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January, 2018

Chinese counterfeiters embrace Korean cosmetics

Original article: Wen Wei Po

Hong Kong authorities have seized $US85,000 in counterfeit cosmetics, most of which are South Korean brands. The impounded goods, which are suspected to be from China, include South Korean make-up and skincare products such as Amore Pacific’s Sulwhasoo, Innisfree and Laneige. Police arrested 12 suspects. Trademark owners complained to police a month ago about suspected phony cosmetics and skincare products on sale in Hong Kong retail outlets, prompting the recent raid. 

Analysis:

Korean cosmetics increasingly resonate with the burgeoning Chinese middle class. They have a reputation for better quality than domestic cosmetics and are priced more competitively than European luxury brands. Revenue from Korea's exports of skincare and makeup products to China reached US$ 3.97 billion in 2016, up 44.3% from US$2.75 billion a year earlier, according to the Korea International Trade Association. 


Enter the counterfeiters. They cost Korean companies $7.2 billion a year, according to Korea's Office of Patent Administration. That agency uncovered 64,526 Chinese counterfeits of Korean products on Alibaba's platforms in 2016. Most of the fakes were cosmetics.  


Chinese counterfeiters create convincing fake Korean cosmetics with the help of Korean partners who have the requisite chemistry skills. O2O Brand Protection has previously reported on Chinese students studying in South Korea who teamed up with a university professor to manufacture fake Innisfree and Etude House cosmetics. The professor was responsible for supervising production of raw materials in Korea. Raw materials were then shipped to Hong Kong and later to a Guangzhou factory for finishing and packing.  


Guy Fong, a supervisor in Hong Kong Customs' Intellectual Property Investigation division, told Hong Kong media that the counterfeit Korean cosmetics confiscated in December were 80-90% authentic. It was only the packaging that suggested something was amiss - Korean words were printed incorrectly with irregular fonts. 


Still, the fakes fooled many consumers, who were told that the products were parallel imports (to justify unusually low prices). Retail outlets sold the counterfeits - face powder, perfume, facial cleansers and facial masks – for between HK$70 and HK$800. Those aren't high prices for cosmetics, but when we consider the counterfeiters bought the products for 10% of the retail price, we can see how it was a profitable endeavor. 

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