Fake goods on the rise in UAE

Counterfeit Crisis: goods are widely sold in some parts of the UAE, and the problem is growing despite efforts to shut down stores selling them.

Counterfeit Louis Vuitton and Chanel handbags sit on shelves in a secret room in a store at Karama Market in Dubai.
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At a small storefront in the Karama neighbourhood in Dubai, a shopkeeper tends to shelves holding faded boxes of perfumes and a dusty display case with a handful of discount watches. But that is not the extent of his inventory.

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Once a customer shows interest in watches, he ushers them to a hidden doorway behind the counter, leading to a steep staircase. Upstairs, in a cramped room with a five-foot ceiling, the shopkeeper encourages customers to sit while he produces shoebox after shoebox of "good quality" watches.

The brand names are familiar - Tag Heuer, Breitling and Patek Philippe - and the prices are attractive, anywhere from Dh300 (US$81.67) to Dh650.

But of course, all of the watches are fake. As are the Gucci and Armani shoes in the shop next door, the brake pads and spark plugs in the car parts store down the street, and the iPhones for sale around the corner.

"That perfume, it is like poison. No joking," a market researcher warned at one shop.

The man, a Jordanian, and his Ugandan partner are employed to scout local shops for fakes to find evidence for legal cases and general complaints in a bid to shut them down. The men say that in Karama, as in many of the less affluent neighbourhoods in Dubai, Abu Dhabi and the Northern Emirates, counterfeit goods are widely sold, at times openly and sometimes with more subterfuge.

It is a source of great consternation for the companies that legitimately own the trademarks on these brands. And the problem is growing.

Malek Khalifeh, an intellectual property rights lawyer with Al Shaali and Company in Dubai, says the operations of counterfeiters are growing and becoming more sophisticated. Much of it originates from China, he says, where technology has become so refined companies can tell which product is real only by testing it with special equipment.

"We may work with the police and see an operation shut down," Mr Khalifeh says. "But [the shops] sometimes come back with a new name, new staff, new everything, but we suspect it's the same people who are behind it."

The industries affected by counterfeiting include pharmaceuticals, luxury goods and spare parts for cars and equipment. The impact of a fake product in the market can be greater than lower revenues.

John Schneider-Merck, an agent for several brands of spare parts including Mahle, says there have been incidents where fake brake pads were installed in lorries. Because the quality is not as good with the counterfeits, they begin to fail much more rapidly than the real thing.

"People have died because their trucks had fake spare parts," Mr Schneider-Merck says. "[The problem] is about more than money. It's also about safety." Still, he admits, sometimes neither buyers nor sellers of spare parts can tell the difference. The packaging is near perfect and factories produce parts of increasingly high precision.

"Years ago, you could tell right away," Mr Schneider-Merck says. "There would be something wrong with the label or a different type of font. Now, they make perfect counterfeits [even] of the hologram meant to certify a product is real."

He says some local mechanics instal fake parts in cars and charge consumers what the genuine article costs, as an easy way to boost their profit margins.

Counterfeiters are often ingenious in their deceptions. There have been recent reports about "fake eggs" in China, made up of chemicals, gelatin and paraffin.

While fake handbags, watches and perfume are major cash generators, the most common type of fakes are in "fast-moving consumer products", such as soap, shampoo and cigarettes.

"The problem is endemic throughout the entire Gulf and Middle East," says Yaser Dajani, an associate managing director at Kroll in Dubai.

But that is not to say such items bought in established supermarkets have a high likelihood of being fake. Most counterfeit products are sold in lower-income neighbourhoods or in places where the real product is hard to find.

"There's a strong relationship between availability of the product in the market and the quantity of the counterfeit products in the market," Mr Dajani says.

"Low-income areas tend to have more counterfeit products because people want the brand, but they don't want to pay the high price."

The UAE, he says, is a major hub for trade across the world - meaning it is also a major transit point for counterfeit goods.

In 2009, the UAE was listed as the port of origin for 73 per cent of the fake medicines seized in the EU; 30 per cent of compact disks and DVDs; and 15 per cent of tobacco products, according to the latest figures from the European Commission.

Those figures indicate only that the UAE was the country from where the goods were most recently shipped, not that they were produced there.

"It is becoming quasi-impossible" to stop, said Christophe Zimmermann, the co-ordinator for the fight against counterfeiting and piracy at the World Customs Organisation in Brussels.

Meanwhile, the peddlers of fake perfume and watches are still doing a brisk business.

They are so well established many of the tourist handbooks dedicate a section to shopping there. In a small corner of Dubai, a whole industry has evolved, with hundreds of shops and secret rooms selling counterfeit goods under the nose of the authorities, supported by numerous cafes, restaurants and supermarkets.

"We can't get them all," says the market researcher. "There's too many."

* with additional reporting by Rory Jones