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Drinks counterfeiting poses health risks to consumers.

COUNTERFEITERS often claim their crime is victimless--the only losers are rich corporations who enjoy healthy profits anyway from their brands. But what if you drink the fake, and it kills you? It happens, Keith Nuthall explores the murky world of drinks counterfeiting.

THE TALLY of counterfeit alcohol victims is long. In April, Moscow's board of health announced that in 2008, there were 1,069 duped Moscow consumers who died after becoming intoxicated by counterfeit alcoholic beverages. The body reported police data alleging that 2 million bottles of counterfeit alcohol were confiscated in Moscow in 2008, with nine illicit distilleries being shut down. And while Russia may have reputation for hard and loose drinking, there were 11 victims who died this April in Turkey from drinking methyl alcohol in mostly fake brands of the traditional aniseed drink raki. Even in Britain, with its relatively tough environmental health controls, there is concern. There has been a rash of fake vodka discoveries in the UK over the past two years and Britain's Food Standards Agency (FSA) has warned of a series of potential heath problems for duped consumers. Last year, it warned that counterfeit SPAR Imperial Vodka found in northern England and London "contains potentially harmful levels of methanol," adding heavy drinkers could be blinded.

With drinks counterfeiting, both consumers and legitimate drinks operations lose out. In many consumer markets, buyers are happy to pay a cheap price for a fake item of clothing, a CD, or book: they might buy the original if they had the money, but they probably do not. With drinks, noone wants to buy a fake: and consumers only know they have been had once they start drinking.

But how big is the problem, in commercial terms? The European Commission releases data every year for the European Union (EU), and its report on 2007 showed that 1.9 million counterfeit food and drink items were seized by EU customs that year. But of course, noone really knows the extent of the problem, because items that slip through the net are impossible to count accurately. The Organisation for Economic Cooperation & Commerce (OECD) estimated in 2007 that the total value of internationally traded counterfeit and pirated products in international trade could be US$200 billion.

So the levels are high, but exactly how much pirated product--especially sector-by-sector is a tough figure to nail down.

As for drinks, the European Spirits Organisation's CEPS director general, Jamie Fortescue said his federation is under increasing pressure from members to act against counterfeiting. There has been steady anecdotal evidence of counterfeits of specific brands being exported into the European Union (EU) from China and Russia, he said. But there was also a growing problem within the EU itself, with eastern European countries recently becoming member states facing home-grown illicit production. Some of this, said Mr Fortescue, is of generic fakes (which claim to be a particular drink, but are actually white spirit or even methylated spirit). "That's happening. The extent of the problem is unclear, but we're getting more and more examples. And then this becomes a health hazard issue as well." Eastern European country governments have contacted CEPS complaining about a lack of policing muscle and in some instances weak laws to control this problem, he said.

Edwin Atkinson, director general of the UK-based Gin and Vodka Association warns another new avenue for counterfeiters as potentially developing problems includes the shipping of counterfeit spirits to consumers buying what they believed to be premium brands over the Internet. When the case of booze arrives, disappointment awaits. And another is the business-to-business supply of drinks, with companies sourcing what they thought were reputable supplies, but end up receiving fakes. There have also been widespread reports in emerging market countries, such as India, for instance, of genuine empty bottles being collected--for instance from hotels--so they can later be filled with cheap generic spirits and sold as the original item. Another variant of this fraud is the so-called 'tipping', where bar and pub managers themselves fill premium-brand bottles with shoddy down-market rubbish and hope their customers are too drunk to notice. This has malpractice has been squeezed by the development of special chemical markets allowing trading standards officers to test whether a drink being served is indeed what it says on the label. In the UK, this problem has been reduced according to figures from the International Federation of Spirits Producers (IFSP), with a survey showing 8% of 1,000 outlets surveyed in 1999 substituting at least one spirit brand, (with the value of this fraud being GBP 43 million). This had fallen to 2% by 2008, said the IFSP. The key for the industry in fighting all these kinds of sharp practice is intelligence, noted Mr Fortescue, with information about counterfeit drinks being fed back from sales teams to managers and drinks industry organisations, then to customs and police teams. "We have people on the ground everywhere."

However, this intelligence is only going to be really useful if governments have sufficient law enforcement and rigorous laws allowing courts to seriously punish counterfeiters. CEPS is concerned such legislation maybe lacking in the eastern reaches of the EU, from where fake drinks can be exported freely westwards through the EU's borderless single market. And indeed, laws really do matter. Scotch whisky continues to be a major target of counterfeiters, and the Scotch Whisky Association (SWA) fights them through the courts. A spokesman stressed: "The SWA continues to take action against unfair competition, such as products 'passed off' as Scotch whisky when they are not, wherever we encounter such practices internationally. At any one time, we can be pursuing up to 70 different legal cases around the world."

To help this process, the association is seeking to beef up its legislative protection worldwide, trying to register Scotch whisky as a geographical indication in emerging markets such as China, India, and Thailand, which have set up geographical indication registers. This would prevent manufacturers in these countries from marketing whisky as Scotch if it was not made in Scotland by traditional methods.

This year should also see the release of reformed detailed Scotch Whisky Regulations within the UK, which the British government is promising would introduce "new categories of Scotch whisky"; add requirements that Single Malt Scotch Whisky be bottled in Scotland; and ban the export of Scotch whisky unless in inert containers "to prevent further maturation outside Scotland." Scottish secretary Jim Murray said recently (NOTE--IN MARCH): "These new regulations ... will provide enhanced protection for Scotch whisky producers."
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Author:Nuthall, Keith
Publication:International News
Date:May 1, 2009
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