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Knock-offs vs. the real thing: which will win?

By Cheryl Gollub

If you get something for nothing, then that’s usually what it’s worth…

Merriam-Webster Definitions:

  • Fraud: deceit, trickery; specifically: intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right
  • Counterfeit: made in imitation of something else with intent to deceive
  • Knock-off: a copy that sells for less than the original; broadly: a copy or imitation of someone or something popular
  • Theft: the act of stealing; specifically: the felonious taking and removing of personal property with intent to deprive the rightful owner of it

The global issues are important to emphasize and concentrate on. The subject matter is significant and it is not going away. Unauthorized retailers and distributors are buying and selling counterfeit products; unsuspecting consumers are purchasing knock-off goods; and the fabrication of counterfeit golf products is running rampant.

  • Acushnet Company, parent company of Titleist, has sued Cam Golf, Inc., City Sports, Inc., Faber Brothers, Inc., GI Joe's, Inc., Academy Sports and Kings of Golf, Inc. for selling counterfeit Titleist Pro V1 golf balls
  • charges vary between alleged distribution of counterfeit golf balls at wholesale or selling at retail locations
  • Counterfeit Alert Network reported, “from a Nike press release, eight people in China have been sentenced to jail and fined after being convicted of counterfeiting registered trademarks, as well as manufacturing, distributing and selling counterfeit golf equipment; nearly 10,000 pieces of counterfeit golf equipment were seized, including more than 740 assembled golf clubs, 1,500 club heads,  4,700 golf grips, 2,300 shafts, 280 club head covers and assorted golf towels, golf bags and apparel”
  • Golfweek.com reported in July 2010, that “alerted by the Anti-Counterfeiting Group, Chinese authorities raided locations and seized illegal copies of authentic golf brands; more than 2,300 golf clubs, as well as counterfeit golf caps, bags and accessories”
  • YesGolf.com reported this year that “Counterfeit golf clubs is a huge international scam costing the golf industry over $6 Billion a year, and that Yes! Golf has recently become the target of a severe Trademark infringement by a company in Korea known as KJ Golf”.
  • noted on the U.S. Customs and Border Protection website that in 2006, “The U.S. Golf Manufacturers Anti-Counterfeiting Working Group joined U.S. Customs and Border Protection for a joint press conference in Itasca, IL during the PGA Championship to inform consumers of the problem of the illegal importation of counterfeit golf equipment”
  • manufacturer’s bottom line, intellectual property (IP), reputation, brand, warranties and returns are all at risk, as counterfeit products continue to penetrate supply chains
  • counterfeit is an alluring business venture with low risk of prosecution and vast profit potential
  • an ease of marketing products globally over the internet makes this industry viable
  • manufacturers must look to utilize preventative measures, methodologies, varied solutions and technologies to contend with this growing problem
  • examination of diverse areas is essential to ‘seek to find’ the route of the challenge; supply chain, global standards, training, enforcement, policies, technologies and the products
  • this global issue requires an powerful tactic to counter the problem before it destabilizes the integrity of the manufacturing sector worldwide
  • those buying pirated or counterfeit items are supporting an illegal trade; a criminal activity
  • unauthorized knock-offs of legitimate products have been referred to in terms of counterfeiting and piracy interchangeably by the Canadian Anti-Counterfeiting Network (CACN).

This financial information noted, clearly indicates a growing problem. The points reflected are from 2003-2010 establishing no end in sight to this global problem.

  • Economic statistics in 2003 reported by the “National Golf Foundation indicated that U.S. consumers spent $2.8 billion last year on golf clubs, some 70% of which came from China, and if only 10% of those sales involved illegal knock-offs and counterfeits, that would amount to nearly $200 million”.
  • FESI reported “the European Commission's best estimate is that the global trade in counterfeits is to the value of over 400 billion Euro, though nobody can be sure of an exact figure”.
  • Manufacturing Executive posted an article November 2010, stating “the U.S. Department of Commerce estimates that 5%-7% of all world trade involves counterfeit products, and estimates the cost to the global economy at more than $650 billion per year. The inherently concealed nature of counterfeiting means that many counterfeit products will never be revealed; this makes measuring the value of counterfeit products at best a broad estimate”.
  • Golf.com reported in June 2010, “golf's low ranking on China's anti-counterfeiting priority list—a frustrating but understandable fact. Of the estimated $600 billion in counterfeit goods traded annually around the world, golf equipment is a very small range ball in a very large bucket. Compared to phony pharmaceuticals, which pose a threat to public safety, or knock-off cigarettes, which represent far larger sums of money, fake drivers and irons receive scant attention from the Chinese government”.
  • The economic and health and safety impacts of knock-offs is of significant interest to the House of Commons Standing Committee on Industry, Science and Technology and the House of Commons Standing Committee on Public Safety and National Security.

