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Manufacturing of counterfeit products rearing its ugly head again in South Africa

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Published Date: April 7, 2022

The recent news reports of a manufacturing facility found to be selling counterfeit washing powder, have reignited concerns about the extent of the counterfeiting industry in South Africa.

When you mention the word “counterfeit goods”, most people think about a few counterfeit sneakers or handbags making its way into South Africa in a container or an opportunistic hawker trying to sell a few items at a traffic light. However, when you look at the reports and actual cases where manufacturing facilities were found in South Africa in recent years, it becomes apparent that there is a real threat to brandholders and the public from within our borders. The word “threat” should not only be considered in the context of the financial harm caused to brandholders, but also the potential health and safety risks, particularly when looking at the nature of the counterfeit products mentioned below.

In 2016, our firm collaborated with several HAWKS branches of the SAPS across provinces to execute simultaneous operations at several manufacturing plants involved in refilling and selling counterfeit engine oil. In addition to the various counterfeit branded drums and buckets of oil seized, large numbers of counterfeit oil drum seals, branded labels and other manufacturing tools were seized from the Suspects.

During the latter part of 2016, our investigators assisted the Police in clamping down on a factory manufacturing counterfeit bottled water. The video clips of this operation have been widely circulated by the various media outlets.

Over the years, manufacturing activities in the counterfeiting industry have evolved into sophisticated syndicates sourcing raw materials from various countries and outsourcing packaging requirements to cheap suppliers. In many instances we identified important documentary and digital evidence showing that the illegal operations were funded and operated through validly registered companies. Counterfeit Goods manufacturing facilities have mushroomed in recent years in places all over the country, including smaller towns like Hartswater, White River and Brakpan, presumably to avoid detection by the authorities.

Although the Covid-19 lockdown restrictions initially appeared to stifle the counterfeiting trade to a certain extent, the downward curve didn’t last very long. In late December 2021, when the country was battling another Covid-19 wave, SAPS arrested several foreign nationals at a manufacturing facility found in Tshwane, Gauteng. The suspects rented a luxurious house in an upmarket estate and used the large garage and other rooms in the house to manufacture counterfeit instant yeast products. Several luxury cars and bank statements showing large sums of money  deposited into company bank accounts were also found at the premises.

In a recent operation in 2022 in the West Rand region, our investigator accompanied the Police during an operation where more than 300 000 counterfeit hair braid packaging-sleeves were seized. It appears that this facility even had their own graphic designer employed at the premises to assist in designing the counterfeit packaging to imitate the genuine versions as close as possible.

The one aspect that has remained consistent over the years when it comes to discovering manufacturing facilities, is that there is no product that they will not copy or imitate. Concerningly, the sophistication of these operations and networks have evolved considerably over the years to constitute profitable business enterprises. That is not only apparent from the luxury cars found at the premises and the trading activities channeled through companies, but also the experienced criminal defence attorneys appointed by them.

Although many brandholders set their hopes on the courts to impose harsh sentences as deterrent mechanisms, brandholders have an obligation to support law enforcement with the required assistance and private investigations. The collection of evidence and timeously submission of subsequent analysis statements are crucial to place the authorities in the best position possible to pursue all the role-players involved. It is important that brandholders are correctly advised on the legal processes and the best options possible to eliminate not only the manufacturing aspect but also to ensure that other parties who have sold and benefitted from the trade in counterfeit goods are apprehended and pursued. In normal run-of-the-mill seizures executed at counterfeit goods traders, you would usually follow the trail of breadcrumbs to the suppliers and manufacturers. But when in the advantageous position of knocking over a manufacturer from the get-go, it is crucial that the legal action should filter down to identify and eliminate the others that derived benefit from the process, whether as traders who purchased counterfeit products from the manufacturers or as the suppliers of raw materials and other tools. When selecting an appropriate civil remedy (whether on its own or to accompany a criminal case) it has been our experience that there are better options to increase the immediate pressure than the usual civil summons-remedy preferred by some anti-counterfeiting practitioners.

With oil and commodity prices skyrocketing due to the Ukraine – invasion, it can be expected that more counterfeit goods dealers will move to take their sourcing activities in-house and start their own manufacturing enterprises.

Jan-Harm Swanepoel
Partner | Trade Mark Attorney

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