Recently, a news report from HBTV-6 (A Chinese broadcaster) has attracted industry attention. According to the report, a cosmetics online store was reported by a German luxury anti-aging brand for selling unauthorized cosmetics. Upon investigation, it was found that the products sold by the cosmetics online store did not have Chinese labels or anti-counterfeit labels. Currently, the Qiaokou Municipal Bureau of Industry and Commerce in Wuhan, Hubei Province has initiated an investigation and confiscated the relevant cosmetics.
In fact, this case is just the tip of the iceberg regarding the sale of smuggled and counterfeit cosmetics by online cosmetics stores. According to incomplete statistics, this year alone, six brands have exposed more than 370 cosmetics online stores. Additionally, law enforcement agencies have also shut down multiple counterfeit cosmetics gangs that primarily operated through online channels. Clearly, the road to combating counterfeit cosmetics for cosmetic brands is still long and arduous.
Value of goods is 1.8 million yuan, investigation has been initiated
According to HBTV-6, in June of this year, Mr. Wang, the exclusive general agent for a German luxury anti-aging brand in the Greater China region, received consumer complaints regarding a product purchased from an online store named “Qi Yu Kan Shi Jie” (Encounter the World). He suspected that there might be an issue. After the company’s verification, it was found that the online store was not authorized to sell their products. Consequently, they reported the situation to the Wuhan Qiaokou Municipal Bureau of Industry and Commerce, the regulatory authority in their jurisdiction.
Mr. Wang stated that in order to further ascertain the truth, they notarized the purchase of some products and preserved evidence. At the notary office, they discovered obvious problems with the products sold by the cosmetics online store. By comparing two products, they noticed a significant difference in the position of the logo, with a gap of approximately 1 cm. “From the appearance, it is clearly fake. Therefore, all the sales activities of this store have attracted our full attention and further investigation,” Mr. Wang told HBTV-6.
On November 1st, law enforcement officers from the Qiaokou Municipal Bureau of Industry and Commerce arrived at the location where the online store shipped its products and found various imported cosmetics. According to the statistics, Mr. Wang’s company’s employee, Hong, identified 27 product categories and 602 individual items related to their brand, filling a total of six large boxes. These products were confiscated and taken away by the Qiaokou Municipal Bureau of Industry and Commerce, who initiated an investigation.
According to Hong’s recollection, during the inventory process, it was found that all the products involved lacked Chinese labels, anti-counterfeit labels, and cross-border e-commerce labels. “Obviously, these products did not enter the Chinese market through our company… Based on the market value of our sales, these six boxes of goods are worth approximately 1.8 million yuan,” Hong told HBTV-6.
In addition to the aforementioned brand, there were several other imported cosmetics brands, including some high-end ones, that lacked Chinese labels and cross-border e-commerce labels.
It is understood that due to the owner, Mr. He, being unable to produce the legal procedures for this batch of goods, the Qiaokou Municipal Bureau of Industry and Commerce law enforcement officers seized the goods on November 8th.
According to the law enforcement officers, the case has now been officially registered and involves more than 1,900 items. If Mr. He, the owner, fails to provide the relevant legal procedures within the specified time and it is verified that the cosmetics are unregistered and lack Chinese labels, they will be confiscated and fined according to the “Cosmetics Supervision and Administration Regulations” and other laws and regulations. If there is suspicion of smuggling or other illegal activities, it will be handed over to the relevant departments for further investigation.
Today, when searching on major e-commerce platforms, it was found that the implicated store “Qi Yu Kan Shi Jie” can no longer be found.
Counterfeit goods are rampant, and the methods of counterfeiting are becoming more sophisticated
“Any brand that takes such actions should be aware that the products involved have good sales, but there are also a large number of smuggled, parallel-imported, and low-priced goods on the market. When the brand cannot find a legitimate source of goods, they can only resort to reporting to regulatory authorities,” commented an industry insider.
In recent years, with the development of China’s economy and the demand for upgraded consumption, the scale of imported cosmetics has been steadily increasing. According to data from the China Commerce Industry Research Institute, the cumulative import value of beauty and personal care products reached 22.3682 billion US dollars in 2022. The General Administration of Customs stated that despite the impact of the pandemic, the import value of cosmetics in 2021 still increased by 23.2% compared to the previous year.
While the Chinese market for imported beauty products continues to grow, the presence of “imported cosmetics” without Chinese labels or anti-counterfeit labels, as mentioned above, is still common.
In fact, the regulations related to cosmetics in our country have long been clear: imported cosmetics must have Chinese labels. According to the “Regulations on the Supervision and Administration of Cosmetics” and the “Management Measures for Cosmetics Labeling,” cosmetic products must have labels on their smallest sales units. Imported cosmetics can use Chinese labels directly or add Chinese labels. If Chinese labels are added, the content should be consistent with the original labels.
