SHANGHAI – Western companies are failing to control rampant fraud in China's anti-counterfeiting industry, which makes it easier for potentially dangerous fakes to reach U.S. consumers. To save money, many brands outsource anti-counterfeiting work to investigators they don't adequately supervise. Few spend the time and money required to take down powerful, hidden networks that drive China's multibillion dollar counterfeiting industry.
The AP found cases of investigators defrauding companies that make electrical components, pharmaceuticals and personal care products, among other things. Here are some examples:
— An investigator hired by Swiss technology giant ABB Asea Brown Boveri to track down fakes was herself convicted of selling counterfeit ABB circuit breakers. ABB unsuccessfully sued China United Intellectual Property Protection Center, the firm she worked for, in Chinese court.
— ABB also suspected China United of faking cases for it and another client, Panasonic. A China United investigator colluded with a counterfeiter to produce fakes that the investigator then had seized and billed as successful raids, ABB said in court filings. The allegations did not stand up in Chinese court. Panasonic and China United declined to comment.
— One of the world's largest consumer goods companies hired an outside investigator who opened four different factories over the years to produce counterfeit versions of the firm's own products, according to two people directly involved in the investigation who spoke anonymously for fear of losing their jobs. The investigator was convicted and sentenced to more than 12 years for fraud.
— Gucci lost a lawsuit this year because it based its case on apparently bogus information from an investigator. In court, Gucci presented copies of government documents that appeared to sanction a firm for making thousands of counterfeit eyeglasses. But when court officials went to verify those records, they discovered the documents were "inauthentic," according to a copy of the verdict. Gucci declined to comment on the case.