For any tourist visiting Dubai’s colorful creek, it quickly becomes a tedious refrain. “Rolex. Omega. Vuitton. Prada. Best prices. Cheap, cheap.” Brand names are reeled of by an array of shady characters blocking your path or tapping you on the shoulder. Show any interest, and you’ll be hustled into a dark alley, led up a flight of stairs in some dingy tenement and ushered into a room packed floor to ceiling with top-name consumer goods at bargain basement prices. The latest special editions from Rolex and Omega are laid out before you. Ray-Ban sunglasses are proffered for less than a tenth of the retail price. Handbags bearing the Louis Vuitton and Prada labels are, at first glance, indistinguishable from the big ticket items they’ve been cloned from.
Anything of value, in fact, even tea, is counterfeited and peddled under the counter or over it. Ominously, goods on which your life may depend like car parts are being faked.
Though some countries – the UAE and Saudi Arabia – have cracked down on the trade, industry representatives say not enough is being done. Most Gulf countries have yet to figure out the scale of the threat, and that is because counterfeiting is not necessarily viewed as a threat. As long as money is changing hands and tourists are being kept happy, the thinking goes, the economy can only benefit. Manufacturers take a different view, and now even the fiercest of competitors are united in their determination to destroy the market in fake goods.
Counterfeit cosmetics and toiletries have grown into a $210 million business in the Gulf. The value of fake car parts is estimated at between $150 million and $200 million in the GCC countries. According to statistics compiled by the intellectual property rights department and intervention department of Dubai Customs, fake goods worth more than 14 million dirhams ($3.81 million) were seized during the first five months of 2006; in July alone goods worth 7 million dirhams were seized. According to one estimate, counterfeit and pirated products cost the Saudi economy more than $4 billion a year. The actual figure is expected to be higher once the full impact on the economy is assessed. It is not clear, for example, how much is lost to customs receipts.
Between February and June last year, eight Dubai Customs centers collectively seized a total of 2,212,147 cartons of counterfeit goods. The bulk of these were intercepted at the port of Jebel Ali and Dubai International Airport. In August, $2 million in counterfeit cosmetics were seized in Sharjah, including fake Christian Dior and L’Oreal cosmetics. The World Customs Organization recently reported that Dubai’s Jebel Ali Free Zone is one of the worst offending entry ports for counterfeit consumer goods. According to the report, fake goods include vodka, champagne, soft drinks and perfume. Between 70 percent and 80 percent of the goods are produced in China.
Which is real? Tackling counterfeiting begins with identification, and that is where the problems start. “We all know where to go if we want to buy fake products. I am sure the authorities have the same information,” says Osama Rinno, the managing director of Clarins Group Middle East. The problem, he says, is that it is sometimes difficult to tell fake perfumes and cosmetics from the originals. “When you go to many of the discount stores, you can find products that look exactly like very well known brand names sold at ten or 15 dirhams when the original ones cost more than 200 dirhams. For sure, the fake ones neither have the same smell nor the same quality. That is why the best protection against counterfeit is buying from official retailers,” says Rinno. His solution is the imposition of hefty fines on importers and retailers of counterfeit products.
The difficulty of differentiating the real from the fake remains, however. In cases where the fake closely resembles the original, discerning eyes are needed. Last summer, perfume giant Chanel vowed to investigate reports that highly sophisticated counterfeit fragrances had been shipped to Dubai from Russia.
“There is a need to educate and enable the retailers to be able to identify fake goods,” says Himanshu Vashishtha, the country manager of ACNielsen UAE. Like other industry watchers, he recommends a two-pronged approach by manufacturers and governments to stamping out the problem. Vashishtha says, however, that the extent of fake goods in the GCC is still lower than some of the markets in Africa and the Arab world. Even in established markets like that of the European Union, fake goods cost an estimated 500 billion euros a year. “The time has come to take some proactive steps by a joint body of the industry and the government to ensure the problem does not reach epidemic proportions,” says Vashishtha.

Gray market. Counterfeiters hide their tracks in elaborate ways, such as shipping goods through a succession of countries on their way to their final destination, and selling goods over the Internet. Lost in the larger problem of counterfeit products is the gray market phenomenon where usually inferior products intended for some other market make their way into one of the upmarket segments to shore up thinning profits. Such goods are sold for a price lower than, or through a distributor different to, that intended by the manufacturer. Unlike the counterfeit, such products seldom invite attention and almost entirely go unnoticed. Industry insiders say the gray market has spread rapidly and the markets in the region are flooded with fake electronic and other items widely used by people, especially schools and businesses.
Awareness among the public is critical to success against fake goods, believes Osama Rinno of Clarins Group. He says that when it comes to perfumes and cosmetics, the public is largely aware that the counterfeit only looks like the real but the quality is not the same. “Companies like Clarins Group invest millions every year in research to make sure that our products … are safe for use. Whoever is buying counterfeit can be at risk as the products are not tested and its ingredients are unknown. They can cause allergies and even damage the skin,” he says. Rinno says the public have the power and should use it. “The public should refuse to buy counterfeit. If it is too good to be true, then it must not be true. If they are paying for a well known product at a fraction of the original price, then the customers should know that there is something wrong,” he says.

Manufacturers have gone on the offensive. Nestlé’s regional intellectual property advisor in the Middle East, Omar Shteiwi, says its operating/producing countries compile a “situation analysis” for counterfeited products in their markets each month which they compare to original inventory. “Nestlé exchanges ‘best practices’ with other brand owners to show innovative methodologies regarding protecting intellectual property rights,” says Shteiwi, who is also the chairman of the Brand Owners Protection Group (BPG).
The group is working with economic departments, chambers of commerce, customs houses, municipalities and police departments and has hired KPMG, the auditing firm, to do a regional economic impact study. Leading companies – including Estée Lauder, A.G. Lachen, GlaxoSmithKline, and Kraft Foods – drawn from different sectors are working together. Another non-government body, Automotive Brand Protection Coalition, began its campaign against counterfeit car parts in 2004 to create awareness of the dangers of installing fake parts.
Shteiwi says Nestlé signed an MoU with Jordan Customs Department last June on the basis of which the department reports to the company any suspicious container or goods. Nestlé has also developed a database of counterfeiters. “One of our external corporate strategies is the so-called brand protection groups where brand owners can join their efforts through sharing and exchanging information regarding counterfeiting,” Shteiwi says.
According to Shteiwi, some governments in the region are taking the threat seriously. “The government of Bahrain has recently passed a law to ensure that action is taken against counterfeit product trade. Even transit goods are being screened and not just those that are at the customs,” he says. Saudi authorities recently seized 90 tons of fake FMCG products worth $1 million. A crackdown coordinated by Saudi authorities and Unilever Arabia led to the seizure of products from a warehouse in Jeddah.
The UAE is training customs personnel to recognize counterfeits. A release issued by the Dubai Customs department says, “Recognizing the negative impact of fake goods on various industries and on the national economy, the Dubai Customs management has been providing specialized training to its inspectors on how to distinguish between bona fide and counterfeit goods.”

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