Growth of counterfeiting industry
Seizures of counterfeit goods are reportedly increasing by 46% annually, which makes the manufacturing of counterfeit goods one of the fastest growing industries worldwide. This is according to Nishan Singh, senior associate and counterfeiting expert at attorneys Adams & Adams, who adds that in August 2011, SARS seized 66 000 counterfeit rugby jerseys, with an estimated street value of R43 million.
"Because of its unique modus operandi, it is almost impossible to obtain accurate statistics on the counterfeiting industry. In South Africa, it's estimated to total an astounding R362 billion," says Singh.
Counterfeiters initially targeted the global market with copies of well-known international trademarks and products such as clothing, shoes, watches and sunglasses. He says this has now diversified to unlikely marketing such as household detergents, cigarettes and automotive parts, as well as pharmaceutical products.
"Counterfeit goods have both economic and social implications. Naturally, the proprietors of the genuine goods suffer huge economic losses, while the consumer is now on the receiving end of inferior quality goods which expose them to both safety and health - which is particularly disturbing."
It is generally related to other criminal activities such as drugs and money laundering.
The growth of counterfeiting has been so exponential that certain industries find themselves in direct competition with the counterfeiters. "Advances in technology, increased international trade and emerging markets are factors that have contributed to the rapid increase in the prevalence of counterfeiting."
While South Africa is not notorious for the manufacture of counterfeit goods, the presence of these goods in the market is undeniable. To combat this problem, measures have been provided to deal with all forms of trading in counterfeit goods in the Counterfeit Goods Act promulgated in 1997.
Detection unlikely, proprietors must file for seizure
Ideally, these goods should of course be prevented from entering the South African borders in the first place. However, due to the large volume of containers that are being imported into South Africa, only around 5% are searched by customs officials. As a result, counterfeit goods slip into the country under the radar.
The Act allows the proprietor of genuine goods to file an application to the Commissioner of Customs and Excise to seize and detain all counterfeit goods that are being imported into South Africa.
"In order to file such an application, the proprietor must furnish the Commissioner with a specimen of the original goods and details of its intellectual property rights, which include copyright and registered and internationally recognised trademarks. Once the counterfeit goods are seized, criminal and civil prosecution against the importer may commence."
Once the counterfeit goods are in the market, the proprietor of the genuine goods can file a different complaint to the Commercial Crime Unit of the South African Police Service, or with an Inspector who has been appointed as such in terms of the Act.
If there are merits to do so, the courts are approached for a search and seizure warrant, which would permit removal of the goods from the marketplace. Again, criminal and civil prosecution may commence against the offender.
Singh says the Act has strict penalties, which may be imposed upon counterfeiters in the event of their conviction. In the case of a first conviction, the counterfeiter is be liable to pay a fine, which may not exceed R5000 for each counterfeit product, or imprisonment not exceeding three years, or both. Some of the more serious sanctions imposed by the courts have been a 5-year imprisonment and a R140 000 fine.
In order to win the battle against counterfeiting, there needs to be co-operation between the proprietor of the genuine goods and the enforcement agencies.
The apparent quality of counterfeit goods has improved and it has become increasing difficult for the police and customs officials to identify these goods. Furthermore, counterfeiters approach the market with increasing sophistication, which makes the industry more difficult to counteract.
"Ultimately though, the responsibility lies with the end consumer. The litmus test is - if the cost of an item seems too good to be true or the source a trifle dodgy, then generally it is not the real thing," concludes Singh.