Piracy and informality increased in Venezuela during the Chavista era, especially over the past decade.
After years of recession, hyperinflation and massive devaluation, the Venezuelan economy is showing signs of growth, but we don’t know how far, and we can see that supermarket shelves have been restocked. The fact is that, nowadays, the brands and formats that Venezuelan consumers are familiar with share the shelves with products of questionable quality that are sold under names, packaging, logos and designs that mimic those of the brands of origin, and with imported items that enter the domestic market without paying import duties or consumption taxes such as IVA (the value added tax that Venezuela has charged since the 1990s) and, in some cases, are sold without invoicing, sanitary registration or compliance with the minimum quality regulations of their respective sectors.
This is how Corgste dental paste is taking market share from Colgate Palmolive, just as sanitary napkin brands Aluays and Alvvays did with Always. Or Scottex toilet paper, Roxana deodorant, cookies called Oieo, Yahnsan soap brand and Untherbood devilish ham rival Scott, Rexona, Oreo, Johnson and Diablitos Underwood respectively.
No hay que olvidar que hace años la revolución trajo a Venezuela marcas piratas como las pastas dentales Corqafe, Colcote y Crogeita. Todas de pesima calidad.
Curiously, after the “sanctiones”, hay original marks and competitive prizes. ¿?https://t.co/7f78BA0mP3
— Luis Carlos 🏴☠️ One Piece (@LuisCarlos) October 12, 2020
On June 5, Alimentos Difresca, the company that produces Diablitos Underwood, denounced in a press release that neither “Diablillos” nor “Diablillos Untherbood” or similar products are under their responsibility.
Compartimos comunicado a nostros consumidores ya the opinión pública in relación con productos that pretenden parecerse a nuestra marca DIablitos(TM) Underwood(TM). pic.twitter.com/sbIOYGTLMo
— Diablot (@DiablitosVzla) June 5, 2022
The price difference between these intrusive brands and traditional brands is huge, which is essential in a market where buying power has been so drastically reduced. For example, a bottle of Head & Shoulders shampoo, the original, costs $6 to $9 in stores, while their successor, called Hair & Beauty or Hoed & Shouders, or the original imported product sold on the black market, can cost $3.
“It has a devastating effect on formal trade. The price differences between original products and counterfeits can reach 70%, which obviously excludes from the market those who work according to the rules,” said the president of the Consecomercio chamber of commerce, Tiziana Polesel.
Some Venezuelan brands face this problem abroad. A few years ago, Empresas Polar denounced that a cream brand copying the graphic identity of its Mavesa line was sold in several countries with large Venezuelan communities, and that other products in these places were impersonating Polar brands like Toddy, Rikesa, and even the flagship Harina PAN.
La Campiña powdered milk and Rikomalt and El Chichero drinks, owned by ParmalatVenezuela, had the same challenge in Spain, Peru and Chile. “Some companies are focused on exploiting the nostalgia of migrants,” said at the time Antonio Planchart, legal director of Empresas Polar.
A public health risk
The greatest loss is for the consumer, who purchases these counterfeit products in good faith, unaware of the details involved. In most cases, these types of products have not passed the quality and health checks that all other products from formal, registered companies must undergo (under the surveillance of a government that liked to put on shows and say that he was fighting capitalism by punishing a big brand).
“These counterfeits can have health consequences for the consumer, while causing irreparable damage to the original brand,” Polesel of the Consecomercio warned.
In fact, even the Rafael Rangel Institute of Hygiene, which reports to the Department of Health, said in 2019 the risk of marketing contaminated toothpaste from pirate brands, after receiving a report from Colgate Palmolive. The institute has recorded cases of skin allergies after using counterfeit sanitary napkins and toothpaste.
Three years ago, Colombian authorities confiscated in the port of Cartagena de Indias 1.5 million units of fake personal care products about to be sent to Venezuela without any phytosanitary registration. A smuggling network using a route from China to Mexico, Colombia and Venezuela brought the cargo into our country in small quantities, overland, crossing the border through clandestine routes. And this stuff still happens.
All packaged products that expect to be sold in Venezuela, whether imported or produced in the country, must be registered and verified with Sencamer, the National Autonomous Service of Standardization, Quality, Metrology and Technical Rules .
Each item receives a CPE (Control de Productos Envasados) number from Sencamer. If the