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The risk posed by counterfeit goods and vehicle parts potentially impacts all those in the automotive industry including manufacturers, distributors and garage operators.
South Gloucestershire trading standards recently raided a premises of an illicit parts trader operating out of a self-storage facility and uncovered counterfeit car parts, with an estimated market value exceeding one hundred thousand pounds.
This included fake versions of parts from major car manufacturers. The operation involved enforcement teams from eight major car manufacturers, including Toyota and Stellantis, and was supported by the government's Intellectual Property Office (IPO).
Who is at risk and why?
Criminal liability for counterfeit vehicle parts
Criminal liability is an obvious concern. Consumer protection offences might arise, whilst health and safety violations can occur where defective components create a risk of accident or injury. In the worst cases corporate or individual manslaughter charges could be investigated if a fatal accident occurred.
Civil liability and product liability claims
Civil liability exposes businesses to product liability claims when counterfeit parts fail, causing vehicle damage or personal injury. Customers may also pursue breach of contract claims for receiving fake parts instead of genuine ones, seeking refunds and compensation for consequential losses.
Financial consequences and insurance implications
Financial consequences include seizure of counterfeit stock without compensation, substantial legal defence costs, and expensive recall programmes requiring identification and remediation for all affected customers.
Insurance complications may arise, with insurers refusing cover for claims involving counterfeit parts and imposing increased premiums. Businesses may lose authorised dealer status, cutting off access to genuine parts at trade prices and manufacturer support.
Reputational damage and loss of customer trust
Discovery of counterfeit parts can severely impact a business's reputation through negative publicity and social media exposure, leading to permanent loss of customer trust.
Rebuilding credibility may prove extremely difficult, even after resolving the issue. Trading standards investigations can result in business disruption and restriction as well as loss of essential accreditations and industry certifications.
Protecting your business: Best practices for dealers and distributors
Businesses should source parts from authorised distributors, implement robust verification procedures, train staff to recognise counterfeits, maintain detailed supply chain documentation, and ensure adequate insurance cover.
The consequences of handling counterfeit parts can threaten a business's viability as well as expose it and potentially individuals to criminal and civil litigation.
The impact on manufacturers: Revenue loss and supply chain disruption
As regards manufacturers the counterfeit parts market is directly diverting sales revenue from legitimate manufacturers and supply chains. The infiltration of counterfeit parts can disrupt genuine supply chains and require expensive measures for detection and removal, increasing operational costs.
The increased use of online transactions makes it easier for criminals to sell counterfeit parts directly to consumers, distributors and garages, often using generic photos or professional-looking but fraudulent websites
Safety risks: Why counterfeit brake pads and airbags are dangerous
Self evidently counterfeit parts, especially safety-critical items like brake pads and airbags are made of inferior materials and are not safety-tested. This makes them more likely to fail, leading to serious accidents, injuries, or fatalities.
There is the obvious risk that when a counterfeit part fails, consumers may unknowingly blame the original manufacturer, leading to a loss of consumer trust, brand loyalty, and long-term damage to the manufacturer's reputation.
Implementing traceability systems to verify authentic parts
Manufacturers should implement and use robust systems to ensure end-to-end traceability and verify the authenticity of vehicle parts. Such systems facilitate the tracing and identification of vehicle parts and make it easier to recall any counterfeit parts.
Consumer education: How to spot fake car parts
Consumers may be tempted by the lower price of counterfeit goods, which means educating consumers and distributors about the risks and challenges is important.
This could be supported by manufacturers agreeing to run campaigns on how to spot counterfeit parts and the associated risk with importance placed on always buying from reputable sources signposting some verified options.
Guidance can also be given on how to report suspected counterfeit parts to both the manufacturer and law enforcement agencies for example through a 'report concerns' webpage on a manufacturers website.
Conclusion
In summary vigilance is key. All those in the industry can play their part in overseeing and managing supply chains. This might include conducting rigorous background checks on any supplier company being used, inspecting the quality of products and in person meetings to ensure product authenticity and safety.
Likewise as in the recent South Gloucestershire matter working with law enforcement agencies such as Trading Standards to report, investigate and prosecute counterfeiters can prove effective in cutting down the number of counterfeit parts available on the open market.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
