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Parts Fake Out: Counterfeiting a Growing Crime; Tire Dealers Can Be Held Liable

Counterfeiting a Growing Crime; Tire Dealers Can Be Held Liable

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Until the 1980s, counterfeiting conjured up images of knock-off brand-name watches and handbags.

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Today, however, counterfeiting is big business, accounting for 5% to 8% of all goods sold worldwide. And it has moved well past knockoff Rolexes and Gucci bags, right into your business.

Counterfeiting is one of the most lucrative crimes today; its impact on the global economy is estimated at $350 billion to $500 billion a year. The FBI calls counterfeiting “the crime of the 21st century.”

The differences between real and fake vehicle parts are getting harder to detect, causing serious financial and, potentially, physical harm. Some of today’s counterfeit parts can easily escape detection by the naked eye. While the appearance of counterfeit parts has improved in some cases, they only approximate the original, with no regard for safety or quality standards, according to experts.

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Industry experts warn there is an increased possibility today that dangerous counterfeit parts or components could appear unknowingly under the hood of the family car or on the axles of a fleet of trucks.

Tire Dealer Liability

According to Anthony Lupo, an attorney at law firm Arent Fox, purchasers may be held liable for selling counterfeit vehicle parts if they knew, or had reason to believe, the products were counterfeit. Lupo defines a “purchaser” as a distributor, retailer, wholesaler or installer. This definition includes tire dealers – both retail and wholesale.

“Resellers may be held liable for counterfeiting if they had knowledge or had reason to know that the products were counterfeit,” Lupo said.

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Lupo added that “knowledge” may be established through “willful blindness,” in which a reseller or installer fails to inquire about the authenticity of the products. Once knowledge has been established, a reseller, such as an independent tire dealer, may be held civilly and criminally liable for counterfeiting.

Civil damages can include statutory monetary damages and non-monetary relief. Courts can also issue preliminary and permanent injunctions, temporary restraining and seizure orders, and may order freezing of assets, attachment of property and destruction of counterfeit goods.

Criminal penalties depend on whether the accused is an individual or a corporation. Individuals who knowingly use a counterfeit mark on or in connection with goods or services may be fined up to $2 million and/or imprisoned for up to 10 years for a first offense.

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But what happens if a counterfeit part fails on a customer’s vehicle? The best-case scenario is a profit-draining comeback by a complaining customer. A catastrophic failure that results in injury or death, however, potentially opens the parts distributor and the installer to significant civil and/or criminal legal action.

Help on the Way

In response to this growing problem, the Motor & Equipment Manufacturers Association (MEMA) is educating the automotive industry about this critical issue. Last year, MEMA formed the Brand Protection Council (BPC) to help its members address counterfeiting and set priorities in the areas of diversion, non-compliant products and intellectual property rights.

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“This has been a serious issue that has cost American manufacturers business and jobs, both overseas and domestically,” said Paul Foley, vice president of the Automotive Aftermarket Suppliers Association (AASA), MEMA’s aftermarket segment, which directs the BPC. “Now it’s becoming a public safety issue.”

MEMA and the BPC have produced a supplemental publication on counterfeiting that is being distributed with the February issues of select Babcox magazines, including Tire Review. It serves as a resource guide for warehouse distributors, parts stores, retailers, service technicians and independent tire dealers and wholesalers.

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The 16-page publication includes an overview of parts counterfeiting, a glossary of terms, a list of industry and government contacts, and guidance on what you can do if you suspect you’ve come across a counterfeit product.

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