Imitation Nation

In this episode, Shabbir and Sven explore the complexities of counterfeit products, focusing on airbags and luxury watches. They discuss the challenges faced by online marketplaces in verifying authenticity and the broader implications for safety and brand integrity.

 

Transcript:

 

shabbir (00:01)
Sven welcome to episode number thirty seven, a prime number I'd point out of Imitation Nation.

Sven (00:08)
Okay. That that took me a second to think, but yes, that is a prime number. happy Friday. How are you?

shabbir (00:13)
I'm good. I usually try and

Sven (00:14)
Okay.

shabbir (00:15)
pretend that I take Fridays off. I clearly never take Fridays off. But I am dressed down as if I am taking Friday off. In the sweatshirt of my daughter's high school, which is for all of us of a certain age, it's a fame high school, like from the TV shows. So she spends half

Sven (00:31)
Nice.

shabbir (00:32)
her day playing cello.

Sven (00:33)
That's lovely. That actually was an excellent movie, side note. So today today is today is the 80s movie day. I reminded Stacy, one of our team members, today on some good 80s movie she should watch with everything developing in AI, I recommended she watch War Games. I don't know if you remember that movie with Matthew Broderick. Just

shabbir (00:52)
Yes.

Sven (00:53)
stuff just becoming really real. And I'm like, you might want to watch that because that's it's very, very relevant right now. So

shabbir (00:59)
The only

shabbir (01:00)
winning move is not to play.

Sven (01:02)
There you go, good quote,

shabbir (01:03)
Ha ha ha.

Sven (01:04)
like it. Well good to see you, sir.

shabbir (01:08)
Good to see you and good to see us both in our home. I think we just recorded an episode recently from you in a hotel room in Colorado, which was a very scenic warm lamp you had, just like the one you have in your office.

Sven (01:19)
That was lovely, yeah. No, and and this is one of the few where I'm not travelling. Starting next week it's gonna be it's gonna be a wild three months of travel.

shabbir (01:29)
Yeah. I

Sven (01:30)
So you will see me

Sven (01:31)
in lots of unusual spots during our recordings, I think.

shabbir (01:35)
I I am going to be traveling to visit with pa a patient victim next week and try and get her story on camera. And remains to be seen if I will be traveling internationally for more peptide victims, but we're finding them all over the world. People I'll just say this, we're not gonna do a whole story on this, but don't be taking those unapproved by the FDA peptides. That is not safe.

Sven (01:58)
no.

Sven (01:59)
No, and as as you and I talked about, because you you told me about this, I started researching it, and so I started researching it on my social media platforms. And because these algorithms now think that I like this or I'm looking for that, my entire social media feed is now full of this. And it is scary what's out there. So yeah, don't don't don't take any of this unapproved stuff. It's crazy.

shabbir (02:24)
So I want to start talking about airbags because

Sven (02:29)
Okay.

shabbir (02:30)
we have talked a lot about airbags, we talked about the big jury settlement, the big award, wrongful

Sven (02:37)
Mm-hmm.

shabbir (02:38)
death suit. In that case, the airbag was sold on eBay. And eBay responded this week by banning the sale of airbags on its platform. Not surprisingly.

Sven (02:51)
I'm I'm sure it's complete

Sven (02:52)
completely uncorrelated. I'm sure it's completely uncorrelated.

shabbir (02:57)
So this takes effect September twenty-fourth. eBay will probi prohibit the sale of all airbags and airbag inflators after a series of fatalities. I think we have nine or ten deaths in the US that have been traced to counterfeit airbags and the six hundred and three million dollar wrongful death verdict. The one young woman with children who don't have a mother anymore. the lawsuit did name eBay. I don't know if that was the deciding factor, but eBay has not

shabbir (03:25)
eBay is not what I would call a poor actor all the time. I mean everybody has in the brand protection world has issues with eBay, but they it's you cannot call them non-responsive. but in this case they have chosen to to respond by banning the sale of of of airbags on its platform. And I I think you've looked at the other platforms that are that that have policies on airbags, Sven. What have you found?

Sven (03:50)
no, and and I think, you know, well, so first of all, glad that eBay is doing this. Like it's one of those moves that's just it's very overdue. was the lawsuit a contributing factor? I would just say yes. I'm sure that they looked at it and say, hey, listen, this while they got dismissed from the lawsuit because of section 230 protection, a six hundred three million dollar verdict. You're like, you look at this and you're like, listen, that's not worth it. and but more importantly.

