Counterfeiting: On the Rise in Asia?

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Last month, police in Vadodara, India, arrested six men charged with selling engine oil falsely packaged and offered as products of Indian Oil Corp. According to a local official, the police seized 19 barrels and 135 cartons of oil, along with plastic containers and machines used to fill and seal the containers.

They were filling the counterfeit oil in the plastic containers that resembled [IOCs] original Servo Super 40 engine oil containers, Inspector K.G. Algotar, of the Jawahar Nagar police department, told Lube Report Asia. The accused used to sell the duplicate oil as original IOC oil.

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Activities like this are nothing new to the industry. Engine oil marketers around the world have battled counterfeiters for years, and the problem is said to reach epidemic levels in countries ranging from Ukraine to Nigeria. But industry insiders say the problem is getting worse in India and other parts of Asia and that the lure of counterfeiting will probably continue to spread as the region trends toward higher quality products.

Counterfeiting of quality lubricants is an ongoing phenomenon in India and Asia, said Tina Vogel, head of public relations at Fuchs Petrolub, a Mannheim, Germany-based lube manufacturer with operations throughout Asia and the rest of the world. The problem in Asian markets is likely to increase as prices for these lubricants increase.

The leading edge of lubricant technology is generally developed in Europe, North America and Japan, where higher quality engine oils are needed to satisfy both increasingly stringent air pollutant emission standards and rising car and truck performance levels. But engine oil quality is rising across much of Asia due to improving incomes, growth of vehicle populations, trends toward higher performance vehicles and tightening of Asian emissions standards.

In general, these higher quality oils cost more. Industry insiders agree that higher prices increase the lure of counterfeiting, both because it allows culprits to charge more and because it gives cost-conscious end-users more incentive to look for alternatives.

Counterfeiting is a phenomenon happening due to upgrading of lubricating oil quality, especially engine oils for two- and four-wheeler categories, said an Indian Oil official who asked not to be identified.

Sources also said that a lack of thorough law enforcement contributes to the popularity of counterfeiting. Police only catch big violators while smaller operators avoid harassment.

The low risk of prosecution and enormous profit potential has made counterfeiting an attractive business, said the IOC official.

Industry experts said human nature to some extent is responsible for the proliferation of counterfeit lubricant trade. In some cases consumers knowingly buy counterfeit products, looking for what they believe to be bargains. In other instances, consumers believe they have purchased genuine articles and may pay similar prices, thereby allowing a bigger profit for the counterfeiter.

In the Jawahar Nagar case, police placed the value of seized goods and equipment at 9.5 lakh rupees (U.S. $15,000), though they did not provide a breakdown or say if that was based on the actual value of the oil or prices charged by the accused. The accused were all booked under several sections of the Indian Penal Code – the countrys main criminal laws – and sections of the Mercantile and Essential Commodities Act. Inspector Algotar called it the first case of counterfeiting in Jawahar Nagar and blamed unemployment and inflation as root causes of the problem.

Satyan Gupta, a project leader for Kline & Co. consulting in Gurgaon, India, said, Counterfeiting is a major problem, and every company will face the problem. In the lubricants industry, he said, counterfeiting is more common for fast-moving products such as engine oils for passenger cars and trucks, as opposed to products such as gear oils, grease and transmission fluids.

Gupta said the problem is also bigger in business-to-consumer sales channels where the supply chain is more complex. B-to-C channels often include distributors and retailers, whereas many industrial lubricants are sold directly from manufacturer to end-users, reducing the opportunity for sale of fake products.

Suppliers of lubricant packaging have developed a variety of features designed to prevent counterfeiting, ranging from tamper-proof enclosures to sophisticated labels that are difficult to duplicate. But observers say counterfeiting operators are forever working to replicate such features. Unfortunately, as counterfeiting becomes more profitable they have more funds for such efforts.

Related Topics

Business    Finished Lubricants