Witnesses Say Counterfeit Products Endanger Both Consumers, Economy

WASHINGTON – Counterfeiters are endangering both our health and our economy by producing fakes of everything from designer handbags to pharmaceuticals.

“We have scores of examples of counterfeit, expired and adulterated medicines,” Novartis global corporate security chief James Christian told the House Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection. “In one case, our anti-counterfeiting efforts interdicted millions of yellow tablets of a popular painkiller that were virtually indistinguishable from the genuine product – including the company logo. These tablets were made of boric acid, floor wax and lead-based yellow paint used for road markings.”

According to U.S. Customs Service estimates, counterfeiting activity costs the United States more than $200 billion annually and has resulted in the loss of 750,000 American jobs. And the Federal Trade Commission recently reported that eliminating counterfeit automotive parts could create 200,000 new jobs in the U.S. auto industry.

“Counterfeiters have attempted to sell fake baby formula, counterfeit pharmaceuticals and phony aircraft parts to turn a fast buck. Those are frightening revelations that should alarm all of us,” said U.S. Rep. Cliff Stearns, chairman of the Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection. “The World Health Organization (WHO) figures that more than 10 percent of the world’s medicines are counterfeit, with percentages reaching as high as 60 percent in the developing world. There also have been product recalls involving consumer products like shampoo and life-style pharmaceuticals.

“Deaths and injuries are inevitable if the current rate of counterfeiting continues,” Stearns said.

Steve Arthur, vice president of government affairs at the Grocery Manufacturers Association, warned that counterfeit products do more than produce a quick buck for street vendors.

“Organized crime and terrorist groups use the sale of counterfeit goods to raise money for illegal activities and violence,” Arthur said. “The Los Angeles Sheriff’s Department testified that many arrested for counterfeit product crimes in Los Angeles are Hamas and Hezbollah sympathizers and supporters. Most alarming is that those who aim to terrorize United States citizens look to counterfeiting to help them achieve their deadly goal: Seized al Qaeda training manuals recommend the sale of fake goods as a financing source for its terrorism.”

One witness talked about a China-based Web site that is a marketplace where both authentic and counterfeit products are traded, undermining legitimate e-commerce.

Sellers are “explicitly seeking worldwide distributors for their counterfeit goods, including software, prescription drugs, golf clubs, apparel and even batteries,” said Steve DelBianco, a vice president with the Association for Competitive Technology. “Small retailers depend heavily on customer trust and respect, whether they’re selling on Main Street or online, but in the growing world of e-commerce, establishing and maintaining trust is even more challenging,”

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