The menace of fake cosmetics

Counterfeit cosmetics has emerged as a serious issue adversely impacting the revenues of cosmetics manufacturers. A report

‘It’s a steal!’. This is one of the favourite expressions of shopaholics, especially when you lay your hands on that most expensive luxury item at half the price. These are precisely the steal deals that have helped counterfeiters across the world and across every imaginable product from car parts to life-saving drugs to cosmetics, lure unsuspecting customers.

Dangerous make-up

Cosmetics companies, like any other, have been fighting counterfeiters for as long as they have been in business. Yet, despite the best efforts that regulators and companies have undertaken, fake products seem to be proliferating the markets.

Not so long ago, counterfeit goods took a simple and well-worn footpath – bogus watches, sunglasses, electronics would be sold by a fly-by-night guy who would set up his wares in the by-lanes of Mumbai and Delhi until they got seized. He would soon return at a new address with more cartons the next day.

With new money, globalisation, e-commerce and brand awareness, now the ‘guy’ has a more lucrative range to sell – personal care products wherein cosmetics make a huge part of the pie.

The cost of buying a cheap branded cosmetics can be nasty, as discovered by 18-year-old Rachael McLaughlin. This teen from Ireland had to be rushed to emergency care due to a severe allergic reaction to Kylie Cosmetics. Turned out Racheal had unwittingly purchased the fake lipstick on Facebook. Kylie Jenner, the designer of Kylie Cosmetics had to resort to Twitter to inform her fans of buying authentic products only from her website.

Unlike people, who, say, buy a sunglass generally know they are not getting a real Rayban for ₹ 2,000, the vast majority of people who purchase counterfeit makeup think they are getting the real thing.

Worse, unlike fake sunglasses, fake cosmetics often come from shady operations, with dirty floors and open vats of dye, and can contain paint thinner, mercury, carcinogens, and dangerous levels of bacteria. Some tests have also have found animal faeces, arsenic and rat poison, a commonly used pesticide to beat the rat menace in these unhygienic sweatshops. Fake cosmetics like eyeshadow made with arsenic can seal your eyelids shut.

Knock-out economy

Even so, counterfeit makeup appears to be selling in higher and higher volume.
An OCED 2016 report titled, ‘Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact’, puts the value of imported fake goods worldwide at $461 billion in 2013, compared with total imports in world trade of $17.9 trillion. Up to 5 percent of goods imported into the European Union are fakes. Most originate in middle income or emerging countries, with China the top producer.

Contrary to the perception that counterfeiters only hurt big companies and luxury goods manufacturers, these grey market deals have a bigger impact. They take advantage of customers’ trust in trademarks and brand names to undermine economies and endanger lives.

The year 2015, FICCI CASCADE (Committee Against Smuggling and Counterfeiting Activities) study also demonstrated that the loss to Indian Government was near ₹ 6,000 crore due to the knockoffs market in the FMCG space alone. The study further said that almost 22 percent of the packaged foods industry was lost to the grey market that year. This means that more than one in five packaged foods you’re consuming in India may be counterfeit.

Online sales are also fueling the surge in the sale of counterfeit goods. Many customers have reported receiving fake products from online resellers like Alibaba, eBay, Amazon and local websites like Flipkart. A survey by Localcircles reported that 38 percent of consumers admitted to receiving counterfeit or fake product from e-commerce sites in 2017.

The modus operandi for counterfeiters is easy – they typically receive spurious products via online deliveries typically from China. Due to the sheer size of the products, most beauty products are less than 20ml packs, a large quantity can be easily couriered across the continent, where local resellers then put it up on online websites at a discount.

Regulatory landscape

Despite the growing costs of counterfeit cosmetics and very real health risks to consumers, when it comes to cosmetics, the regulatory landscape makes aggressive enforcement challenging.

Manufacturing units located outside of the country, lack of stringent IPR regulations are some of the reasons that make it difficult to penalize the offenders. The onus of combatting counterfeit goods is now being shared by manufacturers along with the Government.
From the multi-billion dollar Estée Lauder Cos., that owns MAC, Clinique, and other brands, to Hindustan Unilever (HUL) have waged an aggressive global and domestic campaigns against counterfeiting. This includes stringent vigilance, hiring private investigators, customer awareness mechanisms, state-of-the-art packaging and even using technology to help customers spot a genuine.

Some of the anti-counterfeiting measures include holograms, watermarks, and radio-frequency identification, or RFID chips, QR codes, and digital authentication apps. Such features are a big investment: The market for cosmetic and pharmaceutical anti-counterfeit packaging totalled $35.7 billion in 2014, according to a study by Allied Market Research.

Finally, it is the customer who has to be aware of the dangers of buying a fake. Companies are also taking up this challenge aggressively by using social media and other mediums to inform the customers and help them spot a fake.