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NEMA’s general counsel weighs in on counterfeiting in the channel

By Bridget McCrea

When someone copycats a legitimate electrical product everyone loses. End users get inferior products and may even get hurt by the counterfeit versions. The original manufacturer and its distribution network lose sales, gain legal expenses, and wind up with damaged reputations. The industry as a whole gets a black eye as end users complain about the purchase to co-workers, friends, and family—both online and in person.

The hotter the product, the better the odds that it will be counterfeited either domestically or in a country like China where counterfeiting is big business. In fact, the Department of Homeland Security estimates that 81% of all counterfeits in the U.S. came from mainland China.

According to the National Electrical Manufacturers Association (NEMA) in Rosslyn, Va., the manufacturing and sale of counterfeit products is widely recognized by the U.S. and its trading partners as “a crime involving the theft of intellectual property rights, including patents, trade, service and certification marks, and copyright.”

There are not only economic consequences from trafficking in counterfeit goods, including injury to the reputation of the rights-holder who has made a substantial investment in the quality of its product and brand name, NEMA reports, but also to the deceived consumer, especially when health and safety is impacted, and to governments that face a loss of tax revenue.

In a recent CSA-NEMA report, the groups estimate that counterfeiters sell about $750 billion in products worldwide every year, and that the business grows at a rate of about 20 to 25 percent annually.  “It’s definitely a persistent issue in our industry; it’s not going away,” says Clark Silcox, NEMA’s general counsel. On a positive note, he says electrical product manufacturers have had a “considerable amount of success in knocking out some of the counterfeiters at the source, in China.”

Unfortunately, some of those manufacturers, and their distributors, are fighting a losing battle against counterfeiters that can break down their operations (in answer to, say, a cease and desist order) and then get back into business fairly quickly. “You win one battle,” Silcox explains, “and then five or six months later you find out that someone else has started the cycle all over again.”

Silcox says electrical distributors play a key role in identifying and thwarting the crooks who copy their vendors’ products and then try to sell the inferior, and oftentimes dangerous, items to end users. These strides have been especially evident on the domestic side of the channel. “Manufacturers have had excellent cooperation from the distribution channels,” says Silcox, “in terms of ensuring that their supply chains are clean and free of counterfeits. The manufacturers appreciate that.”

The international field isn’t as easy to rein in, particularly when it comes to inexpensive consumer items like extension cords and batteries. Such products typically work their way through the hands of various importers and then wind up on the shelves of discount stores, tables at flea markets, and online outlets like eBay. “This is an ongoing problem that manufacturers have to deal with,” says Silcox. “In fact, our members are addressing this domestically, and in places like South America, Asia, and Africa.”

China is one of the biggest producers of counterfeit electrical goods, according to Silcox. Many times the culprits are apprehended after presenting the “deal of the century” to prospective customers, who are then shown product photos and offered super-low pricing on a variety of products. In some cases the pictures may feature genuine products, says Silcox, but when the shipment arrives the items in it are anything but genuine.

“If a deal is struck with the buyer, those goods work their way into our domestic supply chains and the trading continues until the item gets to the end user,” says Silcox, who points to the Internet as an enabling medium for the counterfeit deals. Sellers can effectively “hide” behind their computers, show buyers photos of genuine products, deliver the inferior goods via mail or truck, and then disappear.

To electrical distributors who pick up on such activity, Silcox says the best move is to get in touch with the real manufacturer and alert it to the fact that its products may have fallen prey to domestic or international counterfeiters. The manufacturer should be able to easily identify whether the item(s) is indeed legitimate or not.

“If you see something suspicious, report it,” advises Silcox, who adds that even a “no name” product with a test lab mark on it could be counterfeit and should be verified using an online verification system like the type offered by CSA or Underwriters Laboratories. “This can help cut down on counterfeiting and keep end users safe.”

McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

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