It is said that knock-offs started as a localized industry focused on copying high-end designer products such as golf clubs and other products; as such, neither fraud or significant economic harm resulted, as they were priced at a small fraction of the retail value of the real thing. Loss of sales by the manufacturer of the high-end designer products were minimal as the knock-offs and real thing were operating in two distinct markets.

Now this industry of counterfeit / knock-off products has developed into a sophisticated global business where an array of low-end and high-end versions of counterfeit goods, including golf clubs and golf apparel are being manufactured. Subjective information suggests that the sale of such knock-off products is affecting the sale of legitimate products; and that profits and investments of reputable manufacturers are decreasing as a consequence. If true, this too would have an impact on tax revenues. Given the nature of the black market business, it is difficult to substantiate data and statistics.

In reviewing a 2007 article posted by Globalgolf.com, it indicates that top brands like Callaway and Taylor Made are faked most often and that not so much from Ping. This article led me further into a CBS 60 Minutes article in 2004 titled “The World’s Greatest Fakes, Chinese Copies Are Making Their Way Back to U.S.”.

  • The reporter went undercover in Dongguan, China and was offered Callaway golf apparel and equipment for $275 that would retail in US for $3,000. “The whole set was a copy”, as advised by the owner of the shop.
  • The CBS article of 2004 refers to China as the “undisputed capital of counterfeit”. The reporter went further undercover into a factory that was churning out fake Callaway bags at a rate of 500 bags per week.
  • These articles are 2004 and 2007 which clearly indicates that this is a serious problem that is continuing to grow.

Further research led me to an article titled, “Pssst... Wanna Buy Some Clubs?” written in 2003 and posted on Time.com. The details of the article are over-whelming as it speaks of a sting and an investigation referred to as, “Operation Tiger Lily” and “Project Teed Off”.

  • The joint venture sting for “Operation Tiger Lily” was conducted at the PGA Merchandise Show with Callaway Golf investigators and the Orange County, Florida Sheriff’s Office. The products shown were counterfeits of a Callaway ERC II driver, Great Big Bertha II and a Steelhead X-16 iron. “A price of $33 a head, delivered or $32 with volume discount” was offered which retails for $499. The article stated that the seller “volunteered to blacken the soles of the clubs with water-soluble paint to hide the Callaway trademark and then the purchaser could simply rinse off the paint once the clubs cleared customs”.
  • “Project Teed Off” refers to an operation by U.S. Customs which “resulted in 14 indictments and seizure of $6 million worth of counterfeit golf merchandise in 1999”.
  • It is reported that photographs are taken of merchandise at various angles, transmitted to factories in China, who in turn convert into 3 dimensional form, then used to create a mold and flipped around for mass production in as little as two weeks.

Examples of smuggle routes include shipments by air to Vancouver or Toronto and then trucking to the U.S.; transshipping whereby the merchandise goes first to a country not associated with counterfeit golf clubs and then to final destination; or combine counterfeit goods with legitimate goods in the hopes that the entire shipment is not examined.

U.S. golf companies are vulnerable to counterfeit as some are subcontracting club production to China including Adams, Callaway, Cleveland, Cobra, Nike, TaylorMade and Titleist. Ping on the other hand, makes most of its clubs in the U.S.

Today a person with no connections in China can simply purchase knock-off goods at wholesale from China, import them by mail or courier and resell them as genuine goods on auction sites. A prime auction site is eBay and there are many internet forums that have stories to share regarding their counterfeit club or product purchase on eBay.

  • Obtaining goods does ultimately become the responsibility of the purchaser, so buyers beware.
  • EBay is dedicated to enabling commerce among users, but they must do so within the limits of the law. As eBay are not experts in the intellectual property rights, eBay created Verified Rights Owner (VeRO) Program which enables intellectual property owners to report listings that infringe on their rights.
  • EBay provides a seller with this information through their “Guidelines for Creating Legally Compliant Listings”, plus offer the detailed information and advice as noted on their site; Home>Buy>Reviews & Guides>BEWARE! COUNTERFEIT ITEMS BEING SOLD AS AUTHENTIC!
  • It was most interesting when my research brought me to an article in Telegraph.uk.co dated December 19, 2009 titled “Fake golf club criminals jailed for biggest fraud eBay has ever seen”.
  • Imagine more than 96,000 transactions; involving millions of UK pounds worth of fake golf clubs and other merchandise being sold between 2003 and 2008.
  • The article reported that this particular counterfeiting operation was the largest such conspiracy to be uncovered on eBay.
  • The entertaining aspect of the article was that the demise of the operation occurred due to a complaint filed with the Consumer and Trading Standards Institute (TSI) when a purchaser requested a refund from the seller and received no response. ‘Customer Service should always be respected’.
  • During the investigation the TSI uncovered fake golf balls sold had exploded when struck with a club; further to this, a complaint from a customer found in the cavity of a club that there was a tropical spider’s nest.

