Fake Bazaar! From Lipsticks To Toothpastes, Noodles To Milk, Counterfeit Products Make A Killing

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. It바카라�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 can바카라�t smell the coffee바카라�it바카라�s empty, remember?

Well, figuratively speaking, you can. It바카라�s a stiff concoction. Before Nescafe, they바카라�d just finished stacking empty 200 gm packets of Tata Tea, India바카라�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 empty바카라�. The maal is elsewhere.

So what exactly is happening here? Well, this is a superbazaar of another kind, and we바카라�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. It바카라�s off the radar and totally illegal, of course. But you don바카라�t even realise it when these labels quietly come out of the dark and join the well-lit racks of the real superbazaar.

바카라�Except for four or five hours when we stop it to put on the printing rolls or cylinder, it works round the clock,바카라� says one of them, about the machine바카라�s workload. Reluctant to prolong the conversation, they get back to their jobs. The factory worker바카라�s stoic face is back. Outlook got this sneak peek into the inner chambers of India바카라�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. 바카라�As far as I know, there are 30 such rotogravure machines바카라�each worth between Rs 80 lakh to Rs 1.5 crore바카라�operating in various parts of Delhi,바카라� says the source. That바카라�s almost 30 crore fakes with this kind of packaging entering the market in just a month. And that바카라�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, there바카라�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 samples바카라�packets of Mother Dairy, Milk Food, Amul, Tata Tea, Tata Salt, MDH spices, Surf Excel, Tide바카라�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 India바카라�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. 바카라�One Nescafe 500 gm packet will cost about Rs 15,바카라� says Suresh Sati, a private ­detective. Per kg rates of smaller packets range between Rs 350-600. Next step? There바카라�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 retailer바카라�and then, if it바카라�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. 바카라�Let바카라�s say one carton of Tata Tea will have 70 per cent fakes and 30 per cent original,바카라� says Sati. Companies are often reluctant to go public with the fact that the bazaar could be awash with fakes of their brands, though it바카라�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 instance바카라�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. It바카라�s the same thing with tea. That바카라�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 powder바카라�and then, heave ho! To market, to market!

The span of fake branded goods takes in a wide variety바카라�besides tea, salt, spices, ghee, paneer and the like, and toothpaste, shampoo, hair oil, conditioner, bathing soap, there바카라�s ­mobile phones, computer hardware, apparel바카라�and yes, liquor. And most dangerously, pharmaceuticals. Here, the story also gets entangled with a concerted attempt by foreign MNCs to run down India바카라�s industry, so the trail is murkier (see 바카라�How About the Pill You Pop?바카라� 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 se바카라�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 that바카라�s used in the ice-cream industry. 바카라�The salt lacked in iodine and carried impurities. We traced the wholesaler to Barnala and got an FIR registered,바카라� an officer from the firm said.

Sati, who runs the NGO Fake Free India with two partners, has collected a whole gamut of products바카라�Colgate, Eno, Tata Tea, Boro Plus, Revlon, Vicks Vaporub, Iodex바카라�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 India바카라�s formal market matured in recent decades, counterfeiting too has increased manifold. And grown in sophistication. 바카라�If some product requires a particular tag, hologram or label, a separate set of people are engaged to produce that,바카라� says Ajay Jasra, Sati바카라�s partner. Different places act as hubs for different products. Tank Road in Delhi has earned the infamy of figuring among the world바카라�s top 25 physical markets for counterfeiting in the Office of the US Trade Representative바카라�s report, 바카라�2018 Out-of-Cycle Review of Notorious Markets바카라�. It바카라�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 hubs바카라�in Delhi, count Palika Bazar, Sarojini Nagar Market, Gaffar Market, all those.

바카라�It바카라�s a complete network. One party will supply buttons and tags, another will make labels, a third provides packaging and so on,바카라� 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 Delhi바카라�s Sadar Bazar police station in January 2019, says over 5,000 pieces of Nivea and Lakme products have been ­recovered바카라�cream, foundation, eye make-up, lipstick et al. A tip of the iceberg, though, she admits.

