Recently, the Market Supervision Administration of Xuancheng City, Anhui Province reported that the city’s market supervision department, in conjunction with the public security department, successfully uncovered a major case of illegal online production and sale of counterfeit well-known brand cosmetics. The value of the goods involved in the case reached 250 million yuan, and 13 criminals were sentenced to imprisonment and fines.
It is worth noting that this is the largest case of online production and sale of fake cosmetics so far this year. The quantity and amount involved are staggering.
Fake goods amounting to over 30 tons, involving 250 million yuan
According to the report from the Market Supervision Administration of Xuancheng City, in May 2023, the market supervision department of Ningguo City within the jurisdiction of the Xuancheng city received a consumer complaint stating that the sunscreen purchased on a certain online shopping platform appeared to be counterfeit. After being identified by the holder of the brand trademark, it was confirmed to be a counterfeit infringing product. At the same time, the brand trademark holder stated that they had never set up sales outlets on online shopping platforms, and the majority of cosmetics bearing their trademark on online platforms were likely counterfeit products.
After thorough assessment, investigation, and evidence collection, to achieve a comprehensive crackdown, the market supervision department of Ningguo City promptly transferred the case to the public security bureau of Ningguo City and reported the relevant details to the Market Supervision Administration of Xuancheng City. Subsequently, the Market Supervision Administration of Xuancheng City collaborated with the public security bureau and coordinated law enforcement officers from various departments including market supervision, internet security, intelligence, and economic investigation to work together.
After over three months of investigation, the investigators discovered production and online sales shipment points scattered across three provinces. After understanding the basic operations of the criminal group, the market regulatory authorities, in coordination with the public security department, divided into four groups and simultaneously carried out raids in Zhejiang, Henan, and Hunan, successfully capturing this large network engaged in the production and sale of counterfeit cosmetics.
Upon classification, this counterfeit group involved 14 types of special cosmetics and 38 types of regular cosmetics, including infringements on various well-known Chinese brands such as Baiyunshan, BIOHYALUX, Zhenshikang, BigDrop, NALY, HBN, LBR, among others. This case had a wide scope and a variety of products, with a vast amount of transaction data on the platforms. Ultimately, the investigators successfully dismantled five production and operating bases spanning Zhejiang, Henan, and Hunan provinces, seizing over 30 tons of counterfeit goods, involving 52 types of products, and shutting down 387 implicated online stores. It was reported that the value of goods involved in this case reached 250 million yuan.
Recently, the People’s Court of Ningguo City issued sentences of imprisonment and fines to the 13 criminals involved in this case. With this, this major case of online production and sale of fake cosmetics has been solved.
It is worth noting that in recent years, with the rise of live-streaming sales, the issue of online production and sale of fake cosmetics is becoming increasingly prominent. Just this month, there have been multiple incidents of counterfeit cosmetics sales.
According to reports from various media outlets, in August of this year, a person named Li from Jiangsu purchased a large quantity of counterfeit cosmetics of well-known brands. His wife, Liu, promoted these products through live streaming and short videos on online platforms, and within a year, their sales exceeded 430,000 yuan. Additionally, they supplied these products to their friend Dai and shared their experience and techniques of selling counterfeits. However, due to consumer reports, Li and others were arrested by the police after an investigation, seizing over 200 counterfeit cosmetics and more than 400 packaging boxes. Recently, the Jiangsu Procuratorate has prosecuted Li, Liu, and Dai for selling counterfeit registered trademarks, and the court will announce the verdict at a later date.
Also this month, a live-streaming platform anchor named Daming purchased multiple counterfeit “brand” cosmetics at low prices and promoted them through short video apps at significantly lower prices than the market, resulting in sales of over 200,000 yuan of fake cosmetics. Law enforcement officers found nearly 30 types of unsold counterfeit cosmetics at their place of operation, with an estimated value of around 240,000 yuan. The court in Hexi, Tianjin, ruled that Daming, who knowingly sold products with counterfeit registered trademarks, had committed a serious offense of selling goods with counterfeit registered trademarks. Taking into account the nature of the crime, the severity of the offense, confession, and other factors, Daming was sentenced to three years in prison with a three-year probation and a fine of 250,000 yuan.
In April of this year, the Zhejiang Rule of Law Report revealed that in a case of selling counterfeit international brand cosmetics through live streaming rooms handled by the Ouhai District Court in Wenzhou City, one of the sources of counterfeit cosmetics was actually a pig farm. In the end, the owner of the counterfeit sales live streaming room, suppliers, etc., were each sentenced to three years in prison with a three-year, six-month probation, and fined 200,000 yuan, 430,000 yuan, and 70,000 yuan respectively.
According to incomplete statistics from CHAILEEDO, just this year, various market supervision bureaus and police departments across the country have successively handled nearly 10 cases of selling counterfeit cosmetics, involving amounts ranging from hundreds of thousands to billions of yuan. The frequent occurrence of such cases, the high amounts involved, and the wide scope highlight the rampant problem of counterfeit cosmetics at present.
“No loophole is left unexploited, even well-known beauty distributors find it hard to escape
It is worth noting that in recent years, due to the rampant spread of counterfeit cosmetics, besides severe pricing issues on e-commerce platforms, live streams, and other online platforms, many offline well-known beauty chain stores have also fallen into the trap of counterfeit goods.
For example, in June last year, SaSa Cosmetics (China) Co., Ltd. (referred to as “SaSa China”) was fined over 950,000 yuan by the Changning District Market Supervision Bureau in Shanghai for selling unregistered and substandard special cosmetics.
