Growth of online shopping spurs trade in counterfeit products

At a glance, the two websites bearing the Pandora name appear strikingly similar, showing glittering images of charms, bracelets and earrings. Pandora.net invites shoppers to explore a new Mother's Day collection. Pandorapick.com touts deals, oddly, for New Year's of up to 75 percent off.

The first site is real, and the second, offering silver charms for $9.99, is fake.

Pandora, a Danish jewelry company with U.S. headquarters in Baltimore, and countless other consumer brands are struggling with the growing problem of counterfeit goods. Companies like Pandora and Under Armour have dedicated internal teams seeking out counterfeiters and turn to law enforcement, lawsuits and other channels to protect their brands, but it's seemingly a game of Whac-A-Mole as one site is taken down, another pops up.

Pandora's Brand Protection Team — employees and contractors who root out counterfeit web sites, Facebook pages and Instagram accounts — has taken down the lookalike Pandorapick site twice in the past. But it has showed up again and Pandora is taking steps once more.

"Unfortunately, counterfeiting is a serious money-making business for the criminals behind it," said Matthew Scott, a vice president and legal and general counsel for Pandora Americas, in an email. "And the ease, low cost and anonymous nature of the Internet and online selling simply make it easy for this illegal activity to occur."

The stakes are high. International trade in counterfeit and pirated goods made up as much as 2.5 percent of world trade in 2013, or as much as $461 billion, according to a 2016 report by the Organisation for Economic Co-operation and Development and the European Union Intellectual Property Office. Another estimate, from a 2015 report commissioned by the International Chamber of Commerce's Business Action to Stop Counterfeiting and Piracy, places the size of the global counterfeit market at more than $1.7 trillion, up from $600 billion in 2010.

Few categories of products are spared from counterfeiters' attention, said Bob Barchiesi, president of the International AntiCounterfeiting Coalition, whose members include Under Armour, Crocs, Kate Spade, Nike, Lululemon Athletica, Tommy Hilfiger, Pfizer, Louis Vuitton, the Walt Disney Co. and dozens of brands across retail, entertainment, health and other industries. Electronics, pharmaceuticals, contact lenses and other consumer products all are commonly copied.

"We like to say, if you can make it, they'll fake it," Barchiesi said. "We've seen it all... If something is very popular, they're going to mass produce it and get it out there without R&D and quality control."

As more shopping has moved online, counterfeiters have followed, he said, often opening e-commerce sites that mirror legitimate sites much like Pandorapick.

"Years ago, customs would intercept containers of counterfeit luxury goods, and now it's evolved to direct shipments from China to individual consumers," he said. Counterfeiters are "hijacking copyrighted photos of legitimate products and putting that up, so what you see is not what you're going to get."

Pandora officials said they don't know who is behind the counterfeit site. A message left on Pandorpick's "Contact Us" page went unreturned. They said many of the sites selling counterfeits are registered privately in China, so you can't see who owns the domain. That makes tracing them difficult. Once a site is shut down, it often pops up on another internet service provider, they said.

It's difficult to measure the impact of sales lost to counterfeiters because of the underhanded way counterfeiting occurs, Pandora officials said.

Barchiesi said consumers should watch out for prices that seem too good to be true, missing packaging, misspellings on labels or websites, and nonworking or missing customer service phone numbers.

Pandora describes its approach as maintaining zero tolerance against criminals and educating consumers on the difference between its brand and the illegal, fake copies.

The Better Business Bureau Serving Greater Maryland issued a warning last month advising consumers to avoid Pandorapick.com after receiving complaints. Jewelry purchased through the site, which appears in online photos to be actual Pandora products, ended up being "cheap imitations from China," the BBB said.

"Whenever a consumer is deceived into purchasing products from a counterfeit site, our brand and, more importantly, our customer promise of a superior, quality product is severely compromised," Pandora's Scott said in the email. "This can leave cheated consumers with a poor image of our brand and our product."

