An official of LG Electronics' Dubai branch was recently surprised to hear from Dubai customs that a shipment of 14-inch LG TVs was passing through -- because LG stopped making TVs smaller than 20 inches six years ago. Rushing to the port, he was led to a cargo ship where he found 1,050 cheap TVs packed in fake LG cartons. Pirated goods that were once traded only inside China are now turning up all over the Middle East.
◆ Chinese Problem Spreading to Middle East
Until the last couple of years, knockoffs were usually produced by illegal companies in China for distribution there, but recently they have been found in many Middle East countries including Dubai, Iraq and Yemen. In fact last December LG Electronics was able to find a factory that was turning out knockoffs in Shenzhen, China, by following the trail of a knockoff LG cellphone found for sale in Yemen.
In August, LG discovered a shipment of 1,500 fake LG washing machines in Dubai that was headed for Iraq, and in November Samsung Electronics seized 50,000 fake Samsung-branded cellphone packages and user manuals in Shenzhen. Samsung accused the company of pirating.
◆ Korean Companies Fighting Back
The knockoff market is growing quickly. Samsung and LG turned up just 100 cases of counterfeit goods in 2004, but that figure more than doubled to 230 last year. The fake products are usually sold locally for 70 to 80 percent less than the real ones. "Now that Samsung Digital TVs rank first in the world and Korean companies are showing great power in premium markets, the copy problem is getting worse," a Samsung executive said.
The victimized companies are fighting back. LG Electronics has five agencies in China and two in Dubai looking for fakes. In April they plan to teach customs officials in the United Arab Emirates, Kuwait, and Saudi Arabia how to spot counterfeits. Samsung has obtained criminal judgments against fraudsters. Last year jail sentences were handed down to people from an organization that made 20,000 illegal Samsung logos and to people from another company that made 9,000 fake Samsung cellphone batteries.
An executive from LG Electronics said that China has been more willing to face the problem recently. "Fortunately, as part of its image reform campaign, the Chinese government is aggressively trying to deal with the counterfeit problem, and it's a big help."