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September, 2017

Heilongjiang authorities bust large counterfeit cigarette ring

Original article: IPR Action

Authorities in China's Heilongjiang Province have arrested four suspects and shut down a major counterfeit cigarette operation valued at RMB 50 million. During the raid, police seized 4,000 fake cigarettes (200 cartons). 


The operation spanned multiple Chinese provinces and cities. The suspects relied on WeChat to sell the fake cigarettes with promises of "premium quality." 


Currenly, the suspects are in detention. No bail has been announced. 

Analysis:

Counterfeit cigarettes are a huge business in China - both domestically and for export. Analysts say that the PRC produces about 400 billion fake cigarettes a year. Profits can rival those of the narcotics trade. 


TIPG has often pointed out that Chinese consumers know when they're buying fakes. That's the certainly case with these cigarettes, as the counterfeiters never claimed to be selling genuine product. Further, China does not permit the sale of tobacco online. If you do a search on Taobao for the Chinese-language word for "cigarette," you will find cigarette cases, lighters, holders and just about every type of smoking accessory - but no actual tobacco.


Alibaba hasn't always been strict about fighting counterfeiting, but it's certainly not going to permit the sale of products unauthorized to be sold online on its platforms. In contrast, WeChat isn't an online marketplace; it's a messaging app. Who's going to stop someone with a private account from selling cigarettes discreetly? Tencent (the owner of WeChat) can delete an account, but it's easy enough for someone to set up another one. 


Fake cigarettes cause major losses for both tobacco companies and governments. A KPMG study published in July found that the United Kingdom would have generated an additional €2.1bn (£1.84bn) in tax revenue last year if genuine cigarettes had been sold in place of illicit ones. 5.5 billion counterfeit and smuggled cigarettes were smoked in the UK last year, the study found.  


Meanwhile, the health risks of smoking counterfeit cigarettes are serious. A report by the Shandong Provincial Tobacco Monopoly Bureau found that counterfeit cigarettes use sub-standard or even mouldy tobacco. The fake cigarettes not only contain more carcinogenic substances, they also may be contaminated with waste or parasites - such as tapeworm eggs. Unknowingly inhaling the eggs, a person could end up damaging his or her nervous system, the report says. Additionally, the dyes and flavors used in the fake cigarettes may damage eyesight and the reproductive system. 


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