Big imaging-supplies OEMs team up to combat piracy
By Staff -- Purchasing, 4/23/1998
Some big names in imaging-supplies manufacturing have joined together to help fight the growing problem of product counterfeiting and telemarketing fraud in their industry. Formed in 1994, the Imaging Supplies Coalition (ISC), Lexington, Ky., counts among its members: Xerox, Canon USA, Lexmark International, NEC Technologies, Brother International, Epson America, IBM, Okidata, Konica Business Technologies, and Katun Corp. Across the Atlantic, imaging-supplies OEMs have formed a similar group there, the Imaging Consumables Coalition for Europe (icce).William P. Enright, president, ISC, Lexington, Ky., says the two groups were formed "to protect customers from misrepresented products and services by seeking worldwide protection of intellectual property." Enright, who has worked for IBM and Lexmark, helped start the group and has been its president since its founding.
ISC's customers include not only consumers (purchasing managers), but business partners in all types of distribution channels. The group intends to meet its objective by training and education in counterfeit-product identification, methods of product security, techniques for avoiding fraud, and by promoting laws and their enforcement. "We intend to cooperate, educate and, if all else fails, litigate," says Enright.
U.S. industry loses more than $200 billion annually to product piracy, up from $60 billion in 1988. According to the International Trade Commission, product piracy is growing dramatically faster than world trade, expanding by 1100% between 1982 and 1988. What's more, it's estimated that about 5% to 8% of products sold in the world are counterfeit.
Closer to home, results of an industry study conducted by the ISC show a majority of respondents report that they've experienced or suspected that they and their customers are being victimized by telemarketing fraud and intellectual property infringements. While rates of increase in these illegal activities vary, respondents report moderate to significant increases over the past five years and predict the same over the next five years. They also believe the situation is getting worse instead of better. Some key findings of the study include:
*Lost revenue: The study shows annual revenue impact in the U.S. on manufacturers is $225 million. Actual impact, Enright says, is expected to be significantly greater because only 49% of the companies surveyed responded and less than a quarter represents a corporate-wide view. If all the divisions of just the responding companies estimate their revenue impacts, the findings would be significantly higher.
* Hard to detect: Counterfeit quality is improving. Results show that consumers, resellers, and even manufacturers themselves have a difficult time identifying counterfeits. "While most of the knock-offs we have encountered are of extremely poor quality, there have been some exceptions," says Bill Duffy, vice president, worldwide supplies marketing, Lexmark International, and past chairman of the ISC board. "We have had instances where it took our technical experts to tell the difference between our products and counterfeits because their packaging, plastics, and other cosmetic factors looked like ours. However, the performance quality continues to be poor."
* Used sold as new: An emerging trend in the industry is the prevalence of used products (e.g., recharged copier toner cartridges) being sold as new. Among respondents, 52% report used products bearing their trademarks being sold as original.
* Telemarketing fraud: Forty-one percent of respondents report that their customers have experienced fraudulent telemarketing solicitation; 10% have suspected it. Most frequent complaints: undisclosed substantial "shipping and handling" charges, unordered supplies, and offers "to recover lost money." Among one of ISC's recommendations to protect yourself and your company: Centralize office-supplies purchases and train your employees.
* Distribution channels: Respondents believe many resellers knowingly deal in counterfeit products or commit trademark violations. Estimates range from 10% of authorized wholesalers to 24% of unauthorized wholesalers, as well as 15% of authorized and 27% of unauthorized dealers.
* Cooperative actions: When asked what the industry could do cooperatively to protect their customers, some of the responses included open communication between manufacturers, customer education, stronger laws, government involvement, joint investigations, and joint litigation.
One ISC program which has met with much success is called "When In Doubt, Check It Out." Through this program, dealers and other distributors who frequently get offers that turn out to be "too good to be true" can submit questionable goods to the ISC for authentication. These goods are represented as inventory liquidations, manufacturers overruns, or diverted goods from overseas. With the growth in product counterfeiting and the quality of some of the counterfeits, dealers and other distributors are concerned about the possibility of buying knock-offs without realizing it.
When these offers are made, distributors can send samples to the ISC which in turn will submit them to the brand manufacturer for analysis. All requests are confidential and the requestor is not identified to the manufacturer. If the merchandise is legitimate, the requestor is informed and the transaction concluded. If it is used and being sold as new, counterfeit or a trade dress violation, the requestor is asked to confidentially identify the source of the offer. ISC will pursue the situation without the requestor being identified unless they agree.
Enright estimates that buyers and distributors have been protected from tens of thousands of counterfeits valued in the millions of dollars since the program began in 1994. Enright and the ISC can be contacted at PO Box 8378, Lexington, Ky. 40533-8378; tel: (606) 278-3032; fax: (606) 278-1244; e-mail: iscenright@aol.com; Web address: www.isc-inc.org.
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