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Counterfeiting and fraud - How do consumers know what they are getting?

by Maria Lazarte on
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How do consumers know what they are getting?
From medicines to airplane parts, trade in counterfeit products amounts to over USD 500 billion annually – about 5 % to 7 % of world trade – and the numbers are growing every year. The results are dangerous goods, premature failures, more expensive legitimate products and a loss of confidence. So how can consumers trust claims made by manufacturers and sales people ? Are enforcement agencies doing their job ? How can ISO help ?

These were the questions asked at the annual workshop of the ISO Committee on consumer policy (ISO/COPOLCO), which looked at, “ How do consumers know what they are getting ? ” hosted by the Ministry of Industry and Trade in Nadi, Fiji, in May 2012. Over 145 representatives from consumer organizations, public authorities and industry from more than 20 countries came together to discuss how International Standards and good market surveillance programmes can protect consumer health and safety, combat fraud and prevent product misrepresentation.

“ The ISO Strategic Plan 2011-2015 recognizes that the advice and involvement of consumer stakeholders is essential to ISOʼs overall performance and success, ” explained the Chair of ISO/COPOLCO, Norma McCormick, “ ISO/COPOLCOʼs mandate is to ensure that the concerns of consumers are taken into account in ISO standards. We provide a forum to identify and recommend to ISO new and current areas of interest to consumers.”

A bigger issue

Consumers around the world, but particularly in poor and remote areas, have been victims of double labeling, imitation, incomplete information, deceptive packaging, false claims, and misleading or inadequate measurements. “ The Pacific region has been an easy target for traders exporting low cost, sub-standard, and counterfeit products, ” said Attorney General and Minister for Industry and Trade Aiyaz Sayed-Khaiyum in his opening address.

“ I urge you to consider … why these goods are so easily peddled, ” he added. “ It is not just an issue of unscrupulous companies and marketing tactics, but it is also one of enforcement, adequate resources and, of course, poverty… Demand creates supply.”

For example, fines that are disproportionately high will open the door to bribery and corruption. Similarly, an impoverished population will take the risks associated with fake goods if legitimate ones are unaffordable. Solutions must address specific local challenges, and education is crucial for both consumers and business.

Participants concluded that counterfeiting and fraud were fuelled by :

  • Rising volume of global trade and e-commerce
  • Lack of consumer awareness and information
  • Involvement of organized crime
  • Minimal and inconsistent enforcement and penalties
  • Consumer demand and economic pressures driven by high prices and poverty.

We are part of the problem

Yet consumers must also make informed and responsible purchasing decisions, urged Ms. McCormick. “ We must recognize that we, as consumers, are part of the problem. Therefore, it is important that we become part of the solution.”

Participants emphasized over and over again that consumers have a responsibility to be informed and vigilant. Counterfeiting and fraud endanger our safety and that of our families. So what can we do ? Take photographs. Recognize quality marks. And if something does not add up, ask, advised Rae Dulmage, Director Standards Department at Underwriters Laboratories Canada – an organization whose aggressive stance against counterfeiting, involves education, enforcement and partnerships.

“ If the price is too good to be true, ask yourself why, ” added Doug Geralde, Regulator Relations Advisor at the Canadian Standards Association. His own advice to consumers included checking packaging and labeling, acting on recalls, informing manufacturers about failures and buying from reputable sources.

But he emphasized that responsibility for fighting counterfeiting starts with manufacturers and distributors. “ If you have a global brand, chances are there is a knock-off somewhere in the world, ” warned Mr. Geralde, recommending that they facilitate the traceability of goods throughout the supply chain, design with safety first, monitor the market and promote market surveillance.

Nothing to declare

“ Customs is at the very center of the battle against counterfeiting and fraud,” said Mr. Watisoni Rauicava, National Manager, Border Control, Fiji Revenue and Customs Authority.

However, officers do not always have sufficient experience and knowledge. Close collaboration between government agencies and the private sector is essential to share information and best practice in order to detect and capture counterfeit goods at the border. As the World Customs Organization Secretary General said in a congress on the subject, “ Each of us has a part to play, but we must play our part together ”.

Solutions ahead

Partnership and cooperation are at the very heart of the ISO system, which brings all stakeholders together to develop practical global solutions. Two ISO committees are particularly relevant :

  • ISO/PC 246, Anti-counterfeiting tools
  • ISO/TC 247, Fraud countermeasures and controls

The standards being developed by these committees will help prevent, detect and control identity, financial, product and other forms of social and economic fraud. By promoting strong authentication and security, these standards will bring confidence to consumers, government and industry.

