Shampoo case shows perils of honesty in fight against fakes

AP News
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Posted: Dec 10, 2015 2:14 AM

SHANGHAI (AP) — On paper, the reports were perfect, brilliant parries in the fight against fakes in China. There were phone numbers, dates, official agencies, photographs and a nice haul: over 120,000 packages of counterfeit anti-dandruff shampoo, plus seven vats of ingredients.

There was one problem: None of it was true.

The reality of what happened was so galling that when the director of brand protection in China for the company that made the shampoo found out, he did not tell his boss.

"If I disclosed this, it would do very big damage to the team's reputation," the director said. He, and another in-house investigator directly involved in the case, spoke on condition that their names and the name of their employer not be disclosed, for fear of losing their jobs.

The company had outsourced its anti-counterfeiting work to an outside investigator. But instead of finding real counterfeiters, the investigator opened his own factory in a two-story house in Anhui, one of China's poorest provinces. There, above a small grocery shop, a machine pumped out counterfeit shampoo, which the investigator then had seized and billed to the consumer goods company as a successful raid.

It wasn't the first such factory the investigator — a tall, quiet man named Wang Yunming — had opened. It was the fourth.

If he hadn't been caught, Wang could have made over $9,000 for the faked raid in Anhui. Instead, Wang was convicted of fraud and is due to be released from prison in 2023, according to a copy of a judgment from Hefei Intermediate People's Court. Anhui police declined to comment.

In response, the company's brand protection director fired the investigations company Wang worked for and quietly built in new checks and balances to his anti-counterfeiting operation. He now sends staff on every raid and gets the contact numbers of local authorities involved in the raids so he can double-check investigators' reports.

"I want this industry to be more ordered, regulated and legal," he said.

The case showcases the ample opportunity for fraud in the fight against fakes in China and highlights the distortions that underpin many brand protection programs.

"My team's performance depends on three numbers: How many criminal cases you did. The second is how many administrative cases you did. The last is the value of the seizures you disclosed," said the firm's brand protection director.

That means if he had kept quiet and accepted Wang's faked numbers, he himself might have gotten a bigger bonus that year.

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Associated Press researcher Fu Ting in Shanghai contributed to this report.