Sven (04:17)
Is pretty much every other large platform: Amazon, Facebook Marketplace, Alibaba, AliExpress, all of them, and several other marketplaces already have adopted over the years the policy to not sell airbags because they're like, we can't verify them, right? We can't match them to a VIN and all of that, and people falsify them. And so they many of those most marketplaces already prohibited it. So for me, eBay is kind of.

Sven (04:45)
catching up with that, which is great. I wouldn't be surprised if eBay as well as other marketplaces also start to ban all kinds of other automotive OEM parts like brake pads and all of that, because I can't verify it. And I've seen brake pads that are counterfeit that are made literally out of sawdust. and when you hit that on the highway, right? That's just gonna evaporate. So from

shabbir (05:07)
Yeah.

Sven (05:07)
a pure liability perspective

Sven (05:09)
These platforms hopefully will get more cautious with with things that's really safety critical.

shabbir (05:15)
Here's what I don't get.

shabbir (05:19)
With all the resources that eBay has and all the cooperation that they could possibly get from manufacturers, what this basically says when you say we're banning the sale of airbags on our platform and airbag inflators is that we cannot tell you if someone lists it if it's real. Right? That is a huge infrastructure problem. And

Sven (05:41)
Mm-hmm.

shabbir (05:42)
for a marketplace, even with the cooperation of the manufacturer, to not be able to say that we cannot.

shabbir (05:48)
demonstrate that this is real? Like they they could they could have taken the step that the only person allowed to sell airbags is a is an a manufacturer. Right? They could have taken that step, but they decided that that was even contained risk that they didn't want. What does it say when when even the largest marketplace, one of the largest marketplaces in the world with resources to do brand protection, throws up their hands and says, we can't do it. It's not

shabbir (06:17)
It's not possible to tell you

Sven (06:18)
Yeah.

shabbir (06:19)
if the airbag for sale is real or not. That's crazy.

Sven (06:23)
And and I I I for that one I don't even blame eBay for it. I think, you know, you and I, because we deal a lot in the pharmaceutical world, which is a a wonderful world because it's a it's a closed distribution system. The US system is a closed distribution system, and it's only licensed parties are allowed to trade with each other. everybody should know that you're licensed, you ask for licenses. often they're licensed federal, state, municipality through.

Sven (06:51)
That's a nice closed system. I know who's playing in it. For most other products, especially car OEMs, that doesn't exist. Almost anybody can buy automotive parts, especially secondary marketplace. So, like things that are replacement parts for repairs. There are wholesalers, there are sub jobbers, then there are repair places. So they never established a licensed marketplace. So it starts out with the I don't know who is allowed to sell.

Sven (07:20)
And then what they're also missing, for example, in the pharmaceutical world, you have it. You have a you have a track and trace system with a serial number I can track. And in cars, you don't always have that. Now with airbags, they tried to solve it by linking the airbag to the VIN. but if it's a replacement one, I don't have a VIN to link it to. So they just didn't serialize. So it they don't have the basic fundamentals in place to either authenticate the seller.

Sven (07:47)
or authenticate the product. And yeah, it's a it's a massive, it's a massive issue. In the oem market, it's a massive issue. It's generally the issue a lot of counterfeiters are dealing with that they don't have close distribution chains And that makes it really, really hard to combat counterfeit. So yeah, a hundred percent.

shabbir (08:05)
That's really the takeaway. You cannot layer a secure online marketplace on an unlicensed, chaotic, lacking authorization physical supply chain. And that's what airbags are, right? It's not the maker Takata of the airbag listing on eBay. It's some reseller. And they apparently don't have a closed distribution chain for those resellers to be able to s tell eBay.

shabbir (08:30)
And these are the only eleven companies allowed to sell.

Sven (08:33)
That's exactly it. That's exactly it. And Takata might have they might have because I assume Takata's from overseas. So Takata probably has a distribution partner overseas, then they have several importers here. Those importers then ship to distributor partners here, those sell to sub jobbers, so you are you're three levels in and I have no chance to authenticate that. None.

shabbir (08:55)
Yeah, and no licensing. Yeah. It's it's crazy. I'm I'm I'm glad to see eBay do it. I'm sorry they're the last ones. I actually like to think of them as being more more proactive than that, but it's a shame. But they did it and we should give them props for doing it. And it's becoming impossible to imagine that any airbag you buy online is not unsafe. Something I say about medicine every day.

Sven (09:21)
Agreed.

