Counterfeits

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There are many theories as to why Kenyan counterfeiters and entrepreneurs dealing in counterfeits are smiling their way to the bank. From weak and non-supporting frameworks, lack of a national consumer policy on public information, education and communication to adopt the thinking behind “cheap is expensive” conspicuously stands out.

Some quarters believe that Kenyan consumers obsession with “cheap” commodities is to blame for increased counterfeits. Others blame poverty. Local traders “over-price” their commodities citing high costs of doing business. Distributors who visit China and other countries from the East reportedly opt for substandard goods of relatively low quality to satisfy local consumer demand.

Like many other countries, China produces both high quality and substandard goods depending on the buyer’s affordability and preference. Indeed most substandard goods in Africa trace their origin in the East notably India, Malaysia, South Korea and China.

But China is not only known for substandard goods; counterfeits are also their game. But what is the difference between counterfeits and substandard goods? Well, the two terms cannot be used interchangeably. Whereas counterfeits are the exact copy of the original product, they are not necessarily substandard.

On the other hand, substandard goods are actually genuine products only that they do not meet Kenya Bureau of Standards (KEBS) specifications. Counterfeits are supposed to be goods of poor quality passing on as genuine ones .Wikipedia, the free online dictionary, defines a counterfeit as “an imitation, usually one that is made with the intent of fraudulently passing it off as genuine.”

This definition has two outstanding concepts with regard to counterfeited products and their consumption. First, when one resorts to imitating a product it means that he has recognized its market dominance and its level of consumer loyalty which he seeks to exploit and abuse since he can’t compete effectively. Perhaps this explains why only brand names that are well known are targeted for this illegal production. This happens in virtually all economies of the world.

Secondly, and even more importantly, it results from failing economic, legal and policy frameworks that counterfeits thrive in. It is a pure case of corruption and rent seeking and possibly inadequacy in policing. Otherwise how else can one explain a situation where most counterfeits products in Kenya today bear the Kenya Bureau of Standards mark of quality or that some counterfeit products enter our borders under the watch of Kenya Revenue Authority custom officials. The same can also be said of substandard goods.
Since counterfeits thrive in a situation of product market dominance and corruption could China be said to be corrupt to a level that supports counterfeits? Well, according to a BBC report released in February, China just like most industrialized countries, has traditionally had problems with corruption.
Despite an impressive array of anti corruption and ant-counterfeit laws, enforcement is always a tall order. “Despite some highly-publicized prosecutions and convictions, the rate of government corruption has grown in the last ten years, not declined. By some estimates it has grown exponentially”, concludes the report.
Some may have a contrary opinion, but what is common knowledge though is that Chinese counterfeits have flooded the Kenyan market and account for a sizable array of both basic and industrial products ranging from match boxes, writing pens, radio batteries, engine oils, children toys, shoe polish, textiles to electronics amongst others.

Of late, counterfeiters have upped their game by becoming more sophisticated thus making it extremely difficult to distinguish their fake products from genuine ones thereby creating what has come to be known as “genuine” fakes. The most poignant examples in this category are sunglasses, shoes, wallets, mobile phones and printer cartridge.

According to a study by Hewlett-Packard (HP) manufacturers of printer cartridges, most traders along major streets of Nairobi sell fake HP printer cartridges which, are manufactured or refilled in the backstreets of Nairobi by Kenyan counterfeiters working in cahoots with their Chinese counterparts forming what HP describes “the best copy cats in the world”. This illustrates the intricate and global cross-border nature of counterfeits.

World over, counterfeits remain a major headache to manufacturers. They stifle innovation- a major driver of entrepreneurship. Why? Counterfeiting creates a parallel market of fake goods whose demand is always insatiable. Counterfeits are usually relatively cheap and more profitable as compared to the genuine products hence their incessant demand.

A rational consumer will prefer spending less to more for the same product, but can a consumer be said to be rational if he cannot distinguish a fake product from a genuine one, their prices notwithstanding?

Not to mention the health or safety concerns, consumers need to understand that the danger of counterfeits. Unknown to majority consumers, Kenyans remain among the top global victims of consumer ignorance and counterfeiters.

