Counterfeit Products Affect Entire Industry

Distributors beware: counterfeiting remains a problem in the gases and welding industry.

While counterfeiting is commonly associated with watches and handbags, this unfortunate practice is one that affects a wide range of industries, ours not excluded. Several manufacturers in the gases and welding industry have had their products reproduced and ripped off by scam artists looking to make a quick buck and move on. And while the lion’s share of this activity happens overseas, distributors in the U.S. may not be immune to its far-reaching impact.

In 2008, Uniweld President David Pearl II and General Manager Michael Tarala of RegO Cryo-Flow Products shared their stories about counterfeit products with Welding & Gases Today. As it was then, counterfeiting continues to be a major issue for American manufacturers. Says Pearl, “A small amount of progress has been made in the last few years, but counterfeiting is going on all of the time.”

In fiscal year 2011, the Department of Homeland Security reported a 24 percent increase over the previous year in seizures of counterfeit and pirated goods. Homeland Security attributes the jump to increased enforcement from U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE).

Both Pearl and ArcOne president Edward Martin say that they have seen very few counterfeit products make their way into the U.S. “We’ve seen it happen on one occasion with our products,” says Martin, “and we immediately put a stop to it with the company purchasing it.”

But the growth of online shopping into a multi-billion dollar industry has made it easier for counterfeiters to get their wares in front of American customers. ArcOne reports having seen broadcast emails coming from counterfeiters featuring its products.

In its report of FY 2011 seizures, CBP Acting Commissioner David V. Aguilar said, “The growth of websites selling counterfeit goods directly to consumers is one reason why CBP and ICE have seen a significant increase in the number of seizures. Although these websites may have low prices, what they do not tell consumers is that the true costs to our nation and consumers include lost jobs, stolen business profits, threats to our national security, and a serious risk of injury to consumers.”

“Any time counterfeit products get into the market, it hurts everyone, from the manufacturer to the distribution channels to the end-user,” says Pearl. Counterfeiting has cost Uniweld millions of dollars according to Pearl. Within the last six months, Uniweld saw the successful conclusion of a 10-year legal battle in which it sought the prosecution of a man in the Middle East who was importing counterfeit products. But as Pearl says, any time a company is involved in a lawsuit, it raises their expenses, affecting everyone in the supply chain.

Earlier this year, Hypertherm announced that a three-year counterfeiting ring had been successfully broken up. The ring was responsible for counterfeiting Hypertherm’s nesting software, and is estimated to have cost the companies whose products it copied more than $100 million in lost revenues. “Companies suffer because they are not adequately compensated for the extensive time and effort necessary to develop and refine advanced software,” said Nick Rosenberg, leader of Hypertherm’s software division, in a press release. “In addition, customers suffer because companies are unable to devote the needed resources to develop new and better software.”

ArcOne’s Martin echoes this sentiment. “If we spend years developing a product and someone copies it, then we will lose a lot of money,” he says. “How do you put a price on years of development?”

Distributors, because they are in constant communication with manufacturers and end-users, can help play a role in fighting counterfeiters. “If a deal sounds too good to be true, it is,” says Martin.

“The best thing distributors can do is keep their ears and eyes open,” adds Pearl. “We’re always listening to and talking with our distributors. If they come across a situation that smells of counterfeiting, they should inform the manufacturer.”

Are you affected by counterfeit products?

Gases and Welding Distributors Association