Grim competition with counterfeiters
US firms fighting China's golf fakes
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SHANGHAI - Jason Yao lives a dangerous life for a guy in the golf business.
He gets death threats. He raids factories and markets. He shakes down informants and hangs out with private investigators. He has 10 aliases.
China is the focus of the worldwide war against counterfeit golf products, and Yao is on the front lines. His employer, Acushnet, located 7,000 miles away in Fairhaven, Mass., makes the world's most popular - and most copied - golf ball, the Titleist Pro V1, along with clubs, accessories, and shoes that counterfeiters mimic for sales around the globe.
As Chinese officials crack down this summer on the sale of fake items to Olympic fans in Beijing, Yao is farther south in that country, raiding factories that make ersatz Titleist clubs and golf bags. Acushnet is one of a growing number of merchants fighting the increasingly sophisticated counterfeit operations, which are diverting billions of dollars globally to the black market for everything from golf balls and brake pads to pharmaceuticals and luxury handbags. In its most recent report, the Paris-based International Chamber of Commerce estimated that counterfeited goods cost more than $600 billion annually in lost sales, tax revenue, and jobs. For Massachusetts, the largest US exporter of golf balls, counterfeited Titleists could mean millions less in tax revenue.
Increasingly, Chinese fakes are being exported to the United States through online sales on such sites as
Acushnet is spending more than $2 million a year to combat counterfeiting, a budget that didn't exist five years ago. The $1.4 billion company is training US federal customs agents to recognize fakes - for example, to know that since Titleist balls are manufactured in America, all imports from China are counterfeits. Acushnet is paying for security services that monitor sites like eBay for fraud, a move that has allowed Acushnet to shut down 10,500 auctions of fakes since January. And it has hired Yao, a 35-year-old lawyer, and other investigators to ferret out wrongdoers in China and to lobby officials to pay more attention to their cases.
"I'm never going to stop the problem. I'm just trying to make it harder to do," said Lisa Rogan, Acushnet's trademark manager, who oversees the company's anticounterfeit efforts. "We're not just protecting our reputation. We're trying to protect consumers who are getting fooled by these lesser quality copies."
Jimmy Rosen, of Harrisburg, Pa., was one of those consumers. He found what sounded like a bargain on Craigslist: $35 for a dozen Titleist Pro V1 golf balls in damaged boxes (typically $50 at stores). Rosen, 43, called up some friends who wanted in and negotiated for 42 dozen balls for $20 a dozen.
He met the alleged seller, Dallas Conrad, of Carlisle, Pa., and after giving the balls a cursory look, handed over $840 in cash. But when Rosen and his friends compared the balls to ones bought at a store, they saw they had been fooled: The counterfeit balls were a brighter white with a different font and had a visible seam.
"It didn't even occur to me that golf balls were being counterfeited and brought in from China," said Rosen, who filed a lawsuit against Conrad.
Conrad could not be reached for comment. Calls to several phone numbers listed for Conrad were disconnected.
Rosen's 504 golf balls, meanwhile, are locked in his lawyer's office. Rosen sent photos to Acushnet, which is trying to track down links to different counterfeit rings.
While many factories make fakes for local markets in China, exporting products online is increasingly popular. A typical Internet operation includes factories in China; middlemen shipping products to sellers overseas in small packages to elude customs; and sellers across the world listing hundreds of items on websites like eBay, Craigslist, and Alibaba. Records are rarely kept, delivery instructions are often given via text messages to avoid detection, and merchandise is moved quickly by courier out of factories to the middleman so raids turn up few goods.
MarkMonitor, a firm that helps companies track fraudulent auctions, estimates the amount of counterfeit products sold online almost doubled to a record $120 billion from 2004 and 2007. MarkMonitor identifies fraudulent goods online for businesses to review and automatically transmits the counterfeit listings to eBay. Auctions are typically shut down by eBay within 12 hours.
But frustrated retailers, which want eBay to do more, are taking their cases to the courts with mixed results: This summer, a French judge fined eBay $63 million for failing to adequately prevent counterfeit items from appearing on its French site in a lawsuit filed by luxury merchant LVMH, which includes brands such as Louis Vuitton. EBay has said it plans to appeal the ruling. Several days later, a New York judge sided with eBay in a case brought by Tiffany, saying the high-end jeweler is responsible for policing its trademark.
Catherine England, an eBay spokeswoman, said the site tries to avoid counterfeit goods: "It's bad for sellers, bad for buyers, and has no place on eBay."
Fighting fakers on their home turf in China is even more challenging for brands that must try to convince judges and government officials that counterfeiting is a serious crime. Last month, Yin Xintian, of the State Intellectual Property Office in China, played down the amount of Chinese counterfeits and blamed them on expensive copyrighted brands, which he said were driving consumers to buy fake goods.
In some instances, Chinese authorities have stepped up their efforts. They have raided factories and made arrests. During the Olympics, officials are conducting market sweeps in Beijing and targeting fans at the airport trying to bring back fake goods. And the government is playing a video titled "Say NO to counterfeiting and piracy" at airports featuring actor Jackie Chan posing as a customs agent who forces tourists to surrender counterfeit items.
Still, the complexity of tackling counterfeiters has led Acushnet to work with unlikely partners: rival golf businesses. Together, they share information and help fund investigations to target counterfeiters of multiple golf brands. Companies do much of the legwork - hiring investigators and cultivating informants among employees at suspected factories - before local authorities will get involved.
But of the 40 factory raids Acushnet has helped with over the past four years, only 9 have resulted in criminal cases. Chinese authorities rarely shut down factories permanently for making fakes, and some counterfeiters under investigation boldly keep up their illicit business.
"The police spend a lot of resources investigating, but then the prosecutor may not be supportive to police, and when cases are tried in court, sentences are usually a suspension or criminal fine," said Jack Chang, chairman of the Quality Brands Protection Committee, a lobbying group in China representing 180 multinational companies.
Chinese markets are beginning to react. Hawkers of counterfeits, which fill the stalls at indoor silk markets in Beijing and Shanghai, have adapted. Many shop owners now present authentic goods on their floor, or show them in catalogs, but then sell fakes at lower prices. An authentic set of Titleist clubs costs about $2,200, but a customer can get the fake set for $175. At the market, many sellers admitted to a casual shopper recently that they sell copies, and even describe the difference between good and bad fakes.
One shop that moved into a Shanghai strip mall after an outdoor market was closed because of counterfeiting got creative. The store, Shanghai Zhizun Golf Sport Product, has a secret door that leads to a second-story warehouse, where the merchant keeps its stash of counterfeit goods.
Consumers in China have no reason to show loyalty to the authentic foreign brands. In some cases, residents and local officials tip off factories that make counterfeits before planned raids. In the Tong'an District of Xiamen, where an estimated 50 factories are suspected of counterfeiting golf products, villages have their own security teams which work with the factories and post video cameras at every entrance, Yao said. The security teams question and keep watch on every stranger who enters, making it impossible for the private investigators Acushnet sends to get information.
Even factories contracted to make authentic goods often do a side business in fakes or manufacture additional legitimate products to sell to unauthorized vendors. In June, Yao discovered a driving range that was selling authentic Titleist clubheads. But the company sells only clubs assembled completely, not in separate parts. Yao contacted the factory that manufactures the clubs in Zhongshan, and was told that a security guard must have stolen the club heads in an isolated incident.
"I just don't believe them," Yao said.
Jenn Abelson can be reached at abelson@globe.com.
