Are counterfeit automotive parts a problem? What if we were to tell you that counterfeiting products is part of a larger problem of illicit commerce that is used by terrorists to fund their activities? This is a fact and has been documented in Dr. Moises Naim’s book Illicit. Naim, former economics minister of Venezuela and World Bank executive director, explaines how terrorists use illegal merchandise to operate their groups, like the terrorists behind the 1993 World Trade Center bombing raising money by selling counterfeit t-shirts on Broadway.
It was also pointed out that the terrorists that organized the 2004 Madrid train bombings sold counterfeit CDs to support their activities. These activities have since moved into counterfeiting automotive parts because the punishment for counterfeiting is less than the penalties for making and selling drugs or other illegal activities.
If supporting terrorism when you buy counterfeit automotive parts doesn’t bother you, how about the safety of you and your family? Counterfeiters are not concerned with the quality of the parts they sell, only the money that they can rob from consumers. Most of the time, these counterfeit parts are disasters waiting to happen once installed on a vehicle. We take a look at what is happening and what is being done to solve the problem by talking with several companies and agencies involved in the effort.
They just want to cash in and whether or not it is functional is completely secondary to the initial goal of separating a fool from their money. – Joseph Mills, Auto Meter
If you think that the only people being hurt by counterfeiters are the big corporations, think again. We talked to some of the experts that deal with this situation on a daily basis.
“We did some tests on the counterfeit coils that we found. The windings inside the coils were very poor quality and actually melted at a lower temperature as compared to ours,” said MSD Performance‘s Silver Gomez. “There is a safety issue as well. The quality of the wiring being used is not up to most standards. If a customer buys one of these counterfeit parts and the wiring cannot handle the heat that it is exposed to and the sleeve around the wire melts… you can short out a vehicle and cause a fire. It can literally destroy your car,” continued Gomez.
Auto Meter‘s Joseph Mills sums up the problem, “The huge issue is, from all the counterfeit parts that we’ve seen, and we have encountered quite a bit, we haven’t actually found one that does the job that it is suppose to do.”
“Instrumentation is one of the single most important facets of the build. If you are trusting something to keep your investment protected and the information in front of you is completely and totally erroneous, you could potentially have very expensive failures if you’re trusting a bad part that you bought from the swap meet,” said Mills.”You could be looking at a bad tach signal and not realize it and over rev the heck out of the motor. You are depending on a gauge but getting bad information,” summarized Mills.
One of the things that people want to get from a product with our name on it is a reliable performance. – Silver Gomez, MSD Performance
Why It Is A Problem For The Company and Consumers
According to Gomez, “The customers that we don’t see and that don’t call in, the ones that just throw the part away believing that it was an MSD part and buy another part from a competitor, those are the one that really bother us. We have worked hard for decades to develop this brand and reputation. That is why the counterfeiters use our name to sell their knock-offs and destroy a customer’s belief in our brand. It really isn’t fair on any level.”
Do you trust your engine will be fueled properly with a knock-off from a company with no engineering background, no clue as to the design of the product or its materials and tolerances? – Aeromotive Webpage
In this way, counterfeiters do significant damage to the brand loyalty that many companies depend on. This obviously reduces the profits that a company will take in. Anytime a company experiences lost profits, it reduces the amount of money in their research and development budget thereby hurting the development of new products.
“Most of the time we don’t even know it’s happening until one of our jobbers brings it to us,” said Blakely. “We get approached by our jobbers asking how this company can afford to sell their parts so low.” Edelbrock’s Smitty Smith explained, “They think that we are selling them our products at 2/3rds of the price when it’s actually a knock-off.”
Any company with a recognizable brand is at risk of being counterfeited. Unlike counterfeit products of the fashion world, fake automotive parts represent a legitimate safety concern. You can think of the safety concern like this: Would you buy counterfeit medicine?
