Are Brands Scammed Into Replacing Counterfeits of Their Products with Authentic Ones?

On November 13^th, the U.S. Department of Justice (DOJ), in the Southern District of California, announced the indictment of fourteen (14) individuals in an iPhone counterfeit scheme in which they imported counterfeit iPhones, and exchanged them for authentic phones at Apple stores throughout the U.S.

Here’s a couple of quotes from the DOJ press release:

“According to the indictment, the organization – led by three brothers – imported more than 10,000 counterfeit iPhones and iPads from China, exchanged them for the real thing at Apple stores throughout the United States and Canada, and then shipped the authentic devices back to China and other foreign countries to sell at a premium.

“Defendants intentionally damaged the counterfeit iPhones and iPads and fraudulently represented the counterfeit devices to be genuine Apple devices.“

HOW COULD APPLE STORES NOT RECOGNIZE THE COUNTERFEITS?

Apparently, the criminals were able to replicate the unique International Mobile Equipment Identification (IMEI) numbers and serial numbers of authentic iPhones onto the counterfeits so effectively that Apple store personnel were unable to recognize the knockoffs.

HAVE WE SEEN THIS BEFORE?

Although it should be no surprise to learn that persons in possession of counterfeit products have returned or attempted to return counterfeits for authentic ones, this is the first time I have seen this scheme applied at such a far-reaching and coordinated scale. (40 U.S. states including Canada.)

IS THIS COUNTERFEIT-SCHEME MODEL BEING USED AGAINST OTHER BRANDS?

It is likely that this scheme could be used against virtually any brand especially when you consider these counterfeiters became sophisticated enough to copy the unique IMEI and serial numbers of authentic products to convince Apple stores that the knockoffs were the real thing.

COULD THE FOLLOWING LIST OF PRODUCTS FALL VICTIM TO THE SAME SCHEME?

Apparel, footwear, watches/jewelry, handbags/wallets, consumer electronics, consumer products, pharmaceuticals/personal care, optical media, toys, computers/accessories, auto parts, etc. Of course.

FINAL THOUGHT

I think it would be prudent for all brands to do a review of their product-return operations to ensure they’re not being scammed into replacing fakes with the real thing.

ADDITIONAL READING

U.S. District Court, Southern District of California: Unsealed Indictment: November 13, 2019

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