Counterfeit ink: bogus ink and toner cartridges pose high risk for Latin American businesses and consumers.

Counterfeit ink and toner cartridges are a costly problem for Latin American businesses and consumers. Buyers who unwittingly purchase these pirated products may find their equipment malfunctioning--or even ruined beyond repair.

"Everyone but the counterfeiter loses," says William Duffy, president and CEO of the Imaging Supplies Coalition (ISC), an industry organization of eight printer companies who have banded together to fight counterfeiting and educate the public.

"Manufacturers lose revenue, profits and most importantly, brand loyalty," says Duffy. "Customers lose due to the low quality of the bogus products, which may damage their machines. Resellers lose because they must compete with these illegal products and are often called upon by the customers to correct problems caused by these counterfeits. Federal, state and local governments lose when jobs are lost and taxes are not paid."

Counterfeit ink, toner, ribbons and other consumable products are a worldwide problem. ISC estimates that fake ink and toner cartridges resulted in a $2 billion loss to its member companies, who include Brother International Corp., Canon U.S.A. Inc, Epson America Inc., Katun Corporation, Lexmark International Inc., Oki Data Corporation, Sharp Electronics Corporation, Toshiba America Business Solutions, and Xerox Corporation.

Manufacturing companies report that they have made good progress in reducing the quantities of counterfeits in many Latin American countries but in a few countries counterfeits are still common. "Latin America is one of the hotbeds of counterfeit activity," says Duffy. While exact figures for the region are hard to quantify, Duffy estimates that from one-quarter to one-half of certain brand-name inks sold in some Latin countries last year were counterfeit.

Fighting the counterfeiters

Major equipment manufacturers like Hewlett-Packard (HP) have added security features to their packaging of consumable products to thwart counterfeiters (see related article). HP, Epson and many other manufacturers are working closely with civil authorities and police agencies throughout the region to enforce national intellectual property and anti-counterfeiting laws.

Alf Andersen, Epson's general counsel for Latin America, says Latin American nations have made great strides in attacking the problem in recent years. "We have received increased cooperation from government authorities," he says. "For instance, working with the ISC we have made good progress in Paraguay, and thereby reduced the distribution of counterfeit products in the entire Mercosur trading area."

Epson and other ISC members also cooperate closely with the U.S. Customs Service in areas like Miami, which is a transshipment point for counterfeit products headed for Latin America, according to Andersen. "Both with the ISC and acting on our own behalf, we have initiated enforcement efforts throughout Latin America and are pleased our customers are benefiting from reduced counterfeit manufacturing and distribution," he says.

Duffy agrees that joint investigations involving the ISC, individual manufacturers, and law enforcement agencies have shown that Latin governments are willing to work with the brand owners by acting responsibly to limit counterfeiting, as required by their membership in the World Trade Organization (WTO.)

For instance, in February 2003, ISC investigators and Mexico's Federal Police seized thousands of Epson and Canon ink cartridges at 14 retail locations. In a separate action, Mexican Customs authorities seized two containers, each with 3,000 counterfeit ink cartridges, entering Mexico City. ISC has also trained Mexican appraisers at Mexico's Attorney General's Office in methods of identifying counterfeit products.

Other anti-counterfeit raids have taken place in Colombia, Peru and Paraguay in the past year. In Bogota, for example, police seized 38,061 ink and laser cartridges and 17,795 ribbons, along with machinery, packaging, parts and other items used to counterfeit products for Brother, Canon, Epson, Hewlett-Packard, Lexmark, Oki Data, and other brands. The estimated retail value of the products seized was US$5 million.

In July of this year, the Peruvian National Division of Crimes against Intellectual Property Fiscal Police seized hundreds of thousands of counterfeit HP ink and toner product and packaging, preventing approximately US$9.3 million in counterfeit product from flooding the market. "Their continued efforts help ensure our customer's ability to purchase original HP print supplies," said an HP company spokesperson.

Too good to be true?

In Latin America, computer product resellers, businesses and customers are often offered products at prices "too good to be true." A counterfeiter may claim that the offered products are inventory liquidations, manufacturer's overruns, or products diverted from other countries. In other reported cases, telemarketers have sold counterfeit products to businesses, alleging they were made by the original manufacturer.