Sven (09:25)
All right, I have a second story. And the second story actually ties nicely into that. it's another industry where there is no certified seller-reseller network. There is no licensing scheme. There are not track and trace mechanisms in place. and when you have those conditions in place and you put a lot of valuable items into it, counterfeiters go like, that's a that's a fun one to exploit. And so it ties back to the fake watch and Rolex w story we were

Sven (09:53)
covering a couple of weeks ago. You remember that we were talking about some major major seizures that were coming out of Louisville and and Indianapolis. just to refresh folks, that was where those two C B P ports have had seized a total of a hundred twenty five million of fake watches over the last couple of months and we just talked about that. So now now there's a new indictment that just came out where federal prosecutors in Connecticut charged a Brooklyn woman.

Sven (10:21)
and she's accused of trafficking counterfeit Rolex, audemars piguet Panera watches in from China. And according to the indictment, CBP intercepted 74 separate parcels that she had shipped that were tied to the organization she works with, with a combined retail value of more than 16 million dollars, just that one individual in her group. and investigators seized roughly $900,000 in cash. So a

Sven (10:47)
big case that is connected to all of these seizures that C V P is doing increasingly.

shabbir (10:53)
I I'm a successful adult white collar professional, but I'm not successful enough that there's nine hundred thousand dollars of cash lying around my house.

Sven (11:02)
Normally not,

Sven (11:03)
no. No. You know, and and what was really interesting about that case is the timeline. So the the DOJ or the the USA laid it out fantastically. The investigation and this entire Rolex scheme ready started in twenty twenty. So that's six years ago. Six years ago

shabbir (11:23)
Yeah.

Sven (11:23)
they started. They started to seize several items, they started to investigate.

Sven (11:28)
Then in twenty twenty four they they arrested several members of that organization and they keep looking, keep digging before now this final defendant was now charged in twenty twenty six. So besides part of that organization being taken out, they kept at it. It's crazy.

shabbir (11:47)
Yeah, it it's fascinating. I I I don't wanna say there's there's probably no one should interpret what I'm about to say as I think that they are too slow about the investigation because doing an investigation well that'll hold up in court takes time. And you have to follow all the rules. The criminals don't have to follow any frickin' rules. You have to follow all the rules as

Sven (12:08)
Right. Yes.

shabbir (12:10)
law enforcement and as a prosecutor.

shabbir (12:13)
but I I I imagine that along the way there were opportunities to collect evidence on co conspirators to try and get a vision of the entire supply chain to see how they could really stop this crime instead of just making sort of some small arrest that would be handed off as a first offense minor, you imported one watch, two watches, right? At the point at which you've imported sixteen million dollars or so of of fake watches and

shabbir (12:43)
sold them. Right. I think maybe it's time to build a better case. So my hat's off to C VP for the work here and for the U.S. attorney. and I think this is a really interesting moment. I mean I'm not really into watches. I think you are and I have friends who are, but

Sven (12:59)
Somewhat.

shabbir (13:00)
the perfect super fake secondary market is gonna be a really interesting thing. When if if a watch doesn't hold value

shabbir (13:09)
because no one can tell the difference. I don't know what that does to to to the watch industry, but it's probably gonna devalue a lot of it.

Sven (13:19)
Yeah. No, a hundred percent. And so, you know, to what you say, you know, with the timeline and I I looked at the same couple of things. A it started in twenty twenty, and then there was this little thing, the pandemic in between. So I'm sure that or not I'm sure, I know because I worked on it, C B P and A USAs and all of those were very busy with counterfeit masks, counterfeit vaccines, all the weird stuff that

Sven (13:45)
People said you should inject or use or whatever that came into the country. So they were busy with COVID fraud. So that probably derailed that investigation. And that's also something to for also to keep for brand owners in mind when you sometimes think, I want for you to act quicker on my Rolex watch, for example. Yeah, but I might have something that has a direct health and safety impact, right? So I have fake vaccines, fake masks coming in. I'm gonna prioritize that over. I understand the watch is important, but I'm gonna prioritize that over.

Sven (14:16)
And so I would assume that, you know, lay dormant for two years, maybe three years. And they picked it back up in twenty-three, prosecuted in twenty-four, they got most of them. The ring didn't shut down. She kept going. They're like, fine, we'll build more evidence for that person. Plus, that person was in China. And so they also needed for wait for that person to re-enter the United States. And once that person did that, they they they took advantage of it. So no, but 100%, 100% agree with you. The entire super fake.

Sven (14:45)
system. And for this episode, I'm gonna try to find can we can we post TikTok links into our our show notes?

shabbir (14:54)
Yeah, I'm sure we can, yes.

Sven (14:56)
Right. I'll I'll I'll find I'll find a documentary, so to speak, that I was watching on TikTok, which is my social media vice of of choice. and they were looking at the super fake marketplace in China. And there are two companies that are known in China. One produces a almost impossible to identify outer case for the watch. So it's like the band and the metal and face and all of that.

