Don’t Fake IT...

Counterfeiting not only devalues brands but also adversely affects the economy. Stringent law enforcement and consumer awareness are key to counter the counterfeiters

Presenting shocking facts on the IT grey market in India, Communications and IT Minister Ravi Shankar Prasad recently revealed that fake electronics products market in the country is growing at double digit as that for genuine goods in India. Counterfeit and piracy are the two most complex viruses that have infected the entire IT industry. It does not only hamper the brands but also adversely affects the economy. Stringent law enforcement and consumer awareness are the only solutions to counter the counterfeiters.

China-Safe haven for Counterfeiting

In legal terms counterfeiting is the passing off action of the genuine products to customers under an established brand name. In simple words counterfeit is nothing but an imitation which is a fake made. This is nothing but the cheating consumer and running illicit parallel operation. China has been the haven for counterfeiters. It is the biggest source of counterfeit goods in Asia. Counterfeiting contributes around 8% to China’s GDP. As much as 30% of the counterfeit products worldwide is being manufactured in China. The entire crime of counterfeiting takes place through organized rackets active worldwide.

Counterfeiters go rampant in India

Image courtesy: The Hindu

Associated Chambers of Commerce and Industry of India in its recent study revealed that the size of counterfeit products in India was `2,500 crore in 2014 and is likely to grow to `5,600 crore by 2015. Counterfeit goods are easily accessible in Indian market. Big cities and metros are the main spot for manufacturing infringing products. National capital’s Nehru Place and Gaffar Market are the major hubs of counterfeited electronics from where around 75 per cent of fake electronics originates. In Mumbai, Manish Market and Lamington Road Market are the major spots for counterfeited mobile phones, computer components and software. Federation of Indian Chambers of Commerce and Industry’s (FICCI) Brand Protection Committee estimates that grey market in India eats `200 billion revenue per annum. In addition, India’s booming E Commerce market place is been allegedly nurtured by imports of counterfeit products.

Notorious Grey Market Hubs in India

New Delhi: Nehru Place, Palika Bazaar and Gaffar Market

Mumbai: Manish Market, Heera Panna and Lamington Road

Hyderabad: Chenoy Trade Center and Hong Kong Bazar

Chennai: Burma Bazaar

Kolkata: Chandni Chowk

(Reference: USTR report on ‘2013 Out-of-Cycle Review of Notorious Markets’)

Pricing cost honesty?

India is a price sensitive country and Indian consumer is conservative when it comes to spending on electronics and gadgets. That is the main reason why counterfeiting hubs are flooded with customers. Some consumers don’t mind trying the fake products as they come for fraction of the actual MRP. However, consumers don’t know the way they are being cheated with cheap quality products that are not durable at all.

24 year old Zunaid Ali who runs a mobile shop in Manish Market in Mumbai says that he entertain all types of customers right from college goers to professionals who want to buy counterfeited iPhones and other high end phones.

“If you want to buy Samsung note 3, you will have to loose your pocket for around `34,000. But duplicate Note 3 is available at `6,000 here which runs as good as the original one", he says.

Many shopkeepers in Manish market give one year warranty and replacement on counterfeited mobiles. 54 year old Shaheed Bhai who has mobile and gadgets shop in the same market has a realization that the business is illegal and he can be caught in the hands of the law anytime.

“We do have fear of raids and legal action by police and copy right authorities. But it is our business”, says Shaheed Bhai.

Dealers at Lamington Road market claims that counterfeited electronics are as good as original brands and even performs better. However, they do not take any responsibility of products once it is sold. On the allegation of cheating, dealers say that customers are aware of buying fake product.

Consequences of counterfeiting

Any counterfeit is a loss to the brand as well as the Ex-Chequer. It is not only damages business and investment opportunities but also have a negative impact on society and the global economy. Counterfeiting affects governments tax revenue, posses serious threat to law and order, generates unemployment and even posses threat to the health of the consumer. What adds concerns is that there are apprehensions of counterfeiting funding anti national elements.

Legal framework for Counterfeiting in India

• The Indian Penal Code: Section 476
• The Trademarks Act, 1999
• The Copyright Act, 1957
• lThe Patents Act, 1970
• The Designs Act, 2000
• The Information Technology Act, 2000
• The Information Technology Act, 2000
• Instructions for implementation of Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007.
• Prohibits the import of specified goods intended for sale or use in India, subject to certain conditions and procedures.
• Instructions for implementation of Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007.
• Notification prohibiting export of the goods.
• Amendments in the notification regarding Prohibiting import of counterfeit trademark goods.
• Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007.

Brands flex muscles against counterfeiters

Vishal Parekh, Marketing Director, Kingston Technology, India

Companies have vowed to fight against counterfeiting. Many vendors run consumer awareness campaigns and also conduct raids. “We run a number of awareness campaigns, wherein we try to educate our audience about how to identify a genuine Kingston product”, said Vishal Parekh, Marketing Director, Kingston Technology, India.

Transcend Information has officially announced an advisory against the distribution of fake products in India. Transcend has appealed its Indian customers to purchase genuine products only from the authorized distributors. Microsoft asks its buyers to always look for a Genuine Microsoft Label or a Certificate of Authenticity (COA). Microsoft educates partners and consumers about the risks of getting software from suspicious sources.

Deepak Shetty, Chief Marketing Officer, Moser Baer India

Moser Baer, one of the leading brand in CD and DVDs keep vigil on such nefarious activities. “Our first attempt is to counsel the channel partner involved to refrain from such acts. If he persist, we ensure regular genuine supplies are also stopped and we do not hesitate to inform the Authorities and seek action”, said Deepak Shetty, Chief Marketing Officer, Moser Baer India.

Some Shocking Facts about counterfeiting

• Mobile Manufacturers Forum (MMF) estimated around 148 million substandard mobile devices in 2013 were sold in the black-market.
• FICCI estimates that 21% of mobile phone sales in India are unauthorized or counterfeited.
• More than 10% of IT products in the market are counterfeit and than 65% of the software in India is pirated.
• A FICCI survey has estimated the loss of revenue to the Indian exchequer by way of taxes to be roughly around `1,000 crore a year.
• According to Business Action to Stop Counterfeiting and Piracy (BASCAP) the global value of counterfeit and pirated goods, estimated at US$650 billion in 2013, is likely to double by 2015.
• The World Intellectual Property Organisation (WIPO), estimates counterfeiting is costing the global economy more than US$100bn a year.
• World Customs Organisation (WCO), account for roughly seven to nine percent of global trade of pirated and counterfeit goods.

Countering counterfeit-Need for hour

At a time when India is emerging as a fastest growing IT market place, grey market is the biggest hurdle in the growth of IT industry in the country. The government and brand owners play very crucial role in combating the crime of counterfeit. Taking a note of a serious threat of counterfeiting, the government has initiated several steps to monitor counterfeit products and keep a track on the grey market. Additionally, the Indian Penal Code provides legal framework to curb counterfeiting menace. However, there is need for proper implementation of law and coordination between enforcement agencies. Consumer Rights organizations also play very critical role in awareness and vigilance. India needs to create fear of law among the counterfeiters to eliminate grey markets from the country.