INVESTIGATION

OTHER STORIES RELATED TO INVESTIGATION How to Tell a Fake What Fakes May Contain How Does the Fake Network Run

Watch out. The toothpaste you use could be the cause-not cure-of your bleeding gums or tooth decay. The face cream that promised to make you fairer could be the reason why you have pimples. The shampoo you buy to fight dandruff could be causing hair loss. The cola you drink may not be the "real thing", but a drink full of bacteria and yeast-one of the causes of gastroenteritis.

FAKERS use outdated bottles of popular brands to pass off tap water as pure packaged water. Look for quality of seal, the ISI mark and expiry date. THE MOST FAKED hair oil brand can be distinguished only by the absence of the original's flip-top cap. Fake hair oils are nothing but scented refined edible oil. THE DECEPTIVELY similar fake tea packet usually contains some tea leaf dust and plenty of coloured hay and finely cut coir.

This isn't about big brands failing to deliver on their promises. This is about products masquerading as some of country's top selling brands. This is about counterfeit. From an upcountry and unsophisticated phenomenon, fake goods have now become upmarket and sophisticated, sitting side by side with originals on the shop shelves with almost nothing to differentiate between the two. And from there, they are entering millions of homes across urban India.

"It's becoming an everything and everywhere phenomenon," claims Sujata Tiwari, coordinator of FICCI's Brand Protection Committee (BPC), a group of 15 companies set up in 2000 to fight counterfeit products. One of Tiwari's recent seizures of fake shampoos and cosmetics was from shops in the posh Malabar Hills and Peddar Road areas of Mumbai.

You name the product and it can be faked. Medicines, cosmetics, shampoos, software, soft drinks, tea, biscuits, auto parts, music, everything is counterfeited. Every time a company tries to shake off fakers by altering the design or colour of its products or adding complex holograms, the counterfeiters are usually only a few days behind them. "The spread of the new scanning, printing and packaging technologies has proliferated counterfeits to menacing proportions," complains Bharat Patel, chairman of Proctor & Gamble (P&G) and co-chairman of the BPC. Popular brands across product categories are losing between 10 and 30 per cent of their business to fakes. That means three out of 10 fast moving consumer goods (FMCG, a collective term for cosmetics, toiletries and processed food products) in the market could be fake.

Six months ago, Ranjit Kriplani, a Nagpur-based schoolteacher, wrote to an FMCG company complaining of tiny glass particles in a soap he had bought. He discovered it when his three-year-old came running out of the bathroom with scratch marks on his belly. Last year, schoolchildren in Kanpur were down with severe stomach infection for a week after consuming fake soft drinks at a school picnic.

The difference between fakes and genuine is so difficult to tell that it foxes not just unsuspecting consumers but even sales executives of companies. They detect a surge in counterfeiting only when they spot their company's product in shops they never supplied to or if there is a sudden drop in sales of a brand without any apparent reason. P&G first woke up to the problem in 1999 when sales of its Vicks Action 500 fell by 5 per cent in a few months. A market audit revealed that for every 100 original strips of Vicks Action 500 there were 54 lookalike strips. Hindustan Lever Ltd (HLL) too has had similar experiences with some of its brands. "Fall in the sales of a brand at a time when its fakes are flourishing is a blow to the brand image and devastating for the morale of the sales team," admits Ashok Gupta, general manager for legal affairs with HLL.

TOILETRIES counterfeiters usually recycle bottles and cans, making detection tough. Insisting on new packing and checking for smell help.

"The spread of new printing and packaging technologies has proliferated counterfeits to menacing proportions." BHARAT PATEL, Chairman, Procter & Gamble

All fakes are not really fakes. Technically, counterfeit products are those that are identical to the original in looks, colour, name-down to the last detail on packaging, including the manufacturer's address. Not every producer of the phony goods goes to such lengths. Some make a slight change in the name and copy the rest of the design to pass it off as the original. Vicks becomes Viks, Captain Cook could be Captan Cook, Parachute may be Parashute and Sunsilk could be Sunslik (see box: Looks Are Deceptive).

