Fighting Fraud: The counterfeit battlefield
‘Passing off’ has become an increasing concern for the alcoholic drinks industry. Frances Marcellin investigates how brand owners and regulators are working to protect trademarked beverages from fraudsters
Jägermeister is clamping down on the practice of 'pouring over' and 'passing off', which affects reputations, business growth and public health.
The practice has become an increasing concern for the industry. In a recent high-profile case, the former operators of a bar in Norwich, UK, were fined heavily for passing unbranded products off as the spirit.
According to the International Federation of Spirits Producers, in 1998 EU customs officials seized 1 million counterfeit items at border points. Ten years later and that number had grown to 250 million items, and continues to rise.
Jägerbomb fraud: counterfeit alcohol and consumer health
The economic cost to the UK alone each year, says The Institute of Economic Affairs, is estimated at around £1.2bn, but the price paid is not always financial. The ever-increasing problem of counterfeit alcohol also damages business growth, public order and, perhaps most importantly, consumer health.
One of the most recent examples of counterfeiting - where acts of 'passing off' (when inferior drinks are served instead of the one paid for by the drinker) and 'pouring over' (when the customer is served a lower quality drink in the bottle of another brand) - saw a Norwich bar found guilty of substituting Jägermeister with a cheaper alternative brand.
"The company running the bar was fined £10,000 for selling a drink which was not of the nature demanded. It was also fined £3,000 for misleading consumers by pouring the drinks out of a Jägermeister bottle," says Gavin Terry, lead officer of intellectual property at the Trading Standards Institute. "The court also ordered the company to pay over £3,000 in costs."
The company was found guilty of offences under the Food Safety Act and Consumer Protection from Unfair Trading Regulations at Norwich Magistrates Court on Thursday 1 August, 2013.
The bar in question advertised and sold drinks known as 'Jägerbombs', a mixture of Jägermeister liqueur and an energy drink. But after receiving information from a customer querying the product's taste, Trading Standards officers made a spot check. "The results suggested that the bar was using a cheaper, inferior spirit, but still being poured from a Jägermeister bottle - and a formal sample later confirmed the Jägermeister had indeed been substituted," explains Terry.
Currently in the UK, Mast-Jägermeister SE has trademarked and owns the intellectual property of the words 'Jägermeister', 'Jägerbomb' and 'J-Bomb'. "Any product sold under these names must be genuine Jägermeister product and includes everything from menus, promotional flyers, POS or notices advertising these products," says a Jägermeister spokesperson.
Legislation lowdown: tracing the bottles
"Passing off and pouring over one product for another is a growing concern that not only impacts manufacturers, but also damages consumer confidence in the trade, and we are working with Trading Standards to communicate this within our education programme," explains the spokesperson.
Jägermeister says that several factors led to the prosecution, the LOT code being one of them, which mean the bottles can be traced from production to point of usage and can verify the stock is genuine. But in this case - and many others where the quality of the brand is appreciated by its drinkers - the investigation occurred as a result of a customer report. This is something that Jägermeister experiences regularly.
"Often, we are contacted by consumers themselves to let us know that passing off or pouring over is taking place," confirms the Jägermeister spokesperson. "Jägermeister has a huge loyal following and consumers trust that the brand will provide them with the quality they expect."
As a result, Jägermeister and its UK distributor Cellar Trends, like many other brands, work closely with Trading Standards to inform outlets about their responsibilities and ensure they are aware of consumer rights.
In terms of the legalities, Terry confirms that the Trading Standards legislation that is applicable in cases of substitution is the Food Safety Act (selling a drink that was not of the nature intended) and the Consumer Protection from Unfair Trading Regulations 2008 (to carry out a misleading action in connection with a consumer transaction, falsely describing a product that is then sold to a customer).
"For Trading Standards," says Terry, "the main issues in relation to alcoholic beverages are the sale of counterfeit alcoholic productions, typically vodka or wine, and substitution, typically with spirits, where a cheaper product is sold as a more expensive one or as a premium brand."
He continues: "Whilst substitution is a form of passing off, passing off is a civil law tort - Trading Standards do not enforce passing off. Trading Standards uses the criminal law. In relation to the sale of counterfeit vodka, and other counterfeit alcoholic drinks, the relevant legislation is the Trade Marks Act 1994."
Joined-up enforcement: working together
Fake vodka is clearly an escalating problem in the UK, boldly on sale in shops, bars and nightclubs. Terry refers to the recent case where Trading Standards officers found 656 litres of "Premium" vodka, which contained a mix of dangerous chemicals, including chloroform.
Last year bottles of fake vodka called "Drop Vodka" were seized from a store in Lewisham - they contained 28.6% alcohol when vodka should contain no less than 37.5%. The joint operation between the local council and the Food Standards Agency was launched following contact from a member of the public concerned by the bottles on display.
"This is a prime example of the benefits of joined-up food law enforcement between central and local government departments," says Colin Houston, the FSA's head of incidents and food fraud. "Information received through our Food Fraud Hotline meant we were able to work with Lewisham Council to remove this illegal alcohol from sale."
Trading Standards says it works very closely with the International Federation of Spirits Producers - whose members include world-leading brands such as Pernod Ricard, Moët Hennessy, Bacardi and Brown-Forman. This proactive organisation provides hands-on support to enforcement agencies covering field investigations. A high percentage of mass-produced, trademarked counterfeit goods are often expertly packaged and undetectable to the untrained eye, and so technical support, even from industry scientists, is provided by the organisation.
Multi-layer strategies: new solutions and systems
In terms of technology, there is a vast range of anti-counterfeit solutions, from holograms, inks and dyes to taggants, watermarks, near field communications technology and barcoding. There are also non-refillable devices and tamper-evident systems, such as Orchid, a new aluminium and plastic security cap for spirits that has been developed by United Closures & Plastics (UCP) in partnership with Pernod Ricard to cap premium brand Beefeater London Dry Gin. According to UCP, the closure combines a non-refillable valve, designed for high-risk markets, with a tamper evidence mechanism that leaves permanent evidence of initial opening.
Inksure's brand-tagging system, which inserts optical codes into holograms that are verified with opto-electronic devices, is another method providing both product authentication and track-and-trace capabilities through the supply chain. Inksure reported that in 2008 the Ukrainian tax authority started using the solution to combat the use of counterfeit tax stamps and, just one year after, recovered $200m in income from taxes on alcohol and tobacco.
While John Spink, associate director of Michigan State University's A-CAPPP (the first academic body to focus on anti-counterfeiting and production protection), feels that handheld, immediate authentication technologies are important piece of detection and deterrence, he also believes that technology alone may not be enough to solve the problem. "There's no shortage of technologies, what is in demand is to further strategise how multilayer, multi-technology approaches deter bad guys," he says.
As the Jägermeister case has shown, a combination of technology and joined-up enforcement from regulators, brand owners, distributors and the public can create a formidable force against counterfeiting. It is for this reason that brands such as Jägermeister work hard to ensure outlets are fully aware of their responsibilities, particularly in light of 'passing off' and 'pouring over'.
"We actively work with all of the Trading Standards offices throughout the country to help bring this issue to the attention of key stakeholders and highlight the dos and don'ts when it comes to keeping within the law," says a Jägermeister spokesperson. "This will help to drive awareness of the negative implications of passing off and pouring over, which we hope will help to prevent future cases."