Counterfeiting: Fake upturn hits big names: The flood of cheap imitations has become unstoppable

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WALK DOWN any high street in Britain and you are likely to see a cheap imitation of an expensive watch, a famous perfume or a designer shirt or handbag. You might even be persuaded to buy one. Counterfeiting is hitting hard at bona fide British businesses, as the recession has pushed struggling firms to balance their accounts in more inventive ways.

'Factories and printers, especially in the clothing industry, who would never have touched counterfeits before, are now more willing to try their luck,' says Paul Carratu, managing director of Carratu International, a firm of private investigators.

There has been a prolific increase over the past 15 months, he says, both in the number of counterfeit operations and the range of products they are manufacturing. Growing brand-consciousness, fuelled by the boom in designer labels, means that a cheap Taiwanese shirt can easily be sold as an expensive Lacoste for the price of a stick- on crocodile trademark.

Counterfeiting - described by Mr Carratu as 'the easiest form of money-laundering going' - is estimated to cost British industry 6 per cent of its total income in lost sales. And there is a limit to what genuine manufacturers can do about it.

Calvin Klein, which last month smashed a ring producing fake Obsession perfume in Hereford, is tough on counterfeiters. But its director of corporate security, Al Checkett, says that education and lobbying remain its main weapons.

'We have an educational programme for law enforcement personnel in the States, and have offered to train customs and trading standards officers in Britain, as well as personnel of the Cosmetics, Toiletry and Perfume Association.

'We also strongly advise our customers to buy from authorised retail outlets. But none of these measures can stop production.' Two factory seizures in the US involved dollars 15m worth of goods, Mr Checkett says.

Recession or not, times favour the counterfeiters. Tumbling trade barriers in the European Community are helping. Now that goods need only be checked by customs at the first point of entry into the EC, counterfeiters are going for the soft options in the south - Italy, Greece and Spain - to get goods into Britain. Although controls here are more stringent, the problem is worse than in any other EC country.

Protective measures introduced at EC level provide little comfort. Under the European Customs Code, a manufacturer can register its trademark with customs, and officers will detain any consignment that appears to infringe it - but only if it comes from outside the EC.

Anthea Wordsdall of the Anti-Counterfeiting Groups cites a recent case of an importer shipping fake training shoes to Britain. He got wind of the fact that Customs had the trademark registered and were on the lookout. Rather than entering the goods when he arrived, he simply redirected them to Spain, where the mark was not registered. From there it was plain sailing.

Another cover for counterfeiters born of the emerging single market is parallel trading. This bans the blocking of competitive imports from other EC countries, enabling the producer to import cheap goods outside the manufacturer's normal channels of distribution.

Peter Crockford, intellectual property partner of the solicitors Titmus Sainer & Webb, takes a dim view of this. 'Parallel trading is the gospel of the European Commission, which thinks it is the way to make competition work in the Community. Companies can be fined 10 per cent of their annual turnover if they try to stop it. The EC sees the fact that it helps counterfeiting as incidental.'

Glaxo fell foul of the law when Greek copies of its top- selling ulcer drug Zantac were brought into Britain alongside the real thing by a parallel trader. Britain, Germany and the Netherlands are the main markets for parallel imports, which account for one in five of all National Health Service prescriptions. The UK pharmaceutical industry is estimated to be losing more than pounds 50m a year to counterfeiters, and the World Health Organisation has denounced the potentially lethal consequences as 'mass murder'.

The British motor industry, with its high turnover of parts, is proving another soft target.

Ford is currently investigating two cases of counterfeit imports. According to Bob Drakeford, its patent agent, detecting fakes is becoming increasingly difficult as the rip-off artists use improved methods. 'The technology, especially for sheet metal for body parts, has improved immensely in the past 10 years,' he says. Metal parts can be produced by scanning information from the original into a computer-controlled machine, from which the tools for manufacture can be made.

Another fresh incentive to counterfeiters has come from the opening up of Eastern Europe, which has become a dumping-ground for poor-quality counterfeits as well as a source of new copies of coveted Western goods.

British industry is probably most threatened by growing distribution networks for fake spirits brands. Although the copies are not good (a recent batch was sold in lemonade bottles), they sell well in the East, where the low price is what counts.

Some of the most vulnerable names, such as Reebok, Yves St Laurent and Umbro, are responding with full-time investigation teams. But as one weary spokesman for Levi Strauss's international security department in Brussels said: 'We'll never be able to crack it. There's too much money to be made - and it's safer than drugs.'

(Photograph omitted)

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