Like Pandora, Under Armour said it has a special brand protection and anti-counterfeiting team and program that works to eliminate the supply of counterfeit Under Armour products around he world. The company declined to elaborate on the scope of the problem.

"As a leading global performance brand with footwear and apparel in high demand, Under Armour is aware that there are many counterfeiters who take advantage of consumers," the company said in a statement. "We are committed to upholding the trust our athletes put in us, and our products, every day."

Coach, another of the IACC members, says on its website that it "vigorously pursues counterfeiters and the shops, websites, vendors and flea markets that sell counterfeit Coach merchandise," by working with local, state and federal law enforcement, and U.S. and foreign customs officials.

It warns that it does not sell products through individuals, street vendors, internet auctions or flea markets. Counterfeit websites, it said, often use the word Coach and copy content and images from the official site.

The broadening scope of counterfeiting is taking a toll, undermining innovation, hampering economic growth and putting consumers at risk, the OECD said in its 2016 report "Trade in Counterfeit and Pirated Goods."

"Substandard counterfeit products, such as toys, pharmaceuticals or spare parts, can pose significant health and safety threats for consumers," the report said. "In addition, organised criminal groups are playing an increasing role in these activities."

When engineers at UL Inc. tested counterfeit iPhone USB power adapters, they found a failure rate of more than 99 percent. UL said many counterfeit electronic products don't meet industry safety standards that protect users from shock and fire hazards, and they often use counterfeit safety certification marks.

Fake iPhone adapters often are a color other than white, have label misspellings, are sold in loose bins and sell for much less than Apple's $19 price. Other commonly copied products that can be unsafe are typically low-cost and high-volume, such as cheaply made extension cords and plug strips, according to UL.

"Counterfeiting steals from manufacturers who are doing things right, from retailers, and are in a position to hurt consumers," said John Drengenberg, consumer safety director for UL.

At San Francisco-based Sideman and Bancroft, attorneys help clients stop counterfeit goods from being imported and sold by targeting and investigating counterfeit traffickers. Working on behalf of companies, its attorneys have worked with the FBI, Secret Service, Homeland Security Investigations, and other state and federal law enforcement agencies. That kind of collaboration has led to dozens of criminal convictions, jail sentences and restitution orders, the firm said.

Bob Cozzolina, the firm's global customs and investigations director, maintains a global network of investigators who work on cases. Sometimes clients discover the problem after seeing sales decline in a specific market or category. Or they are tipped off by customs agents who spot counterfeit products.

"Some of the counterfeiters have been clever, and they tend to mask their country of origin by moving manufacturing of counterfeit products to other developing countries that might not be on customs or law enforcement's radar," such as locations in Latin America, Middle East and Africa, Cozzolina said. "We think it's important on the counterfeiting side to address the problem from a variety of angles — civil, criminal, customs, supply chain, education."

The IACC has seen some success with "RogueBlock," a program in partnership with credit card issuers that works to cut off counterfeiters' ability to process payments using credit cards or money transfers.

Since 2012, nearly 6,000 merchant accounts have been shut down through the program, Barchiesi said. Many more individual websites were shut down, he believes, because multiple sites often are tied to a single merchant account.

The group also is working with Alibaba.com, an Amazon-like site based in China, to protect legitimate brands and ban sellers identified as counterfeiters, an effort that has helped shut down more than 8,000 illegitimate sites, he said.

The Better Business Bureau Serving Greater Maryland first became aware of the fake Pandora site through its "scam tracker," in which consumers can post mail, phone, email or in-person scams, said Angie Barnett, the group's president and CEO.

Several consumers posted about Pandorapick, Barnett said.

"They thought they were on the real Pandora website," she said. "We do more and more online shopping, and we use it for convenience. Scam artists use that to their advantage."

lorraine.mirabella@baltsun.com

lorraine.mirabella@baltsun.com

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