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Surge in Chinese fakes worries Korean firms

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Aug 21,2005
As more and more Chinese counterfeits of Korean products appear in stores, Korean manufacturers are worrying that the credibility of their brands may be in jeopardy. A report provided to Samsung Electronics and LG Electronics last week asserted that two-thirds of electronics shops in four major Chinese cities ― Beijing, Shanghai, Guangzhou and Shenzhen ― were selling fake Samsung and LG products. The report, by Marksman Consultants, a Hong Kong-based multinational research institute that specializes in counterfeiting, said stores were selling fake cellular phones, earphones, hard disks and even cell phone batteries with Samsung or LG logos. In some cases, they were openly sold as fakes, but most were labeled as the genuine items, and sold at the same prices as the originals. In one electronics shop in Shenzhen, according to the report, a clerk selling earphones with the Samsung logo for 6 yuan (72 cents) admitted they were fakes, and said the factory that made them was nearby and could meet a customer’s order immediately. But electronics are not the whole story. In the past, they made up the majority of fakes, mainly because the profit margins were high, and it was hard to tell them from the originals by looking at the cases. But now, auto parts, cosmetics, food products and even games are being counterfeited, and the fakes are being widely exported. A recent investigation by Hyundai Mobis found that about 30 percent of auto parts labeled as Hyundai’s in eight Chinese cities were fake. The packaging clearly read “Made in Korea” and carried the Hyundai logo. Retailers bought the fakes at about 40 to 70 percent below Hyundai retail prices, and then sold them as genuine at market prices. Hyundai Mobis noted that using counterfeit auto parts is very dangerous, but said it expects them to proliferate because of the profit potential. Until now, Hyundai Mobis has supplied its products to large retailers in China and allowed them to take care of local distribution. Now, in an attempt to combat the problem with counterfeits, the company plans to build five logistics bases in China, including in Beijing and Shanghai, by 2007. It is also considering suing Chinese retailers that sell counterfeits of its products. Fake cosmetics labelled as being by Missha, a low-priced Korean brand, have also been found on sale in Hong Kong and mainland China. Counterfeit items are not only being sold within China, but also in the Middle East, Latin America and elsewhere in Asia. An LG Electronics official said the company learned last year that fake cell phones tagged as LG’s were being sold in Peru. Counterfeit flat-screen television sets were being sold in Israel and Egypt earlier this year; in June, fake LG air conditioners were being sold in the United Arab Emirates. “We found out that there is a large factory in the Guangdong province of China that produces the fake air conditioners,” the LG official said. Samsung Electronics and LG Electronics have requested that customs agencies in certain nations report any suspicious products being imported, and have informed them of the exact sizes and colors of their logos. Outright counterfeiting is not the only issue; the copying of designs is also a problem. At an International Consumer Electronics Show in Las Vegas in January, a Chinese company displayed an MP3 player that looked just like one made by ReignCom Ltd., a Korean manufacturer. ReignCom filed a complaint with Chinese authorities to ban the company from selling the copied products. But just two months later, at CeBit 2005, another trade show in Germany, the company again exhibited the product. The company even featured the MP3 player on an online shopping mall it opened in Japan. China even has a chocolate-covered cookie named CoCo Pie, a close copy of the Choco Pie made by Orion Corp. in Korea. Some counterfeits are available in Korea itself. Chinese MP3 players whose design matched one by Korea’s Mpio Co. were recently being sold at a Korean online shopping mall. The products came with manuals written in Korean. A game copied from Korea’s popular “Kart Rider,” called “Kart Race,” is about to become available in PC rooms in Korea. Some Chinese companies are coming up with names and logos nearly identical to those of Korean brands. A Chinese company calling itself Samsumg is producing cellular phones dubbed Amycall, in an obvious attempt to trade on the brand credibility of Samsung’s Anycall phones. In Shenzhen, a phone maker calling itself Sammeng has a Samsung-esque blue oval logo. “The Korean government should strongly ask the Chinese government to crack down on fake products,” an official from a Korean manufacturer said. He said Chinese authorities have ignored counterfeiters and have not punished them even when Korean companies sued. “At an annual meeting with our Chinese counterpart, we asked them to crack down on counterfeits more strongly,” said a Korean Intellectual Property Office official. “Chinese government officials agree at the meetings, but apparently do not keep their promises.” Ham Soo-young, who is in charge of patent issues at LG Electronics, said it is wise to transfer patents to local branches in China in case of legal disputes there. LG recently won a case thanks to having previously transferred the patent on its air conditioner design to its local branch in Tianjin. Xinfei, a Chinese electronics company, had produced an air conditioner whose design copied LG’s. After the ruling, Xinfei promised it would stop making the unit, and to pay royalties to LG if it did so. “If it was not a dispute between Chinese companies, I doubt we could have won the case,” said Mr. Ham. by Special Reporting Team


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