Fine watches and counterfeiting are all too often mentioned in the same breath. At the Salon Environnement Professionnel Horlogerie Joaillerie, held last June in Lausanne, an entire afternoon was given over to the subject, with contributors from various horizons. One, Michel Arnoux, is head of the anti-counterfeiting division at the Federation of the Swiss Watch Industry (FH). He detailed some of the initiatives which the Federation has taken to combat counterfeiting, an activity which can almost always be traced back to organised crime.
Statistics quoted by Michel Arnoux show that the global market for counterfeit goods grew from US$ 100 billion to more than US$ 250 billion between 2000 and 2007. According to OECD calculations, it accounts for 2% of world trade and destroys some 200,000 jobs, half of which in Europe. Data on products and customs seizures show that textiles come top of the list, accounting for more than 60% of global revenues from counterfeiting, followed by watches (10.4%), a segment which increased 13% between 2007 and 2008.
The vast majority of counterfeit watches originate in China (84%) , followed by Hong Kong (10%) and Thailand (2%). Around 40 million fake Swiss watches are produced each year compared with 25 million genuine ones, generating revenues in the region of CHF 1 billion ($0.95 billion) or 5% of the industry’s sales.
Operation Dong and Tepito II
The FH hasn’t stood by in the face of this mountainous problem. Forty-five of its 500 member brands take part in its anti-counterfeiting group and 25 make up its Internet cell. Each year the Foundation’s laboratory analyses a thousand watches. A finely-tuned database ensures each initiative reaches its target. One such initiative is Operation Dong. “Examination of a counterfeit watch bought in Pisa, Italy, revealed that the components had been sent to Italy from China. We alerted the Guardia di Finanza, which tapped sellers’ phones and succeeded in locating the house in the vicinity of Pisa where some thirty Chinese were assembling fake watches,” Michel Arnoux explained.
The FH led a similar operation in Mexico, codenamed Operation Tepito II. Says Michel Arnoux, “The FH carried out a major haul acting on suspicions regarding large-scale redistribution of counterfeit watches. First of all, the brands concerned within the Federation gave us power of attorney to file a legal case. We then contacted the local authorities to mount an operation involving 300 police officers who seized 90,000 counterfeit watches. The raid took place at one in the morning and was carried out by armed professionals, as these people will stop at nothing to defend their goods. The fight against counterfeiting is becoming more and more dangerous as organised crime takes over.”
The law, theory and practice
In many countries, counterfeiting is a minor offence in the eyes of the law, hence “we have to present a rock-solid case that will give local police a chance to shine,” Michel Arnoux observed. “We do all the groundwork, including in-the-field investigations, to track down clandestine workshops. Arrests being thin on the ground, getting these workshops closed down is often the most we can achieve.”
In addition, the FH takes action to stem the torrent of fakes sold online. Last year, it succeeding in having 179,000 auctions taken down, reducing the online visibility of counterfeit watches by as much. Another of its activities is to track counterfeits to their source, for example by analysing shipping documents which, of course, give a false dispatch address but frequently include a code that counterfeiters use to identify the products. “Over a six-month period, we identified 8,276 items from the same source. From a financial perspective, these products would generate sales income of CHF 14,000 ($13,200) per month. Based on this method of analysis, and thanks to social networking sites, investigations enabled us to seize intermediary stocks and follow leads all the way to a factory producing counterfeits in China. However, police intervention is only considered valid if the fakes are actually there, on the workbench. In China, the law is one thing in theory and another in practice…”