According to the administrative penalty decision, in June 2021, law enforcement officers conducted an inspection on a joint counter set up by SaSa China at the Sincere Macau Retail (Shanghai) Co., Ltd. (referred to as “Sincere Retail”) and found cosmetics labeled as “Inner Natural Fresh Anti-Wrinkle Sunscreen Cream,” which were mentioned in the National Medical Products Administration’s September 2020 “Notice on Stopping the Sale of 12 Batches of Counterfeit Cosmetics (No. 58 of 2020).” As a result, regulatory authorities penalized both SaSa China and Sincere Retail.
Furthermore, the incident of fake Lancôme products at Hema Fresh in April this year also caused a stir. Specifically, a consumer in Shanghai found differences in texture, scent, and overall quality compared to the authentic product after opening a Lancôme product purchased at the Hema X Member Seven Treasures store. The consumer sent the products to two different authentication platforms, both of which concluded that they were counterfeit goods. In response, Hema stated that “the distributor bears primary responsibility and intends to sue the third-party supplier.” Eventually, the case reached a temporary conclusion as the police intervened and initiated an investigation.
As we all know, Sasa International is a well-known beauty chain enterprise in Hong Kong, while Hema Fresh is a community shopping platform under the Alibaba Group that integrates online apps and offline stores. The fact that these two enterprises have encountered counterfeit cosmetics once again highlights the widespread issue of counterfeit cosmetics. The example of SaSa China also serves as a reminder to the industry that both businesses and consumers should be extra vigilant and pay attention to the list of substandard and counterfeit cosmetics published by the National Medical Products Administration and local authorities.
For consumers, it is not only in unknown live streams or with low-priced products that counterfeit goods are easily found, but even well-known offline beauty stores and platforms have not been able to escape. This also reflects the fact that the problem of counterfeit cosmetics has reached an almost pervasive and severe level.”
Collaborative Efforts Making Counterfeits Nowhere to Hide
Overall, with the development of society, the methods and means of counterfeiting, selling counterfeits, and infringing on rights by some unscrupulous businesses are becoming increasingly difficult to guard against. In pursuit of massive profits, they often choose to take risks. Specifically, the targets of counterfeiting and selling fakes are mostly international big brands and well-known Chinese beauty brands, with the products involved often being highly recognizable and popular star products. In terms of distribution channels, online platforms, such as Taobao, Pinduoduo, and Douyin, remain the “hotspots” for selling counterfeits.
The harm caused by counterfeits goes without saying. For brands, counterfeits not only seize market share from legitimate products but also severely damage brand image and reputation. For distribution channels, the invasion of counterfeits disrupts the channel ecosystem, making it difficult for consumers to make choices. From an industry perspective, fake and inferior products often circulate in the market at prices lower than authentic products, easily disrupting the normal competitive order of the market and potentially leading to the phenomenon of “bad money drives out good.”
Therefore, from local regulatory authorities to beauty companies/brands, the crackdown on counterfeits is being further strengthened. For example, on June 14, 2024, the Zhejiang branch of the nationwide operation to destroy infringing and counterfeit goods held its event in Nanxun, Huzhou. According to statistics, the operation in Zhejiang destroyed over 200 types of products, including cosmetics, sporting goods, clothing and shoes, food and drugs, electronics, and auto parts, weighing over 279 tons with a value of 9.6294 million yuan. The destruction was carried out in an environmentally friendly and harmless manner. At the event site, a large number of counterfeit goods were continuously transported for destruction, including counterfeit cosmetics of brands such as “Helena,” “La Mer,” and “Estée Lauder.”
Undoubtedly, this action signifies the regulatory authorities’ zero-tolerance stance towards counterfeits. Following the case where counterfeit cosmetics worth 250 million yuan were seized by the Anqing market supervision bureau and public security organs, on August 5, 2024, the National Medical Products Administration specifically issued a briefing on the case handling process. Additionally, the Anhui Provincial Medical Products Administration commended 9 comrades from the Anqing market supervision bureau for their involvement in the case. This also indicates the national attention given to cracking down on cases involving the production and sale of counterfeit goods.
It is worth noting that China has also introduced new regulations to address the irregularities in live streaming e-commerce. Effective from July 1 this year, the “Regulations on the Implementation of the Consumer Rights Protection Law” explicitly require clarity in live streaming e-commerce regarding “who is selling” and “whose products are being sold.” The regulations also stipulate that platforms, live streaming rooms, and hosts all share responsibility. Undoubtedly, these regulations will enhance deterrence against the sale of counterfeits in live streaming e-commerce.
Furthermore, from the perspective of brands, with the awakening of the rights protection awareness of many beauty companies and brands, the crackdown on counterfeits has been further intensified. Based on public reports and official announcements from brands, at least 25 beauty brands have issued statements related to cracking down on counterfeits since 2023. This means that at least 2 brands are involved in anti-counterfeiting efforts every month.
Brands such as Judydoll, Joocyee, HBN, and RockingZoo have taken various measures to combat counterfeiting, including online complaints, reporting to platforms, legal actions, and collaboration with relevant authorities. Additionally, brands are actively addressing the issue of consumers purchasing counterfeits through internal measures, such as upgrading anti-counterfeiting methods for their products, educating consumers on anti-counterfeiting knowledge, and promoting the idea that consumers should choose authentic products from official channels.
It is evident that although the issue of counterfeiting in the cosmetics industry remains prominent, with the combined efforts of various forces including the government, companies, and brands, the rampant spread of counterfeit cosmetics will inevitably be curtailed, and the market environment will become healthier and more orderly.
