Counterfeiting generally affects luxury goods, but now a worrying trend of counterfeiting consumer goods like wine and spirits is gripping markets worldwide. And South African wines are not immune to this form of fraud… By Anton Pretorius
Buying quality wine has never been more fraught. Global food and beverage fraud is reportedly a US$40 billion (R578 billion) industry. The Interprofessional Council of Bordeaux Wine believes that 30 000 bottles of counterfeit imported wine are sold every hour in China alone.
In 2017, investigators in Shaanxi province found dodgy wine in several of the informal booze and cigarette shops across China. The investigators traced the wines to a nearby warehouse and found 6 000 more fakes, including those of fellow domestic mega producer Great Wall.
Shanghai Daily reported that at some wineries in China, CCTV reporters found workers filling hundreds of bottles with bogus wine. More than 2 million bottles per year were estimated to be made across numerous operations.
At the end of last year, the Wine and Spirits Board (WSB) of South Africa were informed of several South African wines thought to be counterfeited and sold in China. After conducting verification tests on six confiscated wine samples, the WSB found that three of the six were forged. “Two of the three forged labels were from South Africa,” says WSB secretary Olivia Poonah.
She says that these pirate companies set up pop-up shops throughout China and have sub-distributors selling fake wines. The sub-distributors are given authorisation letters, company registration and trademark certificates, all allegedly from the real brand owner. “Chinese wines are often packaged as US, French, Australian or South African wines.”
Under Chinese law, it’s illegal to forge these documents. “However, it’s happening on a massive scale,” says Poonah.
Dan Plane, partner at intellectual property advisors, SIPS, (based in Hong Kong), says there’s no quick fix to the problem. “The pirate companies are very advanced in China. They forge the necessary documentation including the seals, labels and logos really well.”
Counterfeiting has a few different flavours in the world of wine. According to Plane, the first is out-and-out counterfeits, which would comprise of the creation of labels, corks and other elements of a given wine and passing that off as genuine.
“The second is refilling genuine bottles with new (and likely very low quality) wine, recorking the bottle and selling it as new. The third is the creation of copycat wines that resemble the foreign brand, intended to confuse consumers into believing the wine is connected with the real thing.”
The biggest problem with the wine industry, according to Plane, is the reticence to be up front with the market about just how widespread the problem really is. “There’s a fear among producers to creating panic where Chinese consumers treat any wine with ‘problems’ as a ‘pariah’ in the market, causing a loss in sales.”
According to Poonah, consumers are willing to pay more for international wines than Chinese wines and these pirate companies will therefore do anything and everything to make their product seem as an authentic Chilean, French or South African as possible.
“The damage to a company’s brand as a result of counterfeiting can be quite severe. “Having your trademark stolen can effectively close you off to the Chinese market, and potentially force you to negotiate with the pirates to try and get the trademark back quickly,” says Plane.
“Consumers residing in tier one and two cities in China are easy targets as they don’t really understand wine, grape cultivars and wine labels. While there are several wine shops in China selling wine from all across the globe, consumers can’t distinguish between authentic and fake and many distributors tend to dump stock they can’t sell at discounted prices.” Poonah adds.
In addition, the Chinese online sales of wine from around the world is particularly a problem area as it’s difficult to identify the forged wines especially if the pirate company used a copied images from the website of the genuine producer.
Follow the procedure
Plane suggests following these best practice steps when suspecting counterfeiting:
- Make sure your certification seal is registered in China as soon as possible. Plane says it could take up to nine months to a year to complete all processes and have the certification seal registered. The good news is that the WSB’s unique seal code system works and it was how they were able to distinguish the forged labels from the authentic labels and check whether the export documents correlate.
- Register their trademarks/trade names in China. Trademarks fall within the domain of private law. Only the owner of a trademark can use the same.
- Once you have registered your trademarks and forged wines are identified (use seal code to verify) there are four enforcement options that can be used, namely:
- Cease and desist letter – not very effective if sent via email, best to deliver by hand to the alleged pirate company.
- Administration raid action carried out by the Market Supervision Bureau, who can take punitive decisions and cease products.
- Criminal raids – if the value of the wine, based on the actual retail/wholesale price exceeds $8 000 (R115 000), the individuals involved in the counterfeiting can face jail time. If however the value of the product is not high then they will most likely receive a fine.
- Civil lawsuit – China is a civil law country and a court may deem a civil case applicable if materialised evidence of infringement is provided. This route can be followed after a raid has been done where a punishment decision has been approved.
Quick facts on counterfeiting:
- The United Nations Office on Drugs and Crime (UNODC) estimates that the global counterfeit business is in excess of US$250 billion (R3.6 trillion) a year.
- A massive 63.2% of knockoffs originate from China and American brands are the most counterfeited.
- In South Africa alone, an average of three raids per day are carried out in the fight against counterfeiting.
To do a seal code search, click HERE