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

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: 바카라�In a raid in Delhi바카라�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.바카라�

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 industries바카라�textiles, readymade garments, tobacco products, capital goods (machinery and parts), and consumer durables (electronics). Titled 바카라�Invisible Enemy: Impact of Smuggling on Indian Economy and Employment바카라�, 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 years바카라�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 Providers바카라� 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, it바카라�s hazy. 바카라�We can바카라�t say all those samples were fake products. Often genuine products fail for several reasons,바카라� 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 바카라�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 don바카라�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. 바카라�I바카라�d bought it from a local shop. I have lodged an FIR,바카라� Kumar says. A Congress leader from Kota, Rajasthan, Indermohan Singh, even lodged an FIR against Snapdeal for getting a counterfeit wristwatch delivered. 바카라�Police are investigating, but are yet to file a chargesheet,바카라� 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. 바카라�Unfortu­nately, legal lacunae allow a manufacturer to get away saying the product is counterfeit and doesn바카라�t belong to the company,바카라� says Bejon Misra, a consumer activist. 바카라�But it바카라�s the manufacturer who must ensure that I as a buyer get the ­promised quality.바카라� 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! 바카라�They ­deliberately allow counterfeit ­manufacturing, because they grow big as a brand, but fail to meet the ­demand. They don바카라�t want their ­consumer to go to other brands,바카라� says another activist.

Not all companies. Some corporates hire private detectives or surveillance firms for field investigation. 바카라�It carries risks, so companies don바카라�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,바카라� says a senior brand manager of a garment company. On record, all big brands maintain they have a 바카라�zero tolerance바카라� approach.

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

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

Hindustan Uniliver Limited has adopted a 바카라�three-pronged strategy바카라� to ensure on-ground actions against counterfeiters are effective, says its spokesperson바카라�바카라�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.바카라� 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.바카라�

바카라�Counterfeiting of agricultural products is one of the major reasons for farm distress. We are making all efforts to address the issue,바카라� 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 India바카라�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. 바카라�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,바카라� 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 wouldn바카라�t be doubted. 바카라�We cracked that case and got them arrested,바카라� Singh says.

Says Harminder Singh, another leading private investigator with vast experience in intellectual property rights (IPR), 바카라�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.바카라� The website of his organisation, Intelligence Network Agency, ­contains pictures of hundreds of raids across the country. 바카라�Clandestine ­production at dispersed sites, near-perfect printing, mixing of fakes with originals바카라�this is their scheme of deception,바카라� he says. Enforcement ­action, he says, carries on at twin levels바카라�through raids at source sites, 바카라�to nip the problem in the bud바카라�, and raids on wholesalers and retailers, so that the 바카라�supply chain gets disrupted바카라�.

What바카라�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 company바카라�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 someone바카라�s health바카라�and often a violator is only tried under the Trademark Act.

There바카라�s also multiplicity of authorities. In Delhi, the police take ­instructions from the Centre and the food department obeys the state government바카라�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. 바카라�Once companies lose interest in pursuing the matter, the case gets diluted,바카라� says Joseph Koshy of Joseph & Joseph law firm, an expert on IPR. The lax regime makes for a high rate of relapse into crime. 바카라�We have several instances where the same counterfeiter was caught multiple numbers of times,바카라� Koshy adds. Also, IPR protection laws are themselves quite stringent, but courts ­apparently tend to treat violations lightly. 바카라�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,바카라� says a legal expert.

Companies don바카라�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. That바카라�s why often when the police raid a unit on the complaint of a company and finds counterfeits of other companies too, it doesn바카라�t file a case on behalf of other companies. 바카라�We inform them, but some of them don바카라�t want to pursue the case, so the violator is tried only for counterfeiting one product,바카라� says a police official. Many corporate representatives, in turn, allege that often cops ask for a bribe to carry out raids because 바카라�they think we are the golden goose바카라�.

Industry has its own perspective and puts the onus back on government. Anil Rajput, who chairs CASCADE, blames high taxes for product counterfeiting: 바카라�It바카라�s common knowledge that a moderate tax rate will disincentivise illicit trade.바카라� 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. 바카라�If as a brand I have to investigate, go to the police station, go through the entire process, it makes no sense,바카라� he said at FICCI바카라�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. 바카라�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,바카라� he adds. It바카라�s public health, finally, that we are talking about.

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What Companies Say

바카라�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.바카라�

Official Spokesperson, Colgate-Palmolive (India) Limited

바카라�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.바카라�

Satoshi Yamazaki, Casio Computer Co Ltd

바카라�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.바카라�

Sunil Kataria, Godrej Consumer Prod Ltd

바카라�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.바카라�

Spokesperson, Tata Global Beverages

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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

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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