cr
Consumer (Electronics) Durables Industry Rs 21,452cr
Capital Goods (Machinery & Parts) Industry Rs 52,511cr
Losses To Livelihood Opportunity

6.12 Capital Goods (Machinery & Parts) Industry
3.44 Readymade Garments Industry
3.34 Tobacco Products (Cigarettes)
2.21 Textiles Industry
1.25 Consumer (Electronics) Durables Industry
Data as on 2017-18 in lakh Source for both tables: FICCI more  

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View all 35 comments Below 35 comments
Hats off to Vinita Agarwal for this valuable Post. No doubt lengthy, justifiable otherwise the magnitude of the effect that this type of FAKE PRODUCTS are having on every Indian Citizen would become difficult to imagine, I really mean the word Imagine.
And I also salute the Team of Fake Free India, most particularly Sri.Suresh Sati for this wonderful contribution to the welfare of the Society.
well in my opinion the work done here by Vinita Agarwal is worth its praise and also the work being done by Fake Free India is commendable, we as citizens can contribute in with Fake Free India if not by becoming a part of it but by spreading the word about the facts about the word Fake, I was of the view and opinion that there were people involved with only making Fake Degrees and creating fake doctors and now I have got to know about the scale of Fake Products being sold in the market.
And another fact that was placed before us in this article is about how the companies whose products are duplicated/faked shy away from pursuing the matters leaglly as mentioned by Joseph and Joseph. This part on the Companies is very shameful and shows their scant interest in the well being of the society which in facts gives them the reason to be in the market. If the consumer is not there the company is not there.
To sum it up, lets us all learn from this post and extend a helping hand to help ourselves. more  
The post is too big to read and follow the basic idea of reproduction thereof from elsewhere instead of highlighting the issue in a precised manner. However, since independence India has become the hub of counterfeit and adulterated products. We are on the top in corruption, both in taking and giving bribes. Our liberal constitution and socialistic pattern are misinterpreted and misused by the opportunists to meet their own goals creating a complete chaotic situation. Every one is on the run to be first to derive undue benefit of the situation. The concerned government agencies are full of corrupts and are politically dominated by the highly corrupt politicians whose personal interests are best served in making the agencies ineffective. Under such a situation, it is surprising that the corporate houses whose brands names are largely misused by these fraudsters causing them financial loss in billions of rupees are not alert enough and come forward at their own to thwart such illegal activities and to bring them to justice. more  
If you have information then act as whistle blower, else let the vigilance and inteligence wing do their job. more  
Thanks for the exposure .Its happening .I saw in gulf Five riyal and ten riyal super markets ,duplicate products are sold and loads of it from China.
In India with a huge consumer market specially rural and semi rural it us bound to happen.
GOI must constitute a authority to identify, act and punish and help in sustaining the industry .
Duplicate milk,ghee, oil are already been caught repeatedly .Like China ,these food adulterating firms,chemical firms must also be punished . more  
Vigilant authorities, with will to take action, is call of hour to protect all, the consumers being the worst sufferers, in this case ! more  
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