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The Honolulu Advertiser

Posted on: Sunday, May 22, 2005

Fake golf equipment floods market

By Grant Clark
Bloomberg News Service

SINGAPORE — Jacques Gladu snapped up a $640 set of Callaway Golf Co. clubs from a Quebec-based Web site in March, confident he'd found a bargain at a third of the usual price.

Three days later, he called Callaway to check if they were real. "My ball was going everywhere," says Gladu, 58, a retired human-resources consultant in Montreal who plays off a 3 handicap. "I was almost certain the clubs were fake."

Gladu was a victim of swindlers who are spreading Chinese-made counterfeit golf gear from stalls in Shanghai and southern Guangdong province to Internet auction sites around the world. The increasing sophistication has prompted Callaway to team with five competitors, including Nike Inc., in a bid to close down suppliers at their sources.

Demand for fakes is spurring production that siphons tens of millions of dollars from equipment makers a year, according to Rob Duncanson, an Orange County, California-based lawyer who represents the six companies.

"It's a nightmare," says Steve Gingrich, 57, security director for Cleveland Golf, the fourth-largest U.S. clubmaker, based in Huntington Beach, California. "We're getting some assistance in China, but the problem is becoming larger scale through the rest of the world."

Counterfeiters are profiting from legitimate clubmakers' presence in China, which gives them access to techniques to produce the fakes. About 60 percent of all the world's golf equipment is made in China, Gingrich says. Most of the rest is made in Taiwan, the U.S. and Japan.

In addition, equipment makers can hardly turn their backs on China's low-cost, high-skilled workforce and take their designs elsewhere. Clubs that retail for $70 to $90 each cost $3 to $5 to make in China, according to Colin Hegarty, president of Dallas- based Golf Research Group, which tracks the golf industry. A set of nine Callaway irons costs $500 to $1,200 in the U.S.

"The quality of production is amazing and the cost they produce them at is amazing," Hegarty says.

Duncanson, the attorney, says even clubs made outside China are copied there, fueling the counterfeit trade.

"The number of Internet cases in the U.S., Europe and Canada is considerably higher since late 2002," says Stu Herrington, security director for Carlsbad, Calif.-based Callaway, the world's largest maker of golf clubs. "The source is China and the modus operandi is full sets at prices 75 percent below authentic clubs."

Herrington, 63, declined to give figures. Callaway shut down "hundreds and hundreds" of auctions last year, he says.

China accounts for 80 percent to 90 percent of fakes in all industries around the world, according to the Washington-based International AntiCounterfeiting Coalition. Illegal copying costs companies about $500 billion in total each year, says Richard Wynne, a coalition spokesman."

On the fringes of Xiang Yang, the largest open-air market in central Shanghai, hawkers on March 13 offered fake Rolex watches, pirated DVDs of hit movies such as Walt Disney Co.'s "The Aviator," and golf clubs.

One seller said he had a "good" copy of Adidas-Salomon AG's TaylorMade R7 driver with adjustable screws for 700 yuan ($85) and a "less good" version with imitation screws for 350 yuan.

Another said he would export fake Nike, Titleist or Callaway clubs, 10 sets at a time, to the U.K. The sellers declined to give their names.

Callaway, Nike — the world's largest sporting-goods maker — and four other companies responded last year by hiring six local investigating firms to find the copycats. They declined to comment on cost.

The sleuths who find evidence of counterfeiting notify the companies, says Shih Yann Loo, a partner in Hong Kong law firm Baker & McKenzie, which represents the equipment makers. The makers then make formal complaints to organizations such as China's Administration for Industry and Commerce, which has the power to seize goods and impose fines.

In the past 12 months, authorities acting on such information have netted golf gear worth more than $2.3 million, the companies said in statements.

More than 31,000 fakes and 84 sets of molds for making clubs and grips were seized during July raids of factories in Guangdong and Fujian provinces, according to Fortune Brands Inc.

"Often these aren't legitimate businesses, so you can't take the case to a court of law, you have to hunt them down," says Mike Kelly, business director at Nike headquarters in Beaverton, Ore., for the golf-club division. "Many times it isn't even worth the effort. They simply create a new company and move. It's really frustrating."

Sharing the investigation and legal costs are Cleveland Golf, owned by Huntington Beach-based Quiksilver Inc.; Lincolnshire, Illinois-based Fortune Brands, which makes Titleist products; Adidas-Salomon, based in Herzogenaurach, Germany; and Phoenix's Karsten Manufacturing Corp., the maker of PING clubs.

None of the raids so far has resulted in a criminal conviction, says Loo of Baker & McKenzie. Only about 1 percent of people arrested during counterfeit raids are ever convicted, he says.

"It's like spraying mosquitoes," says Golf Research's Hegarty. "You're never going to get all of them, but you can reduce the problem significantly."

China's government last year appointed Vice Premier Wu Yi to head a new drive against counterfeiters. In December, courts stiffened punishments for copyright and trademark violations.