The Dangers Of Selling Counterfeit Products
With respect to the sale of counterfeit products in your store, this article will begin with the same warning it will end with: DON’T DO IT!
Recently, the owner of one brand of a sexual enhancement product accused a 7-Eleven franchisee in Southern California of selling not only that owner’s counterfeit product, but other counterfeit sexual enhancement products as well. The accusation has not been confirmed to the best of my knowledge, but it nevertheless prompted me to write this article because of the inherent danger of selling counterfeit products of any kind or description.
It is easy to understand the temptation to buy products that you might know, or guess, are counterfeit because of low cost and high gross profit. Counterfeit products are always bought from fly-by-night, here-today-and-gone-tomorrow suppliers. Rarely, if ever, will you purchase a counterfeit product from a recommended vendor such as McLane or from a non-recommended—but reputable—vendor. If someone shows up in your store and offers a product from his truck parked outside, and at a cost that is too good to be true—guaranteed, it is too good to be true.
While most people think of luxury brand handbags, sneakers or prescription drugs as being most likely candidates to be counterfeited, a host of other fake products, of a type typically sold in 7-Eleven stores, are flooding the market. Some examples are over-the-counter medications or food supplements, sunglasses, electrical products such as extension cords and batteries, toys for young children, health and beauty aids such as shampoos, toothpaste or skin moisturizers, and entertainment products such as CDs, DVDs, and video games. Some years ago, in the New York area, there was a rash of lawsuits by a legitimate manufacturer against several 7-Eleven owners for selling counterfeit toy bears that displayed that manufacturer’s well-known label.
What exactly is a counterfeit product? Simply stated, it is the unauthorized use of another’s trademark that may consist of a registered brand name, design, logo, etc. Invariably, the counterfeit product appears identical or close to the real product, and is almost always a knockoff of a well-known product that is in demand. In short, a counterfeit product is intended to deceive your customers into buying a fake and inferior product believing it is the real thing. Obviously, that is not what the 7-Eleven image or reputation is about.
Aside from the legal ramifications of selling counterfeit products, there can be great danger of severe injury or even death to your customers. There are reports of batteries causing fires or destroying products. Fake personal care products often contain caustic chemicals, with reports of antifreeze in counterfeit toothpaste. Counterfeit shampoo can cause hair loss, and small and sharp parts in counterfeit toys can break loose and endanger little tots. The list can go on and on, but buying a counterfeit product clearly will not nearly offset the potential financial damages you will suffer when an injured person sues you.
The law is clear—it is illegal to sell or distribute counterfeit products and is both civilly and criminally punishable. The most recent criminal sanctions were passed by Congress in 2006 and prohibit trafficking of counterfeit goods and services that bear labels or similar packaging of any type or nature, with knowledge that a counterfeit mark has been applied to such labels or packaging and with the likelihood that such use will cause confusion, mistakes, or deception.
Federal and state laws provide for heavy-duty fines and imprisonment for intentionally dealing with counterfeit goods, as well as triple damages, attorney fees, and confiscation of counterfeit goods. Prosecutions under the RICO Act involving a conspiracy to sell counterfeit products can result in greatly increased prison time and fines.
The International Anti-Counterfeiting Coalition gives these tips on how to spot and avoid purchasing counterfeit products:
1. Labels that are blurred or torn.
2. Product names that are misspelled or altered.
3. Unannounced changes in product content, color, smell or packaging.
4. Missing codes, 1-800 consumer numbers, or trademarks.
5. Products lacking the usual guarantees and/or licensing agreements one should find.
The best tipoff for 7-Eleven franchisees is an unknown and unsavory looking character suddenly popping into your store with a deal that is too good to refuse. REFUSE IT and send him on his way.
I can offer no possible valid reason to knowingly purchase counterfeit goods, but there are a host of reasons not to give in to the temptation to buy cheap. It may be profitable for a while, but it is not worth endangering your reputation or, even worse, the health and safety of your customers. My final words: DON’T DO IT!