for dinner parties and local use. The business has become very open. Counterfeit items are easily obtained on the streets of all large American cities. In Italy, they're sold by street peddlers known as "Vu cumpra," which means "wanna buy." They even take out ads in the local papers. In Sweden, there was a mail order catalogue that sold all manner of counterfeit merchandise. It was called, "Fake."
SALTING TALES
In few areas of fraud have technological advances been more welcome than among counterfeiters. "Cyberfakes" is the name that the garment industry has given to computer-generated logos and designs. The counterfeiter scans a real logo into his computer. Then he transfers it to a computerized embroidery machine. Using the image as a master, it recreates the design on just about any garment he chooses. Counterfeiters can buy an embroidery machine small enough to fit inside a suitcase for just three thousand dollars. Label-making machinery can be acquired in the same way, but it is much more expensive. More commonly, counterfeiters will farm out the work of counterfeit labels to factories in developing countries.
As U.S. Customs has gotten sharper at detecting illegal apparel imports, counterfeiters have introduced new tricks. They import what they call "blanks," perfectly legal unlabeled apparel. The clothes will then be taken to factories, usually around New York or Los Angeles, and low-wage laborers will attach the counterfeit brand-name labels and logos to them.
Another nettlesome issue is what are known as "overmakes," "backdoor," or "cabbage." A factory making legitimate clothing for a brand will deliberately make extra garments and then sell these "overmakes" to criminals.
A related concern is diversion and the gray market. For instance, products merchandised in the United States are also sold in Africa, but at a lower price to meet the local market. So, a legitimate company will ship goods to a wholesaler in Africa, who will divert them to someone in Milwaukee, where he can get a bigger return, because while there might be a 40 percent discount off the list price in Africa, there's only a 15 percent discount in the United States. This is often a fraud against the sales contract, but it's difficult to enforce because it's so hard to trace where shipments wind up. In the 1990s, for instance, Unilever sent a lot of soaps, shampoos, salves, and creams to Russia. Most of it ended up back in Brooklyn.
Like many other companies, Unilever has attacked the diversion problem by conducting a little contest. It's called "Lucky Bonus." When it sends out a pallet of goods, it will tuck three $25 coupons inside. When the pallet is unloaded and the product removed to put on store shelves, the handlers will find the coupons. The instructions tell them that if they fill them out with their name and address and return them to Unilever, they'll get a check for $25. The key is having that name and address. That tells Unilever whether the pallet got to its intended destination. The concept is known as "salting," and was developed by American Cyanamid for its Old Spice cologne, which was being diverted. It's neither a high-cost solution nor a high-tech solution, but it works.
BUYER BEWARE
I do occasional work for Microsoft, which, given its dominant market presence, has been a principal target of counterfeiters for years. It's gotten so bad that Microsoft can barely get a new piece of software out before counterfeit versions make their own debut. In some instances, counterfeit versions of Microsoft products have beaten the real thing to market. You can go to various Internet auction sites and bid on fraudulent Microsoft programs that sell for a fraction of their retail price.
In early 2000, a guy was busted in the state of Washington, Microsoft's home state, for making counterfeit Microsoft products, including Office 97, Office 2000 Professional, and Office 2000 Premium. He was turning out tens of thousands of copies in his apartment. When they raided it, the FBI found several computers, a sixteen-tray replicator, a color copier, a shrink-wrapping machine, and packaging materials.
A few years ago, an Asian ring was busted in South El Monte, California. The ring had two locations, one to manufacture fake Microsoft CD ROMs and disks, and another to make counterfeit manuals, certificates of authenticity, boxes, and even contest entry forms for free trips. Nothing was omitted. The products seized were estimated to have a market value of more than $10 million.
In Digital Park, a high-tech business center just outside Cambridge, England, a young Texan opened a company