Counterfeits have effects at both the economy and individual levels. The Kenya Association of Manufacturers estimate that manufacturers lose about Sh30B while the government loses about Sh6B in revenue annually.

To the consumer, the effect cannot be easily quantified. Take the example of counterfeit automobile spare parts and pharmaceutical products that put the victims’ lives on the line through possible fatal road accidents and either serious side effects or deaths, respectively.

Economists argue that in a competitive market situation consumers will always be well informed and this is what guarantees cheaper products without compromising quality. Another key question is – can consumer information, education and communication help fight counterfeits?

Counterfeits are both a supply and demand-driven issue. The law may set up punitive measures to deal with manufacturers of counterfeits but if the gullible consumers are not empowered to the point where they can make informed decisions then counterfeits won’t just fade away. Gullible and ignorant consumers are a major setback to the fight against counterfeits. They offer the single most attractive incentive to manufactures of counterfeits.

This is why the Consumers Federation of Kenya points out the flaw within the Anti Counterfeit Act, 2008 which realized the Anti-Counterfeits Agency operating under the Ministry of Trade. The legislation has no single provision on educating the consumer on counterfeits.

All manufacturers engaging in counterfeits are usually aware that they are breaching the law but majority of consumers are not. While deterrents of penalties and criminal punishments are useful, other dimensions to change consumer behaviour reign supreme.

Without a well crafted national policy on consumer information, education and communication, the fight on counterfeits may be an exercise in futility. The public needs to appreciate that counterfeiting has become more sophisticated and as the experience in automobile spare parts, imported drugs and office supplies has shown, many legally recognized traders of imported products sell both genuine and counterfeit products under the same roof.

The perception among average consumers is that counterfeits represent value for money. Consumer education will help dissuade such notions by highlighting the non monetary costs of counterfeits.

Kind regards,
Calvin

Calvin Otieno
Program Officer
Consumers Federation of Kenya (COFEK)
([email protected])

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Counterfeits

Shares

There are many theories as to why Kenyan counterfeiters and entrepreneurs dealing in counterfeits are smiling their way to the bank. From weak and non-supporting frameworks, lack of a national consumer policy on public information, education and communication to adopt the thinking behind “cheap is expensive” conspicuously stands out.

Some quarters believe that Kenyan consumers obsession with “cheap” commodities is to blame for increased counterfeits. Others blame poverty. Local traders “over-price” their commodities citing high costs of doing business. Distributors who visit China and other countries from the East reportedly opt for substandard goods of relatively low quality to satisfy local consumer demand.

Like many other countries, China produces both high quality and substandard goods depending on the buyer’s affordability and preference. Indeed most substandard goods in Africa trace their origin in the East notably India, Malaysia, South Korea and China.

But China is not only known for substandard goods; counterfeits are also their game. But what is the difference between counterfeits and substandard goods? Well, the two terms cannot be used interchangeably. Whereas counterfeits are the exact copy of the original product, they are not necessarily substandard.

On the other hand, substandard goods are actually genuine products only that they do not meet Kenya Bureau of Standards (KEBS) specifications. Counterfeits are supposed to be goods of poor quality passing on as genuine ones .Wikipedia, the free online dictionary, defines a counterfeit as “an imitation, usually one that is made with the intent of fraudulently passing it off as genuine.”

This definition has two outstanding concepts with regard to counterfeited products and their consumption. First, when one resorts to imitating a product it means that he has recognized its market dominance and its level of consumer loyalty which he seeks to exploit and abuse since he can’t compete effectively. Perhaps this explains why only brand names that are well known are targeted for this illegal production. This happens in virtually all economies of the world.