Although there are no specific requirements for Chinese labels on cosmetics entering the Chinese market through cross-border e-commerce, the country strictly cracks down on purchasing agents and smuggling activities, largely to curb the flow of parallel-imported and counterfeit products through cross-border channels.
“There are three main reasons that can’t disappear,” said Li Weibin, Sales Manager of Shanghai Ya Jin International Trade Co., Ltd. “First, the brand did not originally plan to enter the relevant channels, so there are no authorized distributors or formal sources of goods. Second, distributors want to reduce the cost of acquiring goods, so they find small workshops to produce counterfeit and cheap products. Third, the qualifications and procurement volume of operators do not meet the brand’s requirements, so they pool their orders together. As long as it is not cooperating with the brand or its designated agents, this kind of risk will arise.”
In the aforementioned case, according to Mr. Wang, there were apparent differences in the logo position between the products sold by the online store and the genuine products of the brand. From the appearance alone, the counterfeit products could be easily distinguished. Counterfeit products, especially those of international brands, have been a hotbed for counterfeiting. Incompletely compiled data shows that there have been more than 10 reported cases of counterfeit cosmetics stores since December alone.
For example, on December 7th, a post from the Jiangxi Public Security WeChat account stated that after an investigation, it was found that the cosmetics sold by a certain online store under the brand “*Zhi” were counterfeit registered trademark products. Two suspects bought the counterfeit goods from a supplier at an extremely low price and then sold them to customers at the genuine price, with the amount involved reaching 1.6 million yuan. They have been criminally detained by the Yongxin County Public Security Bureau in accordance with the law.
Furthermore, according to a case of trademark counterfeiting published by the Hecheng Court, since December 2021, He Moujuan had purchased imported cosmetics, such as Dior, Hermès, and Lancôme, at a low price, knowing that their source was unclear. She then sold them to the public through multiple cosmetics stores by printing Chinese labels herself. She was ultimately sentenced to four years in prison and fined 1.8 million yuan.
In fact, our country’s criminal law has clear penalties for counterfeiting and selling counterfeit goods. According to Article 214 of the “Criminal Law of the People’s Republic of China,” “Those who sell goods they know bear counterfeit registered trademarks and the amount involved is relatively large or other serious circumstances exist shall be sentenced to fixed-term imprisonment of not more than three years and/or a fine; those who have gained enormous illegal profits or other especially serious circumstances shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years and shall also be fined.”
Overall, although the law has clear provisions, many businesses still take the risk of producing counterfeit products through various means, despite knowing that they are engaging in counterfeiting.
Over 370 cosmetics online stores have been exposed
It is worth mentioning that brand owners are actively fighting against rampant counterfeit cosmetics in the market. According to incomplete statistics, this year, a total of six cosmetics brands have issued anti-counterfeiting statements, exposing over 370 unauthorized online stores suspected of selling counterfeit products. These online stores are found on platforms such as Tmall and Pinduoduo.
For example, the niche overseas beauty brand Zelens pointed out on its official account that as of August 23rd, over 250 cosmetics online stores were selling counterfeit Zelens products. Additionally, the emerging Chinese skincare brand ddg published a post on Xiaohongshu on October 30th, stating that 60 online stores were selling counterfeit DDG Didi Jumi products through illegal means such as adulteration, forgery, and imitation, which harmed the brand’s image and consumer rights.
In response to this, senior industry experts have expressed that counterfeit and inferior products not only mislead consumers but also negatively impact the economic interests and brand reputation of well-known brands. Cosmetics online stores, as a high-risk area, require stricter supervision from enforcement authorities.
Liu Bingbo, CEO of Shanghai Pengzhi Trading Development Co., Ltd., specializing in Korean cosmetics imports, pointed out that there are several main reasons for the prevalence of counterfeit products in Chinese cosmetics online stores. First, inadequate market supervision and insufficient law enforcement create opportunities for unscrupulous merchants. Second, consumers have limited awareness of their rights and limited ability to identify counterfeit products, making them susceptible to fraud. Third, online sales platforms lack effective anti-counterfeiting measures and technological means. Fourth, the low entry barriers and incomplete market access mechanisms of online platforms make it easy for counterfeit products to proliferate.
“In fact, it’s not just cosmetics; every retail sector in China has counterfeit goods,” said Li Weibin. He further explained that the Chinese e-commerce market is vast and has many blind spots. For example, there are relatively few channels for online purchases of Japanese and Korean cosmetics. Additionally, the penalties for counterfeit goods in China are lower compared to other countries.
Qian Qi, General Manager of Hangzhou Mei Yitian Brand Management Co., Ltd., believes that the continuous emergence of counterfeit products in cosmetics online stores is largely due to weak enforcement by the platforms. Furthermore, many owners of department store C-shops have limited abilities to identify counterfeit goods and, driven by profit, solely focus on attracting consumers with low prices.
The road to combating counterfeit products is long and requires multiple parties to work together to resist and crack down on counterfeiting and the sale of fake products. This collaborative effort is necessary to promote the healthy development of the industry.
