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Curbing the Counterfeit Trade in Emerging Markets

Dubai Customs nabbed goods worth $20m in the first half of 2017 at the border alone.


I don’t generally let strangers lock me inside of dingy apartments but, well, here I am. The whole room is illuminated by only two harsh light bulbs, emphasizing chipped paint from the faded green walls scattered across much of the concrete floor. It’s a surprising place to be surrounded by thousands of dollars of leather merchandise. A Pakistani merchant shifts his weight nervously near the door, fidgeting with a leather purse sitting askew on a shelf. “So, do you want to buy anything?”


I am standing in the back room of a makeshift third-floor shop above Dubai’s Karama Market, one of the largest concentrations of publicly sold counterfeit goods in the United Arab Emirates. More than 300 retailers line the ground floor of the market’s concrete structures, but much of the real action happens in the surrounding apartments: rundown accommodations filled with counterfeit apparel and accessories, including watches, wallets, and purses in brands ranging from Nike and Adidas to Fendi and Coach. Standing on the edge of the market 15 minutes earlier, shopkeepers kept their peddling discrete. But as I headed further into the labyrinthine center, the hawking became more brazen.


“I will show you my bags because of your long hair,” one Indian merchant chuckled, pointing to my shoulder-length coiffure. “I know you are not the police,” he said, leading me up a flight of stairs to a room filled with knockoff Chanel handbags.


These shopkeepers are worried about discretion, wary of the UAE’s massive crackdown on counterfeit goods; officials raided nearly $500m worth of items in 2016, a 7% increase on the previous year. While the UAE has declared its aggressive, multifaceted crackdown in service of consumers, brands, and the country’s economy to be a success, the global counterfeit trade is not a simple beast to tackle.


A global problem


Whether through manufacturing, importation, or both, counterfeit goods are present in nearly every corner of the world’s markets. According to a 2016 report by the Organization for Economic Co-operation and Development, the global counterfeit trade is worth nearly $500bn annually – including accounting for a staggering 3% of all goods imported worldwide.


Emerging economies are especially key to the counterfeit market, as they harbor a perfect storm: growing infrastructure to manufacture and ship counterfeit goods but significant gaps in legislation and enforcement to counter the trade. As a shipping hub and developing manufacturing power, the UAE is a hotbed for counterfeit goods. Dubai Customs nabbed goods worth $20m in the first half of 2017 at the border alone.


Today, however, UAE officials are tackling the counterfeit market on several fronts, including touting frequent raids by the ambitious Department of Economic Development (DED) on social media, hosting major conferences and workshops led by agents to help train customs officers, and imposing fines of at least $5,000 on shopkeepers caught selling fake merchandise.


As an emerging market, the UAE has worked diligently for nearly two decades to crack down on counterfeit goods. Dubai officials began the first push in 2001 by publicly declaring that shops in Karama Market had two weeks to sell any remaining illicit stock before they would begin imposing stiff fines and unannounced raids. At the time, the market was notorious enough to find inclusion in UAE travel guides and was referred to locally as “Calvin Karama” for its proliferation of shoddy Calvin Klein knockoff undergarments.


Today, officials contend with increasingly sophisticated fraudulence – acclaimed fashion website Highsnobiety recently wrote about “eerily convincing fake sneakers” they found in Karama – and are lobbying for more aggressive laws that even make purchasing counterfeit goods illegal (a tactic employed by only a few nations including France and Italy).


“I support introducing legislation to make purchasing fake products an offense,” a senior Dubai Police official declared in an interview in March 2017. “It is hard to persuade people that buying or owning fake products is intellectual theft. Residents here should think of it as a social responsibility, and that it’s as bad as stealing.”


 



Can counterfeit goods be stopped?


The push to end the UAE’s counterfeit market is fueled by several considerations. One major point used by officials to dissuade consumers is that the market is frequently tied to money laundering among organized crime and terrorist organizations, a warning both from UAE officials and others around the globe, including an American counterfeit investigator’s recent viral TED talk.


Additionally, while buying counterfeit apparel from a secondary market like Karama may seem innocuous, it can also fund more consequential racketeering in the primary market. These primary market goods can be both more difficult to identify and also more dangerous to purchase, such as knockoff cosmetics with harmful bacteria and carcinogens and even counterfeit medications. A recent shipment was found in Dubai containing 20,000 counterfeit blood medication bottles from Mauritius.


But as an emerging market hoping to attract major brands as well as the tourism dollars that follow, UAE officials’ ability to allay the fears of powerful global brands may in fact be their greatest motivating factor to end the counterfeit trade. As the UAE bids to become a global luxury shopping destination, the formidable Brand Owners’ Protection Group (BPG) – a consortium of local and international companies based in the UAE – established itself in 2005 to protect intellectual property rights and lobby the government for harsher penalties, including stiffer fines and even jail time, for merchants dealing in the trade.


“The [current] fine will not stop counterfeiters from committing the crime again, AED30,000 [$8,167] is just a small part of the profit they make,” Malek Hannouf, a BPG official said in an interview in November 2017.


Connected to all parts of the world


But difficulties abound in attempting to completely snuff out the counterfeit trade in the UAE. For one thing, global trade and shipment is incredibly complex, heightened by the UAE’s free zones and, increasingly, small shipments used in the counterfeit trade to avoid detection.


More pressing for anti-counterfeit officials, however, is the explosion of merchants now utilizing social media accounts to tout illegal goods in a more controlled environment. In 2016, nearly 10,000 social media accounts based in the UAE had to be shut down for peddling counterfeit goods, a 200% increase from the previous year that illustrates the spread of the medium for illegal purposes. Even shopkeepers who work at the brick-and-mortar Karama Market are heading online. During my most recent trip last week, I was offered nearly two dozen Instagram accounts to peruse photographs of counterfeit products and given assurance that any product can be delivered to my apartment anywhere in the UAE.


“Instagram and Facebook are easier for selling. More people see [the products] and police are no problem,” one Indian shopkeeper confessed to me over a glass of tea.    


On my way out of Karama Market, I stopped to talk to a family of jovial British tourists, their stuffed plastic bags and large grins pointing to a successful day of shopping.


“I wanted sunglasses and my daughter wanted handbags. We come to Karama every time we come to Dubai – it’s like the UAE’s version of the Silk Market,” the middle-aged woman told me. “We love it.”


Whether they’re walking through a place like Karama Market, scrolling an anonymous online social media profile, or waiting inside an automobile service center, clearly, many customers still want a cheap deal. So, while local media reported a harder-than-normal summer season for the shops of Karama Market in 2017 – perhaps pointing to success in the DED’s continued raids and other anti-counterfeit initiatives – this might not be the last time I hear “Coach, Rolex, Prada, Fendi” mumbled at the Karama Market.  


Gaar Adams is a writer and journalist. His writing and photography have appeared in The Atlantic, VICE, Foreign Policy, NPR, Slate, Roads & Kingdoms, and elsewhere.