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P&G's epic campaign: war on fakes

By Bao Wanxian (China Daily)
Updated: 2009-06-29 08:21

Customers check P&G products at a supermarket in Shanghai. [Asianewsphoto]

For Procter & Gamble (P&G) there may be an even greater assault on its business than the ongoing gloomy world economy - fakes and brand infringement.

The world's largest personal-care products manufacturer has shown how seriously it takes the threat by prevailing in the latest round of a nine-year brand protection battle against a Guangdong shampoo maker.

Yet the fight could still go on for many years to come.

It all began when similar trademarks for P&G's Whisper brand - Hushubao in Chinese - and the mark Hushibao from Yaman Cosmetics Co triggered the protracted fight.

Established in 1994, Yaman Cosmetics Co in Guangzhou, capital of Guangdong province, registered the Hushibao brand with the Trademark Office of the State Administration for Industry and Commerce (SAIC).

Due to similar pronunciations - Hushibao and Hushubao - P&G China opposed Yaman's application in 2000, but in late 2001 the trademark was approved.

P&G soon took action to fight the decision and began a seven-year battle - which again ended in failure.

Two rounds of defeat did not stop P&G. This time it filed a complaint in Beijing No 1 Intermediate People's Court against both Yaman Cosmetics Co and the Trademark Appeal Board of the SAIC.

The court recently ruled to overturn the decision on the Hushibao trademark and ordered a new round of examination.

"After a nine-year tug of war the latest verdict takes the problem back to the starting point absolutely - to examine the trademark once again," said Yin Xueqian, a lawyer specialized in trademark lawsuits.

"It is the starting point for a new round of a battle in the next eight to nine years and it will cost a lot," Yin said.

"Compared to many other kinds of business competition, a lawsuit is more complicated to handle, which always calls for attaching great attention and power to such a campaign," said Yin.

Other fakes

The Hushibao case is just one of the hundreds of counterfeits and trademark infringement troubles for P&G during its 21 years in China.

Since P&G entered the world's most populous market in 1988, the firm has been repeatedly challenged by fakes and intellectual property infringement, according to a spokesman from P&G Great China.

In 1998, a clothes manufacturer from Shantou city in Guangdong successfully registered the two Chinese characters that spell Baojie - pronounced the same as P&G's Chinese name - as its trademark. In the early 1990s, the Internet domain names of some of P&G's brands - such as safeguard.com.cn, tide.com.cn - were unlawfully registered by domestic companies.

There have also been an abundance of counterfeit P&G products in China for many years.

According to the company, the largest competitor to P&G's business development in China comes not from other powerful companies, but the large number of fakes and piracies.

As a result the company has been waging its own war on piracy.

In 2000, P&G launched over 670 raids, seizing 790,000 cases of fake P&G-brand products valued at nearly 230 million yuan ($33.66 million), according to People's Daily.

"As a household products maker, our business is closely related to people's daily lives," Shannon Young, a senior manager from P&G Great China told China Business Weekly. "So the fight against counterfeit goods and piracy is not only necessary because of the economic damages we face, but it is also to prevent harm to consumers' health and protecting their legal rights."

P&G's long fight against fakes has not always been successful.

As it battled against use of the Hushibao mark, P&G was deeply involved in another lawsuit, to prevent registration of the trademark for Baojie clothes, which P&G ultimately lost.

Insiders said although P&G and Baojie have same pronunciation in Chinese, the brands are used on much different products, which does not cause confusion among consumers.

Similar to Baojie clothes, many domestic companies have used P&G's well-known brand names to on products in other industries over the past 21 years. Examples include Head & Shoulders brand sanitary napkins and Clairol brand insecticide - both of which are P&G shampoos.

The company has also been frustrated by rampant fakes manufactured in the country.

"Along with P&G's brand expansion in China, larger-scale crimes related to faking P&G products are on the rise, though specific data is unavailable," said Young.

"While P&G attaches great importance to anti-piracy and fighting fakes, domestic counterfeit goods makers responded with more diverse ways of faking and enhancing the quality of their goods, which confuses consumers," said a staff member at the Guangdong provincial administration for industry and commerce, as quoted by local media.

"Sometimes, the packaging of these counterfeit goods is absolutely the same as real products, which makes it difficult for consumers to distinguish," he said.

Solutions

As a result, P&G established a China brand-protection team in 1999.

In 2000, the consumer product giant began working in partnership with several other multinationals to build a local organization to fight piracy called the QBPC - Quality Brands Protection Committee - under the auspices of the China Association of Enterprises with Foreign Investment.

"The QBPC made outstanding achievements in the following years and played a indispensable role in promoting China's intellectual property rights protection," the spokesman from P&G Great China said.

Related readings:  White Paper notes progress in IPR protection  China seizes counterfeits worth $221.4m in '08  Microsoft case shows China's resolve in IPR protection  LV sues China firm for selling fakes

The QBPC has grown to 184 world-renowned members including Coca-Cola, Compaq, Gillette, Henkel, Johnson & Johnson and Nike, according to latest data from www.qbpc.org.cn.

The organization has helped open an effective channel between China's central and local governments and foreign enterprises for improving ways to fight fakes.

"QBPC acts as a bridge. It helped multinational companies such as P&G achieve outstanding improvement in preventing fakes in China's market," Young told China Business Weekly during a previous interview.

In 2003, with support from the QBPC, authorities in Kunming, capital of Yunnan province, and in Linyi in Shandong province, seized thousands of boxes of counterfeit Safeguard soap worth an estimated 1 million yuan.

"It is reasonable to see fighting piracy as part of China's process of economic development and social reform," Dong Ling, a teacher from the School of Law under the University of International Business and Economy, told China Business Weekly recently.

"Yet foreign investors should learn more about China's laws and market regulations, as well as helping fight against fakes, to achieve a healthy local market," Dong added.