Think you got a good deal on those Beats by Dre? Might've. Or maybe you paid too much for a knockoff. Thanks to easily accessed suckers like you, business in the world of phony high-end audio has never been better.
Early on the morning of October 28, 2010 a massive strike force assembled outside the Meipai Electronic Audio Factory and three other storage facilities in and around Southern China's Enping City. What had started out as a tip from a handful of major audio equipment makers led to a months-long investigation by Guangdong Public Security Department and Jiangmen City police. By day's end, four people were in jail and 1,200 counterfeit audio items were in police hands, and the so-called "New Dynamics Audio Equipment Factory" was effectively shut down. It was the first salvo in a new war against fake wares, lead by an unlikely coalition of audio companies who, though fierce competitors in stores, are closely allied against a common enemy.
This February, the same international initiative helped tip authorities off to another den of fakes, this time in the UK. Together, the two stings have netted counterfeit audio gear worth more than $500,000. Sounds like a lot, but that's just a teensy drop in a giant bucket: a multi-billion-dollar industry that's proving nearly impossible to quash.
The two recent busts came after months of investigation—including test purchases, surveillance stakeouts, and a series of coordinated raids on warehouses and private residences. All told, authorities have managed to confiscate everything from fake mics and headphones to loudspeakers, amps, and mixers.
The UK raid in particular represents the largest seizure of bogus audio equipment (mostly headphones) in the country's history, according to Sennheiser and Monster. And the two counterfeiters now under investigation are reportedly linked to Britain's third largest online retailer.
While the size and scope of these separate raids may be noteworthy, counterfeiting and copycat designs are of course nothing new to the headphone and A/V industry.
Over the years, a thriving grey market for ersatz goods has sprung up all over the world, nourished by cheap Chinese production costs, increasingly sophisticated manufacturing facilities, e-commerce, and often non-existent IP and trademark laws. In other words, those knock-off Ferrari Limited Edition Monster Beats you mistakenly bought are not only getting easier to make, but they're also quite lucrative for the guys selling them.
According to a recent study put out by the US Chamber of Commerce, counterfeit goods could account for as much as 10-percent of China's gross domestic product (third economy holla!). Worldwide, it's regarded as $600 billion dollar industry—fully half of which is located in the US.
"Right now the counterfeit problem is at an all time high for a few reasons" explains David Tognotti, vice president of operations and general counsel for Monster Cable. "You have a China economy that needs to keep people employed and create millions of jobs every year; you have lax laws and enforcement in that country, you have rising consumer demand for luxury branded goods; and you also have people with a lot less money in their wallets."
Whether it's producing a knockoff Louis Vuitton purse or a pair of Sennheiser CX300s, counterfeiters are taking advantage of this perfect storm. While a decade ago, you had to visit Canal Street—or at the very least a flea market—to reliably hunt down such fakes, in the age of e-commerce, they're literally everywhere. Indeed, part of the problem authorities and companies are facing is finding a reliable way to link these fake products back to their sources. Because these products are typically shopped globally and can move through so many different tiers before reaching a consumer, it's virtually impossible to trace them back to their origin.
"More and more of these counterfeiters have exceedingly smart distribution systems," says Sylke Roth, manager of group legal services at Sennheiser's headquarters in Germany. "In many cases, they are teaming up with other counterfeiters around the world and establishing distribution and manufacturing systems that are nearly as professional as the ones of the original brand."
These realities are forcing companies who would normally be fierce competitors—Shure, Sennheiser, Audio Technica, Harman, and Monster—to team up. Because of their high market profiles, these manufacturers are typically the juiciest targets for counterfeiters. And while many have preferred to remain silent or hide their counterfeit problem, that's starting to change.
"Working together, we can share costs to fight the same problem," says Roth. "We can also share information, so if any one of us hear something in the market or from our customers, we can pass it along to others."
Monster is perhaps most active on this front due to the overwhelming demand for counterfeit versions of its cables and headphones. The company worked with the UK's Trading Standards Service, a consumer protection agency, for the most recent bust. It also recently formed its own internal Global Brand Protection team, which monitors major B2B, B2C, and auction sites on a daily basis, keeping an eye out for counterfeit items. That's in addition to issuing take-down notices to the thousands of fake "official" Monster sites that keep popping up.
But if you eliminate one fake retail site, it seems like five others pop up in its stead. Bust one fraudulent seller on eBay and he uses one of his 10 other seller names to move counterfeit goods. Shut down one factory, the one next door picks up the slack. It's all part of a cat and mouse game with an increasingly sophisticated opponent.
So many companies are switching tactics and placing more of an emphasis on consumer education. Monster has its own counterfeit awareness page, as does Sennheiser. Many other companies are following suit.
Unfortunately, trying to explain what to look out for isn't always easy. There is no hard and fast set of criteria to help identify a counterfeit product. Fake headphones can be impeccable, right down to the boxes and cleaning cloths, or horrible (and even humorous). Prices aren't always an indication, either. Counterfeiters got savvy to the fact that some customers were linking inordinately low prices with fakes, so many have simply raised their prices to appear more legitimate. Now, instead of spending $50 on a pair of $300 headphones, you're spending $250—still a good deal, but not juicy enough to raise a red flag.
But at the end of the day, the easiest way to avoid having to return those "Blose" branded headphones is to stick with authorized dealers. Unless you find a pair of knockoffs that sound great—good luck with that.