Gomez explained how safety is a factor. “When we started running into some of the counterfeits, we noticed the way the wiring was set up and the circuit board internally. Their circuit board was a blue instead of a green circuit board that we supply. We noticed a real poor quality board, components and soldier joints. There are so many things that can happen, like electrical shorts due to poor quality wiring, or the circuit boards inside because they are so cheap, unreliable and the workmanship is generally very poor.”
Counterfeiting is a very serious problem, especially when a sensitive system like the fuel system is involved. Vic Wood of Aeromotive explained how they were battling the counterfeiters on their own internet site. “I think we have it documented very well on our webpage. It’s a daily battle, but we identify the known counterfeiters as soon as we find them. Then we publish that information so our customers can see if they are buying legitimate, genuine, Aeromotive parts.”
The consumer that buys a counterfeit automotive product has a substantial risk compared to consumers that buy fake watches or purses. If a counterfeit watch breaks, it just stops working and you might be late to a meeting. If a counterfeit automotive part fails, people could get hurt or killed.
“It certainly can be a safety issue,” said Mills. “If you have a bad fuel pump that shuts the vehicle off or a faulty tach that shorts out the ignition system and shuts down your vehicle while you are driving. These are potential safety issues. There is faulty wiring in many of these counterfeit units and you run the risk of electrical fire or many other risks associated with bad workmanship.”
Current estimates by the Motor & Equipment Manufacturer’s Association (MEMA) are that automotive counterfeiting has been impacted by $350 – $500 billion a year, and it is growing at 10% a year. MEMA’s estimates indicate a $12 billion in lost sales to the industry on a global basis annually, $3 billion in the U.S. alone.
Even when the counterfeiter is identified, it is difficult to get them to stop. “For the past two years we’ve been dealing with this one guy overseas that has knocked off one of our intake manifolds for a Honda engine,” says Blakely. “He’s copied it right down to the box, the instructions, and the literature that we put in the box. We’ve tracked it down to the timeframe because we change up the literature that we include frequently.” According to Blakely, the manifolds may look the same but use cheap materials and experience a lot of core shift in casting. This causes a lack of uniformity in the thickness of the manifold’s walls.
MEMA has even found brake pads that were made from compressed grass instead of friction materials. Needless to say, these brake pads would not have done the job that they were intended to do. In addition to the safety aspect, fake parts can be costly. A $4.00 fake oil filter is more likely to fail and can lead to significant and costly engine repair that isn’t covered by a warranty.
“This hurts a company’s branding and reputation because you are going to have some customers that believe they are buying an legitimate product and get a poor result. Some of these customers are going to think that the name brand product is not reliable. That is one of the reasons that we would like to see the practice of counterfeiting parts put to a stop,” said Gomez.
Associated Costs To Companies By Counterfeit Products:
- Dilution and destruction of brand names
- Packaging and product redesign
- Costs of legal fees and investigations
- Warranty claims caused by counterfeit products
Counterfeiting Is Not New
Currently China is the worst offender, with estimates of 80% of all violations, but they are not alone. Eastern Europe and India are also major violators. With internet selling sites becoming increasingly more popular, counterfeiting is even taking place in our own backyard. If many economies in the past have actively allowed counterfeiting for growth, why is it a bad thing now?
“We go to serious lengths to prove our reliability, dependability and safey,” replied Mills. “The fact that our products are safe products to install, the fact that they are vibration tested and they are built so that we know that there are no intrinsic dangers in the product. You have to question the motives of people that want to counterfeit parts – It’s purely a cash grab. They have very little vested interest in keeping the consumers alive.”
The fastest and cheapest way to market products is by stealing a company’s technology, brand and market position. Modern technology makes counterfeiters more sophisticated and better at copying products than in the past. It’s harder to identify counterfeit products from the genuine items but every major company’s experts can always spot a fake. Much of the rest of the automotive industry has trouble identifying fakes. If the industry has a problem telling which ones are not real, the consumers will have a problem as well.
“It goes way beyond Auto Meter. The same is true if you buy from AeroFuel, MSD, or whomever else,” stated Mills. “People are buying things that are suppose to work a certain way and are spending a whole lot of extra money trying to chase something down or risking catastrophic damage to their investment as part of that process.”
When it comes to sophistication in copying the original products, Edelbrock’s Blakely says, “It’s amazing. We purchased this manifold off of Alibaba, out of Taiwan, and we had to do a cease and desist infringement letter two years ago. Now it looks like we have the same issue with this same company all over again. It’s to the point where they’ve even copied the tooling points on the parts they are knocking off. I hate to say it, but it’s a really clean knock-off except for the inferior materials.”
A Serious Crime?
Unfortunately, counterfeiting is not seen as a serious crime. Many consumers believe they are simply getting a good deal. The reality is that many drug dealers are turning to counterfeiting because there is less risk and lighter penalties if they are caught. Clearly the crime is serious, and we’ve seen that this issue is a public health or safety issue, not to mention the risk to national security that we discussed earlier.
Many of these fake products falsely claim to meet DOT and SAE standards lull the consumer into a false sense of security. The purchaser of these fake products fail to realize the damage done to the industry however. Buying counterfeit automotive parts robs good manufacturing jobs from legitimate companies. Counterfeiting also destroys the brand reputation of legitimate companies, hurting them at home and in foreign markets.
In countries where counterfeiting is allowed to proliferate, legitimate American companies cannot gain market share. When things go south with the fake parts, American companies must fight to clear their name (possible litigation, costs to investigate, etc.) and restore their brand name.
Counterfeiting at Home
The FBI arrested three men in New Jersey, Shashi Malhotra, Fadi Kilani and Richard Dininni on charges of selling counterfeit brake pads and other automotive parts to repair shops on February 19, 2013.
The brake pads were deceptively packaged to appear as though they were made by Ford, General Motors and other leading manufacturers. Malhotra, Kilani and Dininni, were each charged with one count of conspiracy to traffic in counterfeit goods, which carries a maximum sentence of five years in prison, and one count of trafficking in counterfeit goods, which carries a maximum sentence of 10 years in prison.
We do not know if the men were convicted or if the trial and appeal process is ongoing.
What is Being Done to Fix the Problem?
All of the companies we talked to explain that the consumer can help themselves by buy directly from the manufacturer or their authorized representatives. “Be careful about deals that sound too good to be true,” advised Gomez. Contact the legitimate manufacturer is you suspect anything and get contact information for a follow-up.
What You Can Do To Protect Yourself:
- Go to a trusted and reputable service professional
- Be careful on price differences when shopping around. If a deal sounds too good to be true, it may be.
- Inspect the packaging – it may give it away. Check for:
- Packaging that is flimsy
- Colors that are not correct
- Misspelled words or brands
- Lack of 800 number or web site
SEMA has been participating with members of congress to support a bill that would toughen federal laws against counterfeiting auto parts. SEMA is also working directly with the Congressional Automotive Performance and Motorsports Caucus, to make it unlawful to import or sell products that are falsely labeled or advertised as meeting a U.S. government safety standard.
This would make it easier for Customs to block imports of illegal auto equipment. SEMA has a long standing reputation for working with U.S. Customs, FBI and other government agencies to seize pirated products and prevent illegal knock-offs. The U.S. Customs and Border Protection (CBP) is now authorized to share information with intellectual property right holders for the limited purpose of determining whether certain goods bear counterfeit marks.
The right holder may be provided with photographs and samples of merchandise or retail packaging for examination. The information often includes serial numbers, universal product codes and stock keeping unit numbers appearing on goods. Auto Meter, Aeromotive and MSD all work with U.S. Customs to prevent counterfeit products from reaching the marketplace. Despite their best efforts, some counterfeit products still manage to find their way to consumers. Ultimately it is up to the consumer to protect their investment by following practices like the ones that we discussed previously. In all cases, let the buyer beware.