By Stijn Kits, Business Development Manager at Pointer Brand Protection
Though it may not be the first market one associates with fake products, the construction industry is alarmingly saturated with counterfeits. Between 2001 and 2009, during the US housing boom that preceded the global financial crisis, residential developers were discovered using counterfeit toxic drywall imported from a Chinese manufacturer. The material did not meet the safety requirements or industry standards necessary for development, but was used in an estimated 100,000 homes across the country. After the product was revealed to be substandard, the drywall was tested and experts detected dangerous chemicals and sulfurous gases that proved to be toxic to the exposed homeowners.
Some homeowners reported deteriorating health effects including chronic headaches, sinus pain, pulmonary issues, and asthma attacks. A series of lawsuits unfolded against the manufacturers, developers, and suppliers in the wake of the revelation. Reputable companies were tarnished in the fallout, but what’s worse was that innocent civilians were saddled with insurmountable debt and chronic health issues. Though an extreme case in the use of substandard materials, this is not an infrequent occurrence.
Counterfeiting in the construction industry is more common than many think, and it often has serious, life-altering consequences.
“deteriorating health effects including chronic headaches,
sinus pain, pulmonary issues, and asthma attacks”
Counterfeit building supplies
The construction sector is a big-money industry. A critical part of the US economy, the industry develops nearly $1.3 trillion worth of structures every year. The planning, design, employment, and financing involved in every development project requires exceptional attention to detail. Unfortunately, in some cases among less scrupulous developers, the sky-scraping scope of the projects means corners get cut. A developer may want to cut costs, leading them to a world of cheap imitation products from low-cost countries. The combination of tight timelines, big budgets, large quantities, and low prices is what makes the construction sector a prime target for counterfeiters.
While the use of toxic drywall in the US was a highly publicized and harmful incident, the most commonly cited instance of counterfeits in this industry is that of substandard raw steel. Researchers from the Construction Industry Institute (CII) discovered that, in some cases, replacing structural steel with substandard, low-grade versions could reduce a project’s overall cost by half. In addition to fake steel, knock-off versions of bolts, insulation, concrete, and pipes are also found to be common commodities for counterfeit vendors. While the products may look and feel genuine, they are produced with complete disregard for performance integrity and geographical standards.
Surprisingly, the CII also found that most of the counterfeit supplies they discovered came from vendors on the construction companies’ approved lists. While the way that vendors managed to acquire the counterfeit supplies is circumstantial, the CII found that shipments of fake products were regularly combined with those of legitimate ones in an effort to reduce the detection rates of the counterfeit goods.
What does this mean for brands?
At worst, the inadequate materials and supplies being used in development projects are being advertised as legitimate, authentic brands. If an accident occurs due to the illegally branded product, the repercussions are disastrous. And while, in these cases, there are clear IP infringements that brands have every right to enforce against, it’s the reputational damage that may be irreparable.
At best, the material is unbranded and doesn’t infringe on any intellectual property rights. However, they still exist as an option for developers, redirecting profits away from the high-quality, expertly crafted supplies manufactured by genuine brands to the criminally funded counterfeiters. When it comes to counterfeit goods, inaction always leads to loss.
More than materials
While the existence and use of counterfeit building materials directly affects authentic brands, they’re not the only way counterfeiters take advantage of construction companies and industrial supply brands. The most common fraudulent activity in the industrial industry is the falsification of stamps and documents of origin for the products on sale, as well as the qualifications of the hired construction and machine operating staff. The goods may be genuine but their sale and validity may not be.
Construction supplies are built to specific country requirements and distinct regulations. When these qualifications are falsified, vendors are not only breaking an ethical code, they’re breaking the law too. The prevalence of authentic goods in unintended markets indicates that grey trading and parallel importing is a factor in the construction sector. While undesirable, this is a problem with a solution. If you’d like to know more about grey trade and what Pointer can do to help, read more about it here.
In 2011 and 2014, the American manufacturer of lifting and material handling solutions, Terex, received reports of illegitimate cranes originating from China. In an effort to warn consumers, and to distance themselves from the faulty equipment, they made a public announcement warning buyers to beware of the counterfeit cranes and urged their clients to take appropriate inspection measures before making a purchase. In their plea to consumers, they expounded on the severity of the illegal act saying, “This is a serious situation, and, not only because this infringes on our intellectual property but, more importantly, it poses a serious safety risk for our customers. The use of these inferior, counterfeit cranes can result in deadly consequences.”
Buildings are as structurally sound as the parts that make them. From bolts and steel beams to the heavy-duty equipment used to construct them, every item in a development project is vital to the safety and stability of the end result.
If the estimated 3.3% of all world trade lost to counterfeiting applies to the global construction market too, then its approximate revenue of $17,140 billion (in 2017) could be being damaged by as much as $56.562 billion annually. And, although construction brands stand to lose business from the mere existence of counterfeit building supplies, the real damage would be the human cost due to inadequate infrastructure.
What can be done?
While the ideal solution is for construction companies to source legitimate products from approved vendors, there are other precautions that brands can take too. By enforcing intellectual property rights on counterfeit items that infringe on trademarks, brands can reduce access to substandard materials, potentially saving lives in the process.
Whether your brand has a history with counterfeits or not, it’s never too early to implement a proactive brand protection strategy. For more detail on how Pointer can help you defend your brand and your business, contact us today and start the conversation.