COUNTERACTING THE COUNTERFEITERS
Office equipment dealers are not immune to office supply scam artists.
By Scott Cullen
In good times and in lean times some industries continue to thrive. No where is this more true than with the makers of counterfeit imaging supplies. These scam artists are making a good living for themselves, ripping off consumers and resellers of those supplies.
While counterfeit imaging supplies, such as toner and inkjet cartridges and ribbons are being knocked off left and right at offshore facilities, another scam is selling remanufactured or used cartridges as new. Equally damaging to the imaging supplies industry are the toner phoners who have turned telemarketing fraud into a profitable enterprise. Meanwhile the growing popularity of auction Websites provides another distribution channel for counterfeit imaging products.
A Billion-Dollar Business
The Imaging Supplies Coalition (ISC), a non-profit association of original equipment manufacturers of imaging supplies such as ribbons, toner, inks and cartridges, reports that commercial product counterfeiting of trademarked and copyrighted merchandise costs companies more than $350 billion in sales worldwide with approximately $1 billion of these losses attributed to imaging supplies.
Clearly all ISC members have something to fear from the counterfeiters and the fraudulent telemarketers. But then again so do resellers who may be unwitting accomplices to knock-off artists. Indeed, imaging supplies resellers are an important link in the counterfeiter’s distribution chain. Bill Duffy, president and CEO of the ISC has a million stories about resellers who have been stuck with counterfeit product. While one might think resellers should be a bit more savvy than the average imaging supplies consumer, the lure of imaging supplies at deep discounts sometimes clouds their judgment.
Toner, ribbon and inkjet cartridges represent prime targets for counterfeiters. No wonder, consumables are huge revenue generators. Because of this, knock-offs continue to proliferate, cutting into manufacturer’s revenue streams while also impinging the reputation of manufacturers and dealers who may be selling these counterfeit and often inferior cartridges.
Besides losing revenues, manufacturers also lose brand loyalty when a counterfeit cartridge doesn’t perform properly. Inferior products can also damage the reputation of resellers who may unknowingly sell these products to customers. Similarly, customers are affected because the quality of these products may not match the quality of the legitimate product, potentially damaging their equipment. Poorly manufactured cartridges not built to code and using a mix of volatile chemicals also pose a threat and can create liability issues for those resellers even if they unwittingly sell these products.
Office equipment dealers and resellers of imaging hardware are also victimized because not only are they competing with these illegal products, but they often find themselves called on to correct equipment problems caused by counterfeit consumables. Sometimes these issues can be traced to the consumables others are just another one of those “no problem found” service calls.
The Tell
As printing and graphics technology has improved so has the sophistication of the knock-off artists. Labeling and packaging of these counterfeit products are often so good that in some cases even the manufacturer’s themselves can’t pinpoint the differences between a legitimate product’s packaging and that of a counterfeit product. Some counterfeiters are extremely detail oriented, copying serial numbers and replicating numbers and other identifying marks on the cartridge housings themselves.
While it may be difficult to tell the difference between a counterfeit product and a legitimate one, there are signs. Red flags should start waving whenever an offer is made for products described as “inventory liquidations,” “manufacturer overruns,” or diverted products from other countries.
According to Sharon Kreps, channel marketing manager of Epson America and ISC Chair, one should question when they see brand name consumables being offered at 10% below MSRP. She explains that where the average MSRP of a legitimate product is $22-$24, and someone is offering it for $10-$12, an alarm should go off. However, Kreps makes a distinction between these counterfeit products posing as brand names and legitimate compatibles, where prices may be all over the place.
Preventive Measures
One of the best ways to protect against the proliferation of knock-off products is through education. The ISC continues to educate manufacturers and resellers on fraud in the imaging supplies industry as well as its efforts to eradicate it. For the past seven years, the ISC has held a conference dedicated to these issues.
Imaging supplies manufacturers are also working towards eradicating fraud in the imaging industry by educating their distribution channels. Although Kreps doesn’t see a counterfeiting problem in Epson’s large accounts, such as the Superstore channel, she does concede that certain accounts may be susceptible to the counterfeiters. That’s one of the reasons she felt is was critical to educate Epson’s sales and marketing force so that they in turn can go into the field and educate accounts while at the same time are able to recognize a product or packaging that doesn’t look correct. Kreps notes that whenever these issues are brought to Epson’s attention, the products turn out to be counterfeit 100% of the time.
When in Doubt…
One of the ways the ISC is working to reduce the incidence of fraud is through its “When In Doubt…Check It Out Program.” The program allows dealers, distributors and customers to submit questionable imaging supplies to the ISC for authentication. These products are then forwarded to the manufacturer for analysis. Duffy reports that all requests are confidential and the individual submitting the product is not identified to the manufacturer. If the merchandise is legitimate, the individual sending in the product is informed and the transaction concluded. If it is counterfeit, infringing on a copyright, used or remanufactured being sold as new, the individual is notified and asked to identify the source of the offer. The ISC then pursues the situation without involving the individual who submitted the tainted product unless they agree.
About 20% of all submissions have been verified as counterfeit with nine different supplies manufacturers brands found to have been counterfeited. Through the program, companies have traced the source of its counterfeit products, leading to civil and criminal prosecution in the U.S., Europe, Latin America, Canada and Asia.
The ISC is also working with various auction Websites to detect fraud and protect customers. They’ve even encouraged ebay to set up a separate category for compatible imaging products. “The problem with auction sites is that they can be coming from anywhere,” says Duffy. “As soon as you shut them down, they open up the next day again under a different name.”
Not Going Away
With all these sophisticated tricks up their sleeves, are the counterfeiters are winning the rip-off war? They many not exactly be winning the war, but they aren’t giving up despite the efforts of the ISC. “There’s an endless supply of victims and the industry keeps growing,” notes Duffy. Indeed, as soon as one shop or boiler room operation is shut down another takes its place.
Duffy reports the ISC is working with authorities here in the U.S. and in countries where many of these products originate to ensure that stiffer penalties are imposed. While the ISC handles much of the initial investigation, their results are turned over to the governments where these acts are taking place and it’s up to the governments to shut down the operation and prosecute.
Meanwhile, resellers of imaging supplies should continue to be cautious of deals that seem too good to be true. More often than not, they are.
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