Spot The Fake One

YOU don't expect fifty something, soft-spoken Sathish Makhija to strike terror. But he does. Ask the owners of tacky shops in Sadar Bazaar, in the crowded lanes of Gandhinagar, in air-conditioned Palika Bazaar in New Delhi, where he is in the centre of noisy brawls and fisticuffs.

An ex-officer in the intelligence wing of the Air Force, Makhija is a private detective. His current mission: to ferret out and shut down shops that sell fake goods; destroy the market that survives by selling duplicate brand names, altered logos; kill the parallel market of Reebok shoes, Levi's jeans, Calvin Klein T-shirts, Windows software, Chanel handbags, Fair & Lovely cream, Lakme lipstick, Estee Lauder perfumes, Maruti spare parts, Kit Kat chocolates, Captain Cook salt. In short, exterminate an industry whose turnover runs into thousands of crores.

Phony goods are not new in India, says lawyer Chander M. Lall who got a mandate from Sony 10 years ago to crack the bogus bazaar—800 shops across the land—selling Sony products. During one such raid in Delhi's Lajpat Rai market, one counterfeiter boasted: "I'm the greatest maker of Sony outside of Japan." It cost him his business.

But counterfeiting then was a low-quality, low-price, low-end operation run by small leaguers and retailed mostly via sidewalk vendors. Imitable brands were few, largely owned by MNCs who weren't bothered since they were not doing business in India. Also, many Indian companies preferred to dump goods through the illicit route into the markets to escape excise; they weren't concerned about fakes. In fact, they saw it as image-enhancing.

All that's changing now. MNCs, entering India with brand reputations honed over decades, aren't amused about copycats making huge margins on substandard, cheap goods that undermine confidence in established brands. "We're determined to see counterfeiters punished," says Sanjay Choudhuri, MD, Levi's India. Last year, Levi's conducted some 20 raids. Lacoste, Nestle, Hoechst, Procter & Gamble, Hindustan Lever, Colgate-Palmolive are equally frazzled about fakes. Says Siddharth Verma, GM (marketing), Reebok: "Our brand has an aspirational value that leads to unscrupulous elements exploiting it. We can't afford to let our image suffer."

Indian companies too are realising that fakes hurt. Says Sanjeev Aga, MD, Blow Plast: "We discovered virtually every retailer in Ahmedabad was selling knock-offs and in Mumbai there were more fake Skybags selling than real ones. At least half our business was going to counterfeiters." That's when the company launched nationwide raids. Today less than 1 per cent of hard luggage business is lost, "although in soft luggage 20 per cent still goes to bogus goods".

In '96 Arvind Mills set up an anti-piracy cell, the first of its kind in India. It found that its Rs 70-crore ready-to-stitch Ruf and Tuf brand and the Newport brand—both targeted at the price-sensitive consumer—were being sold either in the original names or in phonetically similar names like Tuf and Tuf, Tuf and Stuff, Newpost and Newfort. Raids were conducted at Delhi's Gandhinagar and Mumbai's Ulhasnagar. The haul: some 2,000 pairs of jeans in Delhi, 1,500 in Mumbai plus countless rivets, labels, pocket blasters and buttons embossed with the brand name. Earlier, in a concerted move, the Indian music industry raided 20 cities, arrested 62 pirates and recovered 93,000-odd pre-recorded cassettes and inlay cards, and 100 high-speed copiers from Punjab and Haryana alone.

Private detectives direct these raids, not policemen. The police, says Shyam Singh, ACP, Delhi Crime Branch, can't take suo motu action against duplicators. Makhija works with a team of informants, who gain the confidence of counterfeit vendors, or with decoys posing as finicky shoppers,often actors. They have to track down the vendor's backlane godown. Once the deal is struck, the law steps in formally. "It's gut-wrenching, frustrating work," says Makhija. Vendors tend to work in fortress-like markets, with a parallel network of wholesalers, distributors and retailers, guarded by strong entities like the Gandhinagar Readymade Garments Association or the Ulhasnagar Sindhi Association. At most centres, hawk-eyed 'spotters' sit in the lanes and bylanes, ready to spread the word if a detective or cop is spotted. The hint of a raid, and shops snap shut in seconds and goods disappear with lightning speed. At times, violence ensues. Makhija has had chairs thrown at him, dodged broken bottles—the long scar on his cheek bears testimony. Says Dharmendra Kapoor of Super Network, an anti-counterfeit group: "Unless I receive one threatening call a week, I feel I'm slackening in work." But it's a losing battle for now. Reasons:

Technology:
When every computer is a potential duplicator, the only investment is the floppy disk. "The temptation and rewards of an unfair game are very strong," says Verma. Agrees lawyer Bindu Chib, who represents Motion Pictures Association in India: "All that a pirate needs is around Rs 30,000 for a television and a VCR to make illegal copies of a Hollywood product that would cost around Rs 17.5 crore to make." Scanners make it easy to copy logos in ditto and colour printing makes look-alike labels as perfect as possible. The quality is better and while originals spend big money on brand-building and awareness, the margins are bigger for counterfeiters who not only save on promotion but also central and state taxes.


Neighbouring countries are providing counterfeiters with larger markets. Early this year, fearing a witch-hunt in Hong Kong after China took over, pirates there dumped software in India through Nepal—which had no copyright laws until recently. Around the same time, Walt Disney discovered that hard-to-tell illegal prints of their characters on toys and watches were the result of some counterfeiters importing product stamps and moulds from Singapore and Dubai. They cracked down on the 100-odd counterfeiters in a bid to stem the menace.


According to Chib, "fake makers are good planners, close to the market, know what's selling, practise just-in-time management of inventories with as little wastage as possible." The crackdown on counterfeiters has resulted in their scattering their assembly line into a hard-to-connect jigsaw of small operations. If earlier the pirates were working for 24 hours at one site, now they work only eight hours at night in far-flung sites, storing goods in different godowns, making it difficult to catch large quantities. "It's like killing bees with a hammer," says Parveen Anand, a copyright and trademarks lawyer.


With satellite television, a new market is being created in the rural areas of customers who want to buy dear brands at cheap rates. Thus, the low-end counterfeiting is finding a larger market in the rural areas whereas in the metros covert retailing is on the rise. "The sales staff of companies are often in cahoots with the large stores to slip in well-made copies of T-shirts or jeans along with the originals."

One major factor in the growth of counterfeits is the tedious process of justice. On paper, Indian law prohibits unauthorised duplication, and provides for civil and criminal prosecution of duplicators. The punishment: a Rs 50,000 to Rs 200,000 fine, and a jail term of 7 days to 3 years. "But often, the complainant agrees to compensation and apology from the offenders and the case is withdrawn," says V. Ranganathan, additional DCP, Economic Crime Branch, Delhi. "If the clients persist with the case, the backlog of litigation and processes can be so time-consuming that it defeats the whole purpose of initiating any action. In the meantime, the counterfeiter can start off under a different name and address," says C.M. Maniar, partner, Crawford Bayley & Co.

The peddlers know this. "If I'm caught, I'll post bail, and be back in a day or two," says one pirate peddling software. Another counterfeiter of Reebok and Nike shoes even fancies himself as a kind of Robin Hood, stealing designs from foreign companies to give to poor countrymen. "These companies are fooling people by charging Rs 4,000 for shoes costing Rs 500. We're not cheats, they are," says he. In the face of such logic, can police raids or court cases really counter homegrown entrepreneurship?