Matured two years: Nick Bartman’s investigation of fake wine, other IPR issues in China

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The logo that sets many in the industry quivering...

By Jim Boyce

In March of 2010, I met Nick Bartman twice in Beijing to talk about wine and intellectual property rights (IPR) in China. At that time, Bartman was investigating the scale of IPR infringements, including fake wines, in China and had started The Wine Protection Group in an effort to get major industry players to pool their resources.

I also had numerous email exchanges with Bartman and compiled a Q&A that incorporated my queries and some briefing points he wrote. I sent some of that material to mainstream media journalists because I figured it was an interesting story, but it didn’t resonate with them. Two years on, I see a growing number of media stories popping up about fake wine, especially via Google alerts. Perhaps, Bartman was ahead of the times. In any case, he has since stopped the Wine Protection Group and now works with a client in Bordeaux on the issue of IPR infringement in China. He can be reached at nick.bartman (at) yahoo.com.

Below is material from the 2010 compilation (my highlights). It is meant as a “flasback” on the issue, and the views are obviously those of Bartman, although I think some of his points will be familiar to those in this market in 2012.

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JB: Where did you go during your five-week tour of China and what did it reveal to you about the scope of the fake wine problem?

NB: My itinerary included Beijing, Yantai, Qingdao, Guangzhou, Wenzhou, Shanghai and Ningbo. I visited retailers, including small shops and supermarkets, wineries, and even distributors that operate out of apartment buildings.

I estimate I saw 300 to 400 different fake wines during my five weeks in China. The more I look at my 2,000 pictures and study details on each label, the more that number increases.

With a few exceptions there were fake wines dispersed among the originals in the one hundred or so shops visited. Unless buyers are wine savvy, they don’t stand a chance of knowing whether what they are buying was real or not.

As for a percentage, I might take a stab and say 50 percent of the foreign wine I saw is fake. There are a lot of tricks being played. For example, a supermarket buyer may taste and order a selection of foreign wines, but what is then delivered is fake. Of course, many outlets also knowingly buy fakes.

JB: How does the fake wine industry work?

NB: The first and biggest problem of fake wine is the use of names of foreign appellations and areas of origin on Chinese wine. Unauthorized use of winery names is a fast growing phenomenon.

To gain credibility and to fool the wine buying public, many wine dealers, including manufacturers, distributors, and bottling plants, invent brand names and addresses relating to foreign wine growing countries and then illegally claim a foreign appellation, but in fact it is in the main all Chinese wine.

Even a legitimate action such as a one-off order by a Chinese customer from a foreign winemaker can lead to giant problems as the original invoice gets used in front of customers as credibility. Also, if checks are ever made by authorities, the invoice acts as a perfect cover.

It is important to note that the fake wine problem is domestic as few of these wines are for export. The goal is to trick the ever growing ranks of new wine drinkers into believing they’re buying original wines, when in fact they are being unmercifully ripped off.

JB: You are creating an industry group to address counterfeit wine in China. What makes you think this is the best way to get results?

NB: No single company, appellation group, or government body can hope to control the fake wine problem on its own given the size of China and the tens of thousands of outlets. Even if a brand owner had the ability to chase around each store in the pursuit of fakes, it would then need to get the enforcement authorities to do something about the problem. By cooperating, stakeholders can increase their ability to find fake wines and get the authorities to act against them.

JB: Counterfeiting has long been an issue in China. Why did you choose to set up the Wine Protection Group now to address it?

NB: Fake items such as watches and sports shoes were allowed to get out of control many years ago and are available everywhere. In contrast, the wine market is relatively new, perhaps only five percent of its potential, and wine can only be sold through licensed premises. This means the time to act is now. A lack of action by the wine industry and a lack of knowledge on the part of public enforcement officials and the public will see fake wines get out of control and the market become just as irrecoverable as it is for many other international luxury goods. Simply put, stakeholders in the imported wine sector cannot let counterfeiters become their de facto marketing companies.

JB: What were the general opinions of people in the wine industry in China toward the issue of counterfeits?

NB: Unfortunately, the most common response by business people to fakes in China is a shrug accompanied by a slow wag of the head indicating resignation to the problem. Such a misguided reaction comes from those who have no proper knowledge of enforcement in China. In fact, stopping fakes in China is often the easy bit; getting brand owners to realise this and work together against fakes is the far greater challenge.

JB: Concrete actions against counterfeiters would require cooperation with the government. Why would the government care?

NB: Fake beverages are taken seriously by public officials because of the health and safety risks and to keep the public from being duped. Misleading declarations of any origin is a criminal offence for at least three different public enforcement departments. Public authorities will take criminal action against illegal use of trademarks as well as for misuse of countries or regions of origin or any other indications of origin that mislead the consumer. Despite a common perception that fakes cannot be fought in China, there are many successful cases.

JB: How do you intend to get the authorities to cooperate and what kinds of actions do you envision?

NB: Since wine can be a health risk if incorrectly made, wineries and premises licensed to bottle liquor are regularly visited by public authorities. However, with so many countries, regions, localities and wineries around the world, it is currently impossible for them to know fake from original.

The public authorities have to be guided and helped to identify fakes through seminars and regular hands-on assistance. Counterfeiting is a criminal offence but it’s a business crime and does not carry the same weight as such matters as public order offences. Business is perceived to be big enough to look after itself to the extent that if they have counterfeiting problems, then they should help and gather evidence and support the public authorities.

Action against counterfeiters is best when left to the criminal process through public enforcement authorities. Once a complaint against an infringer is filed, then raids and seizures can be instant, whereas the Chinese civil court process can be lengthy and expensive in legal fees for decisions to be reached. Each year many legal actions against copy wines are filed in the civil courts which results in years of litigation and astronomical legal fees; whereas a criminal complaint could have been filed with the public authority on a Monday morning and within a day or so officials can raid offenders and immediately stop trade.

(Note: I will dig through a few dozen additional emails and later post any other interesting info re Bartman’s study.)

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