Scam worth millions with counterfeit parallel imports

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As alleged gray market goods, counterfeit detergents worth millions were placed on the market in Switzerland – and made their way as far as Germany. Reports from customers eventually alerted the brand owners to the counterfeits.

A Swiss businessman presumably imported thousands of counterfeit detergents of well-known manufacturers from Hungary into Switzerland. As so-called parallel imports or gray market products, the fake goods were imported into Switzerland outside of the official distribution channels and sold for 3.65 million Swiss francs (circa 3.31 million euros) to a well-known retailer, which resold the supposed leftover stocks at low prices; including in Germany. However, the products carrying the Ariel and Persil brands were fake; in 2016, authorities carried out raids, and after four years of investigations, the case is now in court in Zurich.

The counterfeits are said to come from Hungary. From there, the Swiss businessman received an offer from a Hungarian trader in 2013; subsequently, products totaling 88 truckloads were imported into Switzerland. The goods were resold in large quantities to Otto’s AG: around 5,000 bottles of 4.55 liters of liquid detergent and approximately 2,500 packages of washing powder weighing 6.5 kilograms each. According to a current expert report, these products were counterfeits.

The fake liquid detergent carrying the Ariel brand had come from an old industrial building in a commercial area in the Budapest region; only a few kilometers away, cheap Czech washing powder was filled into Persil boxes, according to reports. The counterfeits are said to have looked confusingly similar to the original products – the buyer, Otto’s AG, could hardly have noticed the differences; the prices were also in line with what is common in the industry and therefore gave no reason to suspect that the products might be illegal, according to media reports.

The illegal dealings of the Swiss businessman came to light after three years, rather as a result of a coincidence: Customers in Germany contacted the manufacturer Henkel, complaining about the filling quantity of Persil Maxi packs. The company became suspicious and filed criminal charges. Investigations established the trail of the counterfeit goods, which ultimately led to Hungary via Switzerland and a warehouse in northern Germany. Hungarian authorities, taking action against the illegal activities in August 2016, also contacted the Ariel manufacturer Procter & Gamble (P&G) for assistance in checking the authenticity of goods. “Since then, P&G has cooperated with authorities in Hungary and Switzerland in the investigations”, a spokesperson said according to media reports. P&G reportedly has its own team to identify fakes and assist authorities with suspected counterfeiting.

The Swiss man now on trial had built a complex network of companies for his gray market business. In just four and a half years, he had established ten different trading companies, deleting many of them from the commercial register after just a few months. To cover his tracks, he is also said to have fabricated several alleged intermediary transactions with the help of middlemen, says the indictment; and also to have foregone keeping accounts. He kept his proceeds in cash and gold – during a raid at his parents’ apartment in 2016, police officers found ten kilos of gold. The parents now have to stand trial for money laundering.

The current case illustrates that criminals might also be involved in business with so-called gray market products, which are purchased abroad or traded outside of the official distribution channels. In Switzerland, so-called parallel imports are legal except for pharmaceuticals. The court in Zurich is now to establish whether the suspect knowingly traded in counterfeit products. According to his lawyer, he was not aware of this; moreover, the lawyer questions the expert reports which presumably prove that the products are counterfeit. In Hungary, further proceedings in the case are currently still underway too.

Source: NZZ

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