In most cases a consumer isn't able to notice the subtle change. An AC Neilsen survey found 80 per cent of those who purchased lookalike brands thought they were buying the original. Besides, under the Trade Mark Act, imitation of label, words, letter, shape of goods, packaging, combination of colours and even signature (for instance, Johnny Walker) is also an offence.

FAKERS haven't spared products like baby powder and mouth freshners. A real mouth freshener has no supari and is usually saccharine free. Expiry is six months from manufacture date. Fakes and look-alikes have supari and saccharine and don't mention maker's name or address.

"It's daylight robbery for consumers, companies and the government. Yet there is apathy towards counterfeits. " ASHOK GUPTA, General Manager (Legal Affairs) Hindustan Lever Ltd

Imitation surely isn't the best form of flattery for the brands under attack. In fact, the more popular a brand, the more it gets copied. That's the reason why FMCG companies-aggressive advertisers of their brands-are hit the most. The AC Neilsen survey estimated the annual loss to the FMCG industry at Rs 2,600 crore and to the government, in unpaid taxes, at Rs 900 crore. An org survey of 12,500 retail stores completed in January 2002 found the counterfeit market to be 5-15 per cent of total annual sales of the Rs 60,000-crore for FMCG industry. That's between Rs 3,000 crore and Rs 9,000 crore a year.

But sales aren't the only thing lost. "More dangerous than the loss of sales is the loss of credibility and brand equity. Counterfeiting can kill a brand and cripple a company's distribution system," points out Ashok K. Aggarwal, president of the Dharampal Satyapal Group, which owns the Catch, Pass Pass, Rajnigandha and Tulsi brands.

The FMCG industry isn't the only one haunted by fakes. The Indian Pharma Alliance claims an annual damage of Rs 4,000 crore to the pharmaceutical industry due to spurious drugs. Soft drink manufacturers lose an estimated 10 per cent of their Rs 7,000 crore annual sales to fake drinks. If counterfeiting of software, music, auto parts, publishing and electricals industries is added the size of the counterfeit industry in India would be at least Rs 30,000 crore a year and the loss of tax revenues about Rs 10,000 crore.

The losses of the industry and the government are the fakers' gains. Counterfeit products are sold at the same price as the originals, but the production and marketing cost are usually less than a fourth of the real's price. The use of cheap ingredients, zero expense on advertising and minimal distribution costs enables a counterfeiter to recover his investment within three months. After that it's cream. The fake version of a 100 ml bottle of Keo Karpin hair oil, which retails for Rs 24, costs only Rs 4. A 300 ml bottle of spurious soft drink could cost less than Rs 2, against the market price of Rs 10. Here, of course, there are no packaging costs since fakers use original soft drink bottles and the cap too is recycled.

COUNTERFEIT SOFT DRINKS are the toughest to detect since fakers use original bottles and caps. The caatch is in lesser fizz, milde taste. Always check the date of manufacture which shouldn't be earlier than six months.

"Consumer awareness is the best way out. The penalty levied on counterfeiters should be crippling and money should be transferred to a trust for consumers." MANU BHAI SHAH, Managing Trustee, Consumer Education and Research Centre

The drastically low cost is a pointer to the dangerously high health and safety hazards that fake products pose. But neither the Government nor the industry has done much to test and publicise the harmful effects. All that is available are stray anecdotes. Bangalore's Poornima shot off an e-mail to a company whose fairness cream "reddened and inflamed" her skin. Then, of course, were the cases of Kanpur school children and the Kriplanis of Nagpur.

To be sure, most counterfeit products-including fake medicines-are not poisonous, but simply ineffective and unhygienic. It is in the interest of the counterfeiter that people consume fakes without suffering side effects. That keeps the business going and no alarm is raised. A fake Vicks Action 500 may contain just 200 mg of paracetamol compared to 500 mg in the original.

But that doesn't make fake products less risky. In most cases, the damage could be slow, steady and irreparable. Bleeding gums caused by poor quality toothpastes or hair loss due to harsh shampoos or cancer caused by carcinogenic substances in a cream are serious side effects. In most cases, the consumer is unable to trace the cause to the product. A recent lab test conducted by Pepsi India of 67 fake and regional soft drinks brands in Rajasthan found bacteria, yeast and coli in most bottles. The soft-drink makers did not have bottle-cleaning facilities and used tap water, cheap sugar and substandard colours.