Lorena Cora, product and marketing manager for Canon Latin America in Miami, says counterfeit supplies are a constant problem that varies from country to country. "The most popular counterfeit items are the ones that people buy the most," she says.

Companies that buy products using a low-bid process are particularly susceptible to counterfeiting. "We work with companies and governments to authenticate products with the low-priced bids," says Andersen.

For Latin businesses, it's important to note that none of the original equipment manufacturers have sold their ink patents to other companies, Cora adds. "That means whether it's a fake product or a generic one, it won't be as good as the original."

Jose Ramos, Epson's service manager for Latin America, notes that the production of legitimate ink cartridges is a complex process done in clean room manufacturing environments. "Because counterfeiters are often produced in filthy, clandestine locations, the quality of their ink and inkjet cartridges is terrible," he says, adding that some of their cartridges will only print a few pages, or produce 'banding' with some areas of darker or lighter ink.

Not only can this poor quality ink clog the printer's precisely engineered printheads and nozzles, they can also leak and stain prints, according to Ramos. If leaky ink gets on the printer's motherboard, the equipment can fail permanently. When users experience these problems, they typically blame the manufacturer, not realizing that the ink or toner has been made by a counterfeiter.

"We work closely with retailers and distributors to help them avoid buying fake products that result in customer dissatisfaction," says Agustin Chacon, Epson's marketing director for Latin America. "We ask our customers to resist low-priced offers and to buy from authorized distributors. As we all know, that which appears cheap can end up being very expensive."

Of course, counterfeits are not the only potential cause of problems. Poorly made refurbished ink and toner cartridges can also damage expensive office equipment, according to Panasonic's Genaro Magana, subdirector, communications group, Consumable Systems, in Mexico City.

"Consumers should know that off brand products are not compatible with our Panasonic brand," he says. "The equipment doesn't function as well, and consumers lose protection of the factory warranty." Panasonic is working with business organizations and the Mexican government to make consumers aware of the problem.

Nestor Cuervo, sales manager for copiers, adds that consumers assume that refurbished cartridges are as good as the originals. "But when the injectors or internal parts malfunction, they realize the extent of the problem," he says. "What we want to do in Mexico is let consumers know that it is dangerous for them to use these refurbished products."

Using unauthorized products in fax machines can also create problems. Manuel Cancino, a sales representative for Panasonic faxes and printers, notes that poorly made film can stick to the inside of a fax. "That could ruin the product," he says.

TIPS FOR BUSINESSES AND CONSUMERS

What can businesses and consumers do? The imaging supplies coalition, along with major manufacturers, recommends buying ink and toner cartridges only from an authorized reseller of the products or a supplier with whom you have a history of doing business. The web sites of ink manufacturers usually include a full list of authorized resellers.

Be suspicious of ink cartridges offered at well below the usual price in a local market. While some counterfeiters do sell their fake products at standard retail pricing, most typically will offer steep discounts in order to encourage a quick sale.

Finally, check the packaging closely--especially if the manufacturer includes security seals or protective labels. Many counterfeit products can be identified in the store or on the street by the poorly printed quality of the packaging.

In addition, the ISC offers a program called "When in Doubt ... Check it Out" that allows dealers, distributors and customers to submit questionable imaging supplies such as ribbons, inkjet cartridges, laser cartridges, toners and developers to the ISC for authentication. All requests are confidential, and the requester is not identified to the manufacturer.

If the merchandise is legitimate, the requester is informed and the transaction is concluded. If it is counterfeit, used or remanufactured and being sold as new, the requester is notified and asked to confidentially identify the source of the offer. The ISC will pursue the situation without involving the requester.

Since launch of the ISC program several years ago, hundreds of thousands of counterfeit imaging supplies valued in the million of dollars have been removed from commerce. Nine different brands targeted by counterfeit imaging supplies manufacturers have been identified, and approximately 20 percent of all products passing through the ISC have proven to be counterfeit.

"Fighting back against the counterfeiters is a win-win situation for manufacturers, businesses and consumers," says Duffy. "Our message is to get it off the street." For more information, visit www.isc-inc.org.