Sven (15:25)
And then there's a second company and they produce the internal mechanism. And that's that's and they work together. And but those two pieces are so good that you cannot distinguish them. Furthermore, those companies, as most criminal organizations do, don't just do it in one outlet. Like each one of them has multiple production facilities. So even if law enforcement takes one of them out, they just switch it over to the other. And

shabbir (15:50)
Yeah.

Sven (15:51)
those watches were the ones that

Sven (15:53)
I mean, I should put another link in there from the Wired folks, where the Wired reporter that we covered in the last podcast, I saw the video of him with the watch literally going to the Rolex store. And he's like, This is a counterfeit watch. I know it's a super fake because I bought it. And he goes in the store and he comes back out and he's like, and they told me what a beautiful piece you have. That's how good they are. So

shabbir (16:17)
Yeah.

Sven (16:17)
yeah, it's a tremendous problem for for these for these companies.

shabbir (16:22)
It's gonna be interesting to watch, but you know, that is the world we live in.

Sven (16:28)
Well the the interesting

Sven (16:29)
piece here is now gonna kinda connect it actually back to what we had with the airbags. So I know you and I in the last pod were like, my God, if if Rolex is not freaked out about this. So I made some phone calls, called around and asked, and yes, Rolex is highly aware of this. They are very freaked out about it, but to a degree they also figured out we don't know exactly how to stop that. So what they did actually separately, Rolex had launched probably two years ago at this point.

Sven (16:56)
A certified, like a Rolex certified pre owned program, which like if you want to make sure that the Rolex you buy on a secondary market is an authenticate Rolex, you sell it through their marketplace. And Rolex will basically take the watch, really authenticate it, and then say, Yes, that's a watch that we can authenticate is a Rolex. And then Rolex of that takes, of course, a cut from it, like they take a processing fee. So they make money twice

shabbir (17:22)
Of course.

Sven (17:22)
on the watch, once the original and once on the resale.

Sven (17:25)
Because they're like, fine, we'll just we'll just sell the watch twice and then we make money off that because we know we can't combat the counterfeit issue. So credit to them for that. But long term it might really, really continue to undermine what a Rolex is worth and how much they can charge. Because like every Rolex I now see on my friend's wrists. I'm like, I don't know if that's real, man. Because I don't.

shabbir (17:52)
Yeah. Yeah, it's not like a Ferrari, right? If you buy a Ferrari, then you have these scheduled maintenances at the Ferrari dealership

Sven (18:00)
I guess.

shabbir (18:01)
every X thousand miles. They they definitely make a little bit of money keeping the car in shape over time. Rolex, until they invented this, doesn't necessarily have a a reason to make money on a watch once they sell it once.

Sven (18:15)
Right, one one time sale and and normally you have you have collectors obviously who own many and you have the you can only have this Rolex if you already own five different ones. So they have like which Ferrari also is that model? which I I never understood what but it's fine. I'm not that much into watches. but yeah, no, it's it's it's a massive issue. And for folks that are following this, the upcoming special 301 notorious market reports will focus

Sven (18:42)
On superfakes. So the USTR is trying to understand. Okay, talk to us what all exists in the superfakes market. And so I think that'll be a very interesting special 301 notorious markets to read to see what are what are, and we will probably do a special episode on this. What are all the super fakes out there? Like watches, jewelry, bags. It'd be be fascinating what it is.

shabbir (19:07)
I mean we I I personally you and I have personally seen the super fakes in the pharmaceutical world. They they actually have real serial numbers that are were really issued by the original manufacturer. Sometimes the counterfooters put them on a hundred different units, which is how you can know if you're looking at a hundred units with the same serial number that that that is not real. but those exist. and I'm sure that there's some others.

shabbir (19:35)
you know in the in the electronics world

Sven (19:38)
yeah. Well think of think about actually the the Gilead case, right? Where they were basically recycling existing bottles where they were basically buying bottles from the homeless community. Those were real bottles. So now that's actually a super fake because I can't authenticate that because it's a legit bottle, but you put something in it that's not it. So yeah, that probably that probably would also qualify as a super fake. Yeah.

shabbir (20:02)
Some of them are probably super fakes. They're they're I've seen some of the pictures of the bottles from that litigation and some of them are very damaged after having been toted around by homeless people with the rest of their belongings. They're it's not an ideal storage environment.

Sven (20:16)
It's a kind way of putting it. Fair point.

shabbir (20:21)
Well that's all we have for today. Thanks everybody for watching and look at your watch real careful.

Sven (20:28)
That's right. Shabbir,

Sven (20:29)
have a wonderful weekend which is upcoming and please read us out.