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August, 2018

Fake luxury goods proliferate on WeChat

Original article: Sina Weibo

Chinese counterfeiters are tapping the WeChat ecosystem to sell fake luxury goods to domestic buyers. The counterfeiters are becoming increasingly sophisticated, in some cases including certificates of authenticity and evidence that the products were imported from overseas to dupe buyers. Because of its closed nature, WeChat provides counterfeiters with more anonymity than an online marketplace like Taobao.

Analysis:

China luxury news site Jing Daily points out that China's reduction of duties on luxury goods in recent years may have actually boosted counterfeiting. Overseas purchasing agents who buy legitimate luxury goods for Chinese buyers abroad - where they historically have been much cheaper than in China - have seen their business flag now that the same products retail for lower prices at home. With their livelihood threatened, overseas purchasing agents have turned to counterfeiting to pay the bills. 


Profits are stratospheric. Earlier this year, Suzhou authorities seized RMB 10 million in counterfeit beauty and fragrance products. One of the suspects told police that it cost the operation just 1 yuan to manufacture a 50 ml bottle of fake perfume in Guangdong Province. The fragrance was sold RMB 200 or more, the suspect said.  


Jing Daily has found that Chinese students studying overseas are sometimes part of the fake luxury-goods supply chain. One student, who is involved with counterfeit luxury-goods sales on WeChat said: "The profitability now is attractive, and it’s hard to recognize the difference between counterfeit and real goods.”


It's also relatively to easy to evade the authorities on WeChat. In contrast to Taobao, there's not necessarily a online “store" for authorities to target. There may not even be a listing. Instead, authorities must view the exchanges between different WeChat users and figure out the identities of the counterfeiters and the whereabouts of their production facilities and distribution network. 


A seller of fake goods can operate in the shadows on WeChat, peddling the phony wares to anyone who's interested. Interested parties need only accept a request to join the seller's contact list. The two parties can then communicate via the WeChat app, which supports text, photos, audio and video. 


In a March press release, Tencent highlighted its recent anti-counterfeiting efforts. The company said that its WeChat team collected "more than 126,000 valid infringement clues through user complaints on its Brand Protection Platform" over the past year. 99.9% of the complaints resulted in an "accurate crackdown facilitated by brand owners," the company said. 


In the press release, Brent Irvin, Vice President and General Counsel of Tencent, said that the firm "takes the issue of infringement very seriously and is committed to improving its efficiency at handling complaints, and providing brand owners with comprehensive and multi-dimensional brand protection measures."


It is in Tencent's interest to proactively handle the growing fake-goods problem on WeChat. Otherwise, the company is likely to invite unwanted attention from the authorities amidst rising scrutiny of the overall e-commerce sector. Indeed, Chinese e-commerce upstart Pinduoduo is under investigation for alleged failure to crack down on knock-offs and fake goods on its marketplace.

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