The health and safety risks they pose make counterfeiting of medicines and FMCG products more grievous than the piracy of other products. Yet little is being done by the companies and the Government to spread awareness about the hazards of fakery. That explains the abysmal level of consumer awareness about the staggering scale and the harmful effects of counterfeiting. All a few leading companies provide, after much pleading, is a list of ingredients that counterfeit products may and may not have (see box: What Fakes May Contain). Nothing else. Admits Ashok Chabra, executive director, P&G, and a member of the BPC: "A company will do anything to gain an additional 5 per cent market share, but won't display the same agility in recovering a similar size of market share from fakers." A looming fear for companies has been of customer scare, which could trigger a largescale shift to rival brands. The formation of the BPC, which has rivals like Coca-Cola and Pepsi and HLL and P&G cooperating with each other, should remove that fear.

TALCUM POWDER fakes are mostly filled with silica and do not have antiperspiration ingredients like chlorphenesin or zinc oxide.

"More dangerous than the loss of sales is the loss of credibility. Counterfeit can kill a brand and cripple a company's distribution system. ASHOK AGGARWAL, President, DS Group

Observes Manu Bhai Shah, managing trustee of the Ahmedabad-based Consumer Education and Research Centre: "The best weapon in the fight against counterfeiters is customer awareness, but companies have been slow in educating people." He advocates Class Action type of suits against counterfeiters under which the guilty party is asked to pay a huge penalty and the money is transferred to a consumer trust. Ajit Yadav, director (legal affairs), Pepsi, suggests a method by which the fine imposed on fakers is based on an estimate of taxes he may have evaded.

But such punishments are impossible under the existing legal system. Though India has several laws against counterfeiting-the Trade Mark Act and the Copyright Act being the main ones-their enforcement is poor and penalties are no tougher than a slap on the wrist. The police does not consider commercial crimes serious enough. Raids are conducted only after pleading and pressure from companies and their lawyers. The news of raids is often leaked out in advance, making the whole exercise a wild goose chase. Of the counterfeiters caught, the conviction rate is less than 1 per cent. "We need an attitudinal change in enforcement agencies and the judicial system," stresses leading intellectual property rights (IPR) lawyer Pravin Anand.

Lax enforcement has emboldened fakers. In January 2001, the police caught a former employee of an FMCG company making fake versions of nine popular brands under one roof in Delhi's Malviya Nagar. At the top end of piracy are organised syndicates with powerful patrons in the wholesale trade and even in the police (see box: Inside A Counterfeiter's Network). At the bottom end, counterfeiters can be simple folk like a husband and wife team in Lucknow, caught last month stirring up colas in a bucket. Or Tejpal Singh of Delhi's Sadar Bazar who collects Charlie perfume bottles from trash heaps, fills them with a scented liquid and sells them as perfumes smuggled in from Hong Kong. The easing of imports, proliferation of sachet packaging and the profusion of product variants have fuelled the growth of fakers.

Fed up with the inability of the Government to control counterfeiting, industry is hiring former policemen for surveillance. Former police chiefs of Delhi Arun Bhagat and Vijay Karan have lent their services to the FMCG and pharmaceutical industries. Julio Ribiero, former Punjab DGP is battling music piracy. HLL has a team of 20 officers and an annual budget running into crores of rupees for brand protection. BPC, which meets once every two months, spends Rs 2 crore a year on efforts to stamp out fakes. In the past few months, some state governments have woken up to the problem. Delhi, West Bengal and Madhya Pradesh have formed IPR cells in their police departments. In Delhi, two courts have been designated to deal exclusively with IPR disputes.

But the governments' offensive has to be stronger. The companies will never win the war against counterfeiting on their own. At best, they will keep fakers on the run. For the rising tide of spurious products to subside, hefty fines and imprisonment are necessary-along with a campaign for consumer awareness by the Government and the industry. Be it shoring up of the bottom lines or the struggle against fakes, the consumer remains the pivot.