Secondly, and even more importantly, it results from failing economic, legal and policy frameworks that counterfeits thrive in. It is a pure case of corruption and rent seeking and possibly inadequacy in policing. Otherwise how else can one explain a situation where most counterfeits products in Kenya today bear the Kenya Bureau of Standards mark of quality or that some counterfeit products enter our borders under the watch of Kenya Revenue Authority custom officials. The same can also be said of substandard goods.
Since counterfeits thrive in a situation of product market dominance and corruption could China be said to be corrupt to a level that supports counterfeits? Well, according to a BBC report released in February, China just like most industrialized countries, has traditionally had problems with corruption.
Despite an impressive array of anti corruption and ant-counterfeit laws, enforcement is always a tall order. “Despite some highly-publicized prosecutions and convictions, the rate of government corruption has grown in the last ten years, not declined. By some estimates it has grown exponentially”, concludes the report.
Some may have a contrary opinion, but what is common knowledge though is that Chinese counterfeits have flooded the Kenyan market and account for a sizable array of both basic and industrial products ranging from match boxes, writing pens, radio batteries, engine oils, children toys, shoe polish, textiles to electronics amongst others.

Of late, counterfeiters have upped their game by becoming more sophisticated thus making it extremely difficult to distinguish their fake products from genuine ones thereby creating what has come to be known as “genuine” fakes. The most poignant examples in this category are sunglasses, shoes, wallets, mobile phones and printer cartridge.

According to a study by Hewlett-Packard (HP) manufacturers of printer cartridges, most traders along major streets of Nairobi sell fake HP printer cartridges which, are manufactured or refilled in the backstreets of Nairobi by Kenyan counterfeiters working in cahoots with their Chinese counterparts forming what HP describes “the best copy cats in the world”. This illustrates the intricate and global cross-border nature of counterfeits.

World over, counterfeits remain a major headache to manufacturers. They stifle innovation- a major driver of entrepreneurship. Why? Counterfeiting creates a parallel market of fake goods whose demand is always insatiable. Counterfeits are usually relatively cheap and more profitable as compared to the genuine products hence their incessant demand.

A rational consumer will prefer spending less to more for the same product, but can a consumer be said to be rational if he cannot distinguish a fake product from a genuine one, their prices notwithstanding?

Not to mention the health or safety concerns, consumers need to understand that the danger of counterfeits. Unknown to majority consumers, Kenyans remain among the top global victims of consumer ignorance and counterfeiters.

Counterfeits have effects at both the economy and individual levels. The Kenya Association of Manufacturers estimate that manufacturers lose about Sh30B while the government loses about Sh6B in revenue annually.

To the consumer, the effect cannot be easily quantified. Take the example of counterfeit automobile spare parts and pharmaceutical products that put the victims’ lives on the line through possible fatal road accidents and either serious side effects or deaths, respectively.

Economists argue that in a competitive market situation consumers will always be well informed and this is what guarantees cheaper products without compromising quality. Another key question is – can consumer information, education and communication help fight counterfeits?

Counterfeits are both a supply and demand-driven issue. The law may set up punitive measures to deal with manufacturers of counterfeits but if the gullible consumers are not empowered to the point where they can make informed decisions then counterfeits won’t just fade away. Gullible and ignorant consumers are a major setback to the fight against counterfeits. They offer the single most attractive incentive to manufactures of counterfeits.

This is why the Consumers Federation of Kenya points out the flaw within the Anti Counterfeit Act, 2008 which realized the Anti-Counterfeits Agency operating under the Ministry of Trade. The legislation has no single provision on educating the consumer on counterfeits.

All manufacturers engaging in counterfeits are usually aware that they are breaching the law but majority of consumers are not. While deterrents of penalties and criminal punishments are useful, other dimensions to change consumer behaviour reign supreme.

Without a well crafted national policy on consumer information, education and communication, the fight on counterfeits may be an exercise in futility. The public needs to appreciate that counterfeiting has become more sophisticated and as the experience in automobile spare parts, imported drugs and office supplies has shown, many legally recognized traders of imported products sell both genuine and counterfeit products under the same roof.

The perception among average consumers is that counterfeits represent value for money. Consumer education will help dissuade such notions by highlighting the non monetary costs of counterfeits.

Kind regards,
Calvin

Calvin Otieno
Program Officer
Consumers Federation of Kenya (COFEK)
([email protected])

Shares
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