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54 October 2015 | beautystorebusiness.com Guest Column Counterfeit Beauty Products Here's how to identify those fake items and get them out of your supply chain from an expert. by Andrew Brodsky THE PROBLEM OF COUNTERFEIT COSMETICS AND other counterfeit beauty products has become much more prominent and frightening of late with reports of fake beauty SKUs containing toxins that have led to several serious, high-profile injuries—and even one death. A unit chief at the Federal Bureau of Investigation has noted, "Counterfeit cosmetics sometimes contain harmful or even carcinogenic ingredients, perhaps not intentionally designed to harm—but because the coun- terfeiters feel no obligation to protect the consumers, they are defrauding." As reported in Cosmopolitan (May 12, 2015, online) and elsewhere, these products—such as fake Laura Geller GlamLASH—are often manufactured in unsanitary conditions, and can be contaminated. Unsus- pecting consumers who use these products have gotten rashes, dermatitis, eye infections, acne and eczema— and in some cases, long-term, deep physical effects. Looking at the global economics of counterfeiting, fake branded products cost the retail economy an esti- mated $250 billion, according to USA Today ("9 most counterfeited products in the USA," March 29, 2014, online). Other estimates put this number as high as $650 billion. This tidal wave of fakes poses a brand nightmare both to product manufacturers/suppliers and retailers— not to mention in cases such as dangerous, unregulated fake electric hair dryers and toxic counterfeit makeup a very real danger to consumers. How do these phonies get into the supply chain? And can they be stopped? WHO'S DOING WHAT? In the United Kingdom, where consumers spend an estimated £90 million every year on fake goods, the national government is taking the problem of brand protection seriously. Its Intellectual Property Office has funded a special police unit that protects industries that produce legitimate, high-quality physical goods and online digital content from intellectual-property crime. If that sounds alarmist, consider that British police have seized thousands of products masquerading as popular brands such as MAC and Benefit—and found them to contain mercury, lead, arsenic and cyanide. In the last 18 months, it has shut down more than 5,500 websites selling fake luxury branded goods and has seized more than £3.5 million in fake goods. In the United States a ABC news report has found that fake MAC brand eye shadow being sold in a dollar store contained five times the acceptable amount of lead and 20 times the amount of copper a human organism can sustain, as well as beryllium, a known carcinogen. Indeed, the FBI issued a consumer alert in 2014 that called out the prob- lem and named the National Intellectual Property Rights Coordination Center (iprcenter.gov), also known as IPR, as a partner in this battle. The report states that "the volume of all sorts of counterfeit cosmetics and fragrances coming into the United States is definitely on the rise … because the Internet has given counterfeiters widespread access to customers, and because criminals increasingly view dealing in counterfeit personal-care products—as well as other knockoff consumer goods—as a relatively low-risk crime since many of the perpetrators are located outside of the United States." The vast majority of counterfeit goods are manufac- tured in China. They get into the supply chain and find their way to stores or are hawked on the street. But, as the FBI has correctly pointed out, there's an even greater threat on the Internet. By far, the majority of counterfeit cosmetic products are sold online on global marketplaces such as Alibaba, Taobao and eBay, and on independent, copycat websites and social-media platforms. The online counterfeit market is far more rampant because coun- terfeiters are able to sell massive quantities of a given product online—often in a single transaction. Beyond online marketplaces and individual sites sell- ing counterfeit goods, social networks and mobile apps, whose security is even easier to breach, compound the ecommerce problem. Counterfeiters targeting average consumers rely on advertising their products online— especially through social media. Once a Facebook user has "liked" a product, the door opens for fraudsters to post ads for very similar-looking products, usually priced 30% to 35% lower than retail. These will often come up looking like an actual post by one of the target's friends. HOW DO YOU KNOW IT'S FAKE? Here are some tip-offs from the FBI that the products you're buying (or selling) might be counterfeit: • Packaging. Look for even a slightly different color than the authentic brand, different lettering and/or wrapping that doesn't look professionally done. • "Limited-edition" advertising. It's probable that the authentic manufacturer doesn't offer it as a limited edition. • Price. If it's significantly lower in price—many counterfeit products come in at around 30% below manufacturers' suggested pricing—it's doubtless a fake. • Consistency and texture. Especially in cosmetics if the product doesn't feel like the authentic brand, it probably isn't. • Color or scent. For fragrances, if the color of the fluid in the bottle doesn't match the original or there's something even a little "off" about the scent, beware. Fragrance manufacturers too abide by extremely strict standards and regulations that keep their prod- ucts not only consistent in quality, but also safe for consumer use. • Unauthorized retail outlets. If branded beauty products are being sold through vendors that don't seem to be offi- cial sales reps for the brands, they're probably counterfeit. This includes flea markets, mall kiosks and, of course, the plethora of online marketplaces and fake websites. WHAT CAN BE DONE TO STOP IT? While the actual seizure of counterfeit goods is the province of law enforcement, when it comes to online sales of fake branded products there's actually quite a lot that retailers can do themselves to stop these fraud- sters from selling their wares. The proof is in the fact that many thousands of brand and trademark infringe- ments are removed from online platforms every day, and hundreds of cyber criminals are brought to justice. Image courtesy of Andrew Brodsky