The virtual world and social networking we live in, simplifies the counterfeit industry. For example one only needs to surf these China based websites to view the extent to which this goes on; Taobao.com or dhgate.com. They are pleased to sell and ship branded products at wholesale as long as you have a credit card.

There are many sites to help educate the public with regards to knock-offs and counterfeit. For example mygolfspy.com has a section in their site devoted to “10 Ways Not to Buy Fake Golf Clubs on eBay” and “Golf Club Scam Alert System Checklist”.

The manufacturers and educators are doing their part to take action and educate the consumer.

  • Titleist has established a web tab on their site specific to counterfeit notices and for the public to report, which then goes through Acushnet Company for further investigation.
  • Nike Inc. notes on their site within their “Public Policy Position Highlights” that Nike, Inc was a vocal supporter of the passage of the Pro-IP Act signed in law in 2008; Nike, Inc. is a member of the multi-stakeholder Observatory on Counterfeiting in the European Union; they are a member of the Federation of the European Sporting Goods Industry that are working to combat trade of counterfeit goods; Nike, Inc. is a founding member of the Quality Brands Protection Committee (QBPC) in China and Nike, Inc. is also an active member of the International Anti-Counterfeiting Coalition (IACC). Nike, Inc. also reports that more than 3 million articles of counterfeit Nike product were seized at manufacturing plants by customs in fiscal 2007 and a considerable amount of product was also seized at retail outlets globally.
  • Cleveland Golf offers a disclaimer on their site; “Cleveland Golf wishes to maintain our commitment to providing quality merchandise. Please be aware that when not purchasing from an authorized Cleveland Golf retailer, you run the risk of receiving counterfeit product. Attractive pricing is tempting, but are you sure what you have purchased is genuine? Our warranty only covers actual Cleveland Golf equipment.”
  • TaylorMade provides a separate drop down tab on their site for counterfeit, offering “TaylorMade Counterfeit Info”.
  • In 2008, Holland College Students in the College’s Professional Golf Management program hosted the 8th Annual Atlantic Golf Symposium and offered topics that included “how to recognize counterfeit golf merchandise”.

“Fake Golf Club Sellers site purpose is to help in the fight against counterfeit golf equipment and to bring a better awareness about the counterfeit items and their peddlers”. They are seeking support among others who want to keep the markets clean of fake junk. This site noted in July 2010, that “The circulation of fake / counterfeit / clone / imitation golf equipment has gotten out of hand and it is killing the industry. Although there has been a recent awareness of these fakes flooding the markets, thousands of uninformed people are still buying these clubs at abnormally cheap prices. There are many US entrepreneurs who are buying these in bulk (many of the fake sites present themselves as “wholesalers”) and then selling them to unsuspecting consumers on channels such as eBay, Craigslist, or even their own US-based sites”. The “Fake Golf Club Sellers site provide a list of known online fake-mongers”.

When all is said and done; consumers purchasing counterfeit / knock-offs are receiving a comparable product at a lower cost. Could there be anything wrong with this? For starters, U.S. and other countries are spending millions in research and development to design products, only to have them copied. This has extensive economic impact and, as noted above; those buying pirated or counterfeit items are supporting an illegal trade; a criminal activity.

Without a doubt, all industries worldwide are experiencing counterfeit, knock-off and fraud challenges. Going back to the beginning of my report;

  • manufacturers must look to utilize preventative measures, methodologies, varied solutions and technologies to contend with this growing problem
  • examination of diverse areas is essential to seek the route of the challenge; supply chain, global standards, training, enforcement, policies, technologies and the products
  • solutions must be addressed specific to the business

The pros and cons are extensive within the ongoing battle to combat counterfeit in the golf industry.

  • Pros - through such a widespread problem; more and more education is now present in the golf industry; there is more awareness of the economic impacts; and the human conscious is working towards doing the ‘right thing’, by purchasing through the correct channels. The golf forums are endless with the tales of ‘woes’.
  • Cons – only the tip of the iceberg is noted above…

Cheryl Gollub wrote this article as a course assignment in the Golf Club Operations Online Certificate Program (GCOOL) offered by Selkirk College. She is the former Deputy Operations Manager, Olympic and Paralympic Family Hotels, Vancouver 2010 Olympics and Paralympics Organizing Committee.

 

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