ISO 12931:2012, Performance criteria for authentication solutions used to combat counterfeiting of material goods, developed by ISO/PC 246 has already been published. The standard will help organizations of all types and sizes to validate the authenticity of material goods. ISO/TC 247 is currently working on two standards :

  • A security management system for fraud countermeasures and controls
  • An anti-counterfeiting track and trace method using unique identifier numbering

Short measure

Another area where we can develop solutions is through metrology – the science of measurement, explained John Birch, AM Honorary Board Member, International Organization of Legal Metrology. Standardized measurements can be used to protect consumers against short measure and fraud.

Throughout history, fraud has been endemic in trade measurements, whether through lack of transparency, manipulating technology to distort results (e.g. taximeters) or simply by using inappropriate quantities. For example, petroleum is sold by volume not energy content, but temperature variations can result in up to 2 % effective short measure.

What can be done ? Standard size packaging and requirements, clear and appropriate quantity labeling, unit pricing and quality marks, can provide consumer protection – particularly important as pre-packaged goods now dominate retail food purchases, increasingly crossing borders.

Acting on promises

“ To promise is one thing, to deliver is another. Proof in the form of conformity assessment is needed, ” emphasized Olivier Peyrat, Director General of AFNOR, ISO member for France.

The ISO Committee on conformity assessment (ISO/CASCO) has developed numerous standards and guides on testing, inspections and management system implementation to ensure that consumers know what they are getting. “ For those companies that are too recent, too small or too remote, good conformity assessment, preferably against an International Standard, can help achieve consumer confidence, ” said Mr. Peyrat.

He also suggested that implementation of ISO 26000 on social responsibility, can promote consumer trust.

Market surveillance

Conformity assessment standards can be used in market surveillance, one of the solutions that participants agreed upon, was essential to address counterfeiting.

Governments should increase the regulatory power of market surveillance and consumer protection, advised Graeme Drake, speaking on behalf of the United Nations Economic Commission for Europe (UNECE). He also emphasized that International Standards for market surveillance terminology can make it easier for countries to work together.

“ Non-compliance and counterfeiting are increasing and becoming more difficult to detect, ” he said. UNECE is working to counter these trends by making recommendations to governments, developing a database of market surveillance authorities, promoting best practice and raising awareness. He emphasized the importance of collaborating with ISO, and invited increased cooperation with ISO/COPOLCO.

Be aware

Education and information are crucial, underlined participants. One advocate was Premila Kumar from the Consumer Council of Fiji, who highlighted the plight of the Pacific islands, which are far from the countries that manufacture many of the goods that they use, and therefore particularly vulnerable.

Ms. Kumar explained that if a product is recalled in another country, the Pacific islands are not always informed. And often, products are labelled in languages they do not understand. She also called for improved market surveillance, enhanced consumer involvement and strong deterrent measures, such as compensations to users.

Indonesia has introduced a Consumer Protection Law addressing regulation, surveillance and education, said Nus Nuzulia Ishak, from the Indonesian Ministry of Trade. She explained that market surveillance is the joint effort of the government, society (consumers) and consumer protection NGOs.

Carlos Amorin from ABNT, ISO member for Brazil, highlighted the challenges faced by the country, such as its large territorial extension and the low level of consumer claims. However, with a system in place for inspections and conformity checking, Brazil ensures a high level of conformity and compliance.

To mark or not to mark ?

“ All products must comply with standards and must have a mark. But consumers donʼt know this, so they are not looking for it. Even some of the authorities donʼt know this, ” said Guillermo Zucal, from IRAM, ISO member for Argentina. Although the country has systems in place to protect consumers, the biggest challenge is raising awareness of the issues among the general population, such as the existence of compliance marks.

But Arnold Pindar, from ANEC, the European consumer organization, believes that a single mark is not the solution. Consumers place more trust in brands, retailers and advice from friends than in certification marks. All laws and regulations are worthless without effective market surveillance and enforcement, he said.

What ISO can do

Participants concluded that international cooperation is essential to fight counterfeiting and fraud. They called for better practices in border protection, sharing of information within and across countries (for example, for product recalls and seizures), increasing awareness among consumers (including risks and where to seek recourse), and more transparency and traceability throughout the supply chain.

So how can ISO help ? ISO standards provide practical solutions that can be implemented all over the world to address the needs of industry, government and consumers. They harmonize efforts, spread best practice and increase confidence. Participants therefore suggested that ISO tackle the following areas in the fight against counterfeiting and fraud :

  • Additional guidance on market surveillance
  • Comparative testing
  • Consistent classification and formats for reporting and sharing incident data on a global scale.