Deep in the bowels of companies like HP, an elite squad composed largely of former law enforcement personnel is currently hard at work planning a series of covert raids around the world.
Their target: Counterfeit printer ink and toner cartridges. According to the Imaging Supplies Coalition, the annual market for counterfeit printer cartridges adds up to roughly $3.5 billion in market value. To combat this issue, manufacturers and other interested parties extensively with law enforcement around the world to track and raid these printer pirates.
To learn more about the world of counterfeit printer supplies, I spoke with Andy Binder, HP's Vice President & General Manager of Office Supplies and Solutions about how his company is fighting back—and why this might matter to consumers.
Pretend I'm an alien from Mars and I know nothing about counterfeiting. Tell me about the world of counterfeiting printer products from brands like HP.
Okay, first it's probably best to define what counterfeiting is. It is when somebody intentionally deceives somebody into believing they're buying something like a specific brand when they're not. Counterfeiting in the supplies business happens where customers buy something--usually because of it's using the HP trademark or logos and things like that--and they think they're buying genuine HP supplies, and they're getting something else inside the box.
So what types of products in HP's portfolio is this primarily a concern with?
It's probably the biggest concern with our printer supplies. I would say about 85 percent of the problem is on the toner side of the business, and about 15 percent is on the ink side of the business. There are also a number of accessories that tend to be counterfeited. Things like batteries and power cords. On the PC side of the business, we see it as well.
When somebody buys these things, where do they tend to be buying them? Are they buying them in legitimate-seeming office supply stores, or in some shady back alley?
They don't tend to buy them in well-established and well-known channels. Where they do find it is online marketplaces or in emerging markets. There are shops and malls where there are small businesses that don't necessarily have names that people recognize, and we tend to see the problem existing in areas where somebody doesn't have a brand name that they're trying to protect. So it can be anywhere. We see a lot online, but we also see it in physical marketplaces around the world.
You're dealing with a worldwide issue here across different countries, with different laws and different governments. That has to make the problem hard to deal with when you're dealing with international borders and some countries that may not view intellectual property the same way the US does.
Well, it definitely does add to the challenge because it's really critical for us to work with law enforcement to take action, so HP can't take literally unilateral action against counterfeiters. We have to work with law enforcement, and so in some countries, they're very vigilant. They don't want counterfeiting in their markets, and so law enforcement is very aggressive and takes whatever leads we give them and to exile them. In other markets, it's less of a priority and therefore it's much more of a challenge for us to take action. And so we have alternative things we can do to counteract the counterfeit without being completely dependent on the government to do it for us.
How big a problem is counterfeiting? And why is it a problem for the consumers, as opposed for just for your brand? Basically: What's the downside for us as consumers?
Sure. Let's talk about the size of the problem first. So the Imaging Supplies Coalition, which is a coalition of printer manufacturers worldwide, estimates that the counterfeit problem is about $3 billion each year for the printing supplies industry alone. That's a very significant problem.
Our experience here with customers is that they think they're buying an original high-quality HP printing supply. In fact, what they're getting is a poor-quality, inferior, counterfeit cartridge. That can have a harmful impact on the environment as well as obviously having poor performance in printers.
It also impacts a lot of jobs. There are a lot of legitimate manufacturing jobs that were created in the production of cartridges. A lot of the counterfeit products are made in what I'd say are nonstandard manufacturing facilities with a higher risk for workplace safety issues and the health and welfare of the people who are actually doing the production of those cartridges as well.
If they were cutting corners, which they usually are, they're obviously not going to use the best components, and you have things that can impact the consumer when it comes to, for example, indoor air quality. We find that a lot of these knock-offs really don't pay attention to anything like that. In testing that we've done, 100% of these products fail things like indoor air quality tests, which are designed to protest consumers. We also find that they tend to not use plastics that are recycled and have a high concentration of nonstandard components that are dangerous for the environment as well. So there are many downsides when it comes to the use of these counterfeit cartridges, and customers need to be vigilant and understand what those impacts are.
So do you guys ever get calls from folks calling customer service because they're having issues with products, only to realize the product they're having an issue with is a counterfeit? How does that usually play out?
It happens all the time. The customer usually describes what they had purchased and where they had purchased it, and obviously, any damage that's done to the printer as a result of buying counterfeit product can't be covered under a standard HP warranty. So the customer is gonna have to pay for the repairs to their printers as a result of these failures or have to figure out how to get that cartridge replaced themselves.
Is that a pretty common scenario, where a customer's like, "Something's going on here. It isn't working right." And then the rep on the phone is able to kind of figure out: "Oh, you bought a counterfeit cartridge." Is that a common conversation?
Yeah, and it depends on the market, so in a place like the United States, it's probably more of a rarity. But in the emerging market, that's not a surprising event to happen. I've personally been involved where customers have called me and said: "Hey, I've never had a problem with your supplies before, but now, this thing is leaking toner all over my machine." I'd ask him a few questions, like: "Where'd you buy it from?" And really quickly ascertained that they weren't buying it from a legitimate source, and so it was probably counterfeit. I'd ask a few questions regarding the cartridge itself, and quickly it was determined that it's not a genuine cartridge and I'm essentially breaking the news to them they didn't get what they thought they were buying.
What regions is this the biggest problem in, and why?
It tends to be in emerging markets. Our big problems are in India and China. I think there are economic incentives for people there. They're more willing to take those risks in those types of markets, where a place like the United States or Western Europe would be less tolerant of any type of counterfeit happening. I think there's more of an environment, where it's... well, I wouldn't say it's allowed, but it's more pervasive and, therefore, more difficult for governments to really take action in the way they need to.
Let's talk raids for a second. Talk to me about how you guys work with law enforcement, how raids are carried out.
This is a very interesting and cool part of the business. We have a bunch of regional investigators who oversee investigation work all over the world. These people most often have former law enforcement backgrounds, and so they are used to being very conscious of this type of behavior and they go out and they follow up on leads. They establish a communication link with local law enforcement. Essentially, what they do is build the case. They do evidence, they do surveillance, and then bring it to the local office and law enforcement to take action.
HP often does this on behalf of other manufacturers as well, because some of the counterfeits are not just counterfeiting HP, but they're making them of many other brands' products as well.
So we work with the local officials and bring the case to them and they go through the appropriate approval processes and then take action. Sometimes it's in marketplaces, as in physical stores, where they'll go in and raid the stores and confiscate all the product as well as arrest the individual there. In other cases, we find manufacturing facilities where they're able to take over the entire manufacturing facility and capture the components as well as the finished goods they have there.
So in 2018, we had over 500 raids, confiscating over eight million units of counterfeit products and components. So it's a very significant process that we have in place with lots of raids in order to keep on top of this and really create a clean marketplace for our consumers.
And who are these guys who are being raided? Are they career criminal? Are they teenagers who are Googling how to make fake ink cartridges? Who are these guys?
I think it is a mix, but I think it tends to be a bunch of people who are kind of career, operating on the edges of legitimacy in the businesses that they do. So we see a lot of clear counterfeits, and it's not just our products. I think they go wherever they can make a profit, and try to take advantage of those market opportunities. That's not just printing supplies. Like I said, they could be doing power cords and batteries and other things as well. They see an opportunity to make a buck and are not into following the laws. I think they gave up on that, so I think we tend to see people who get in trouble before being in this type of business.
do you guys have sort of like a control center, like a war room, almost, where you guys are tracking counterfeiters and planning your evidence collection and eventual raids?
Well, we do. As part of our response to counterfeit, we have a dedicated Investigation Enforcement Team. So that is run centrally. We have a central manager there that manages all the regions for doing that, and so we identify and prioritize those regions where, or cities, where we want to execute raids and drive enforcement, and make the priorities for the business. So it is kind of done centrally, but like I said, we have a large team throughout the world that kind of operates at the instructions of that team. To make sure that we're following all the rules, you need the policy list in a way that represents HP in the best light.
So when you or law enforcement confiscate these goods, are you running a chemical analysis on them to figure out what they are? What are some of the things that you discover when you run these tests?
I'm not sure if we necessarily do testing on them, but we know kind of the makeup of the various components that make it a counterfeit cartridge. As I mentioned before, one of the first things that people do is they counterfeit the box, and so we have basic security labels on those boxes that help to distinguish genuine HP from a non-HP supply. We have technology that's similar to what we use in US currency, so we are able to look at that label and determine whether it's a copy or an original. Now, because these labels are so good and hard to reproduce, we've seen some examples where counterfeiters actually reused our boxes. In places like India and China, there are literally people who collect HP's empty boxes and then use them for their counterfeit goods.
In addition to the box, we have a test that we do on the cartridge inside. There are a number of key components on the cartridge that you can tell by looking at them if they're genuine HP or not, so that's the secondary test. We're able to look at the physical cartridge and look at the attributes there and check off to determine whether it's a genuine HP supply or not.
