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Bogus buys

Released at: 23:52, 05/02/2015 Cosmetic Market

Bogus buys

A number of foreign cosmetic brands have become victims of counterfeits as local authorities face many obstacles in exerting some oversight.

by Hoang Thu

Ms. Nguyen Thi Mai, a 30 year old receptionist at a restaurant in Hanoi’s Nam Tu Liem district, was hospitalized recently when her face became swollen after using blemish remover. The White Doctors Melasma Pro, priced at VND780,000 ($36), was advertised as a perfect blemish removal cream, but a week after buying it online it had done quite a bit of damage to her face. “I had less spots after using the cream for a few days,” she explained. “But then I started to itch terribly.” The White Doctors Melasma Pro is, in fact, among 17 cosmetic products recalled by the Drug Administration of Vietnam under the Ministry of Health in October last year. Ms. Mai’s experience is among numerous cases reported around the country, ringing alarm bells about the amount of dangerous cosmetics in the market.

Cosmetics lead the list of the 31 most-counterfeited items in Vietnam, according to figures from the Vietnam Association for Anti-Counterfeiting and Trademark Protection (VATAP) released at a conference on the prevention of fake and counterfeit goods sold in the lead up to the lunar new year, held in December in Ho Chi Minh City. “Counterfeit or fake cosmetics are made so quickly that they appear in the market immediately after our products have been launched and established a reputation among customers,” Ms. Pham Huong, Coach Manager of LG VINA Cosmetics, the exclusive importer and distributor of two high-end cosmetic brands - Ohui and The History of Whoo - told VET. 

Easy to find

Despite their poor quality, fake cosmetic products still sell like hot cakes because of their cheap price and attractive packaging. Fakes labeled as Chanel, Maybelline and Lancome are available widely in night markets, stores and online shops. According to Ms. Vu Doan Thuy, National Sales Manager at The Faceshop Vietnam, the price of fake and counterfeit products can be 40-50 per cent lower than their authentic counterparts. The Faceshop have been in Vietnam for ten years and become among the most-favored in large cities, which results in fakes flooding into the market. “While the cosmetics industry is growing, authentic The Faceshop cosmetics’ sales in Vietnam fell in 2014,” she said. “The spread of counterfeit and fake cosmetics adversely affect the reputation, brand and revenue of authentic products.”

Most fake cosmetics and their ingredients in Vietnam come from China. Smugglers need only get the fake products over the border, where they are then distributed around the country. Last October the Hanoi Police’s Department of Environmental Crime Prevention found thousands of boxes of cosmetics of unknown origin at the Bach Phuong International Trade Company. Company owner Doan Thi Dung was unable to provide police with certificates of origin for the ingredients used in her company’s cosmetics. She admitted buying the ingredients at border markets in Lang Son and Mong Cai, as well as bottles and boxes of the invented Ecolly brand, then selling them as a foreign-brand of cosmetics from France to beauty centers in Hanoi for $70 a set. 

In many stores, fake cosmetics labeled as foreign brands are advertised as hand-carried imported goods or hand-carried by flight attendants from their country of origin. “Many women are desperate to have a fair complexion for as little money as possible,” Ms. Huong added. “This is one of the major reasons behind the spread of counterfeit or smuggled products in Vietnam.”

A tough battle 

Fighting against counterfeit products has never been an easy task. During investigations by local authorities in recent years, many products suspected of being counterfeit had to go through costly and time-consuming testing, as to the naked eye they appear to be the real thing. Those who sell the fakes have also started using more sophisticated tricks, buying one or two batches of authentic products and using the paperwork for their counterfeits. There are also insufficient staff tasked with monitoring and managing the market. “Prevention efforts cannot have the desired effect without the active participation of businesses,” said Mr. Do Thanh Lam, Deputy Director of the Market Surveillance Agency under the Ministry of Industry and Trade.

According to Mr. Lam, many businesses have not paid adequate attention to intellectual property rights and not applied legal and technical measures to protect their brands and prevent counterfeits. In particular, some businesses have not cooperated with authorities or provided product information. “Businesses have not understood the importance of protecting their brand, which has created major difficulties in preventing counterfeit goods,” he said. Businesses need to have a specialized division for protecting their intellectual property rights and cooperating with and supporting agencies. “The Market Surveillance Agency will create the conditions for businesses to participate in the investigation process,” he said. 

However, a few enterprises have their own strategies to highlight their brands and authentic products. LG Vina Cosmetics focuses on organizing information and advertising campaigns to improve consumers’ ability to identify authentic products. “Our products are also equipped with anti-counterfeit stamps issued by the Ministry of Public Security as well as our company’s exclusive seal,” Ms Huong said. The counterfeiters, however, also have the technology to produce genuine-looking stamps and seals. 

The VietLotus Co., the exclusive importer and distributor of The Faceshop cosmetics, invests more in building up its exclusive store network. “We recommend that customers not touch cosmetics in markets or online,” said Ms. Thuy. “We also issue exclusive symbols for our authorized stores and outlets so that consumers can readily identify them and feel secure when shopping.” There are 50 exclusive stores and 28 official outlets distributing The Faceshop cosmetics in all major cities throughout the country. “In 2015, we will continue to develop our sales network in order to help customers more easily find our authentic products,” she added.

Enterprises in the business look forward to local authorities issuing tougher sanctions to prevent and tackle the spread of counterfeit cosmetics, including increasing penalties by 3-4 times than currently and prosecuting violations. Under Government Decree No. 185/2013/ND-CP, which took effect on January 1, 2014, individuals producing and trafficking counterfeit goods or prohibited goods are fined a maximum of VND200 million ($9,364) and the organization involved is fined VND400 million ($18,728). Enterprises recommend that local authorities resolutely monitor and ban the import of cosmetics with unknown origins and work with other countries to verify the origin of import products. 

Keeping watch

Mr. Nguyen Trong Tin

Mr. Nguyen Trong Tin, Deputy Director of the Market Surveillance Agency (MSA) under the Ministry of Industry and Trade (MoIT), tells VET’s Hoang Thu about counterfeit and smuggled cosmetics and their efforts at control.

How many counterfeit and smuggled cosmetic products were found during MSA inspections in 2014? 

In performing the tasks assigned to it by the government, National Steering Committee 389 (the National Steering Committee on the Prevention and Control of Smuggling, Trade Fraud and Fake Commodities), and MoIT, the MSA directed subordinate departments to strengthen checks and control and strictly handle violations in smuggling, trade fraud and fake commodities in general and violations in cosmetics in particular and recorded some significant results. 

In 2014 MSA seized and handled a total of 632,570 cosmetic products, including 189,050 smuggled products, 375,106 products with labeling violations, 4,717 products with quality and utility violations, 59,567 products with packaging violations, and 4,130 products with other violations.

Can you tell us about the tricks counterfeiters use, especially in the production of fake cosmetics labeled as high-end foreign brands? Where do the raw materials, packaging, and labels come from?

Counterfeit cosmetics on the market as well as the ingredients used, especially in high-end cosmetics, mainly come from other countries. They are smuggled or hand-carried into the country.

In many cases, raw materials and finished products imported into Vietnam have not been labeled as high-end cosmetics. After the process of preparation, extraction, and packaging, they look very much like high-end foreign brands.

How do you treat fake cosmetics labeled as high-end foreign brands sold online and in luxury department stores?

The inspection and handling of violations on the internet is very difficult, including the tasks of collecting information and gathering evidence to ensure there is a legal basis for handle the violations, especially when foreign-based servers are used.

To deal with such complex violations, market surveillance departments in big cities and certain provinces work with MoIT’s Vietnam E-commerce and Information Technology Agency (VECITA) to test the observance of e-commerce provisions. 

Many organizations and individuals have been sanctioned for administrative violations regarding setting up e-commerce websites selling cosmetics without notifying local authorities. 
MSA has recently focused on promoting businesses’ awareness and calling for their cooperation in the fight against counterfeit products. Coordination has significantly improved as a result but requires further strengthening in the future.

Businesses and distributors such as supermarkets and department stores need to choose reputable suppliers to prevent counterfeit cosmetics finding their way into their distribution channels. When detecting counterfeit products these businesses and distributors must promptly notify local authorities and coordinate with them during inspections and the process of handling violations.

What measures and sanctions does MSA have to reduce the spread of counterfeit and smuggled cosmetics in 2015? 

In 2015, smuggling, trade fraud, and fake commodities will remain complex problems and adversely affect authentic production and people’s lives. To contribute to limiting the production and trade of counterfeit goods in general and of cosmetics in particular, MSA continues to aggressively implement the following key tasks based on directions from the government, the Prime Minister, National Steering Committee 389, and MoIT.

Firstly, we will continue to fully direct our subordinate departments to strengthen checks and controls and to handle violations on smuggling, trade fraud and fake commodities in general and violations in cosmetics in particular. 

Secondly, we will continue to focus on enhancing policy mechanisms by identifying shortcomings in regulations relating to management and propose recommendations to authorities to amend and improve relevant laws. 

Thirdly, MSA will call for businesses’ participation in our investigation campaigns. We will directly guide businesses in “hot spots” to participate in the fight against smuggling, trade fraud and fake commodities, and then fully check and handle violations.  

Fourthly, MSA continues to actively forecast market movements and timely handle any arising issues to create significant changes in campaigns to control smuggling, trade fraud and fake commodities. Based on previous inspection results, we will evaluate past efforts to improve investigation efficiency in controlling and handling violations. 

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