Counterfeit Crisis: UAE executives want harsher punishments to slow the flood of fake goods flowing through the Gulf - with video.
Brands urge big fines for fakes
The penalties for trafficking counterfeit goods need to be increased to slow the flood of fakes flowing through the Gulf, say UAE executives.
Dubai Customs officials seized 75 per cent more shipments of counterfeit goods, including luxury handbags and brake pads, last year compared with 2009.
But many companies say the guilty parties often end up back in business within weeks. The same pattern applies to shopkeepers who sell fake goods locally and openly admit the fines they incur are not a serious deterrent.
"We are trying to influence local authorities to have much tougher penalties and fines towards people who infringe the trademarks," said Mansour Hajjar, the managing director of Allied Enterprises, a regional partner for dozens of premium brands such as Louis Vuitton, Chanel and Fendi. He said imitations not only hindered sales but also tarnished the brands' images.
Many of the most fashionable counterfeit goods, such as handbags, watches, sunglasses and perfumes, are sold from private rooms in the backs of stores or nearby in the homes of the shopkeepers.
"The moment the police find out about these secret rooms and make a raid and destroy the goods, they fine this person," Mr Hajjar said. "But the fine is not big enough to put them out of business."
Several shopkeepers who were selling counterfeit goods this week conceded as much.
"It's worth selling them because it's good business," said one shopkeeper, who asked not to be named, in the Karama section of Dubai.
He said the typical fine for a first offence was Dh10,000 (US$2,722), which is an acceptable cost given that a busy store can collect as much as Dh1 million a year. Stores are only shut down after a third offence, shopkeepers said.
Brand agents in the UAE, who are responsible for safeguarding their companies' intellectual property in the region, say they contact authorities when they locate a store peddling fakes but feel their efforts are having little effect.
"What we are doing is only a scratch on the surface. We shut down one [store selling counterfeits], and five more reopen," said Ulrich Mueller, the head of Middle East and North Africa (Mena) sales for Mahle car parts.
International officials say thousands of container ships from Asia are being sent through the Jebel Ali Free Zone in Dubai before going on to Europe.
According to the latest figures from the European Commission (EC), the UAE is the second-most common source of counterfeit goods seized in Europe, behind China. Some 14.6 per cent of all fakes detained in the EU in 2009 came through the UAE, up from 12.3 per cent in 2008, the EC said.
But not all of the counterfeits that enter the country are re-exported to foreign markets. Brand agents say they believe an increasing number of knock-offs are being sold locally.
The range of faked products - and the sophistication of the forgeries - is also on the rise.
"It is not just luxury goods. It is everything you can imagine," said Christophe Zimmermann, the co-ordinator for the fight against counterfeiting and piracy at the World Customs Organisation in Brussels.
In some cases, such as medicines and car parts, the concern is as much about public safety as it is commerce.
John Schneider-Merck, an agent for several German spare parts manufacturers in the Mena region, said counterfeiters had developed such sophisticated techniques the only way to discern a fake part from a real one was to have it tested in a laboratory or machine shop with specialist equipment.
"The packaging is almost perfect," he said. "There used to be problems with the logo or the text on counterfeit products. You cannot tell just by looking at it anymore."
In 2009, the UAE was listed as the port of origin for 73 per cent of the fake medicines seized in the EU; 30 per cent of compact disks and DVDs; and 15 per cent of tobacco products. Those figures indicate only the UAE was the country from where the goods were most recently shipped, not that they were produced there.
Although precise figures are not available, Mr Zimmermann said his organisation believed somewhere between 60 and 80 per cent of the world's counterfeit goods were made in China.
Mr Hajjar said it was only "a matter of time" before the Middle East imposed fines at a similar level to those in Europe, where counterfeiting is now seen as serious offence.
"Europe took many years before it began to solve its counterfeit problems. We will get there," he said.
Dubai Customs officials could not be reached for comment.
* with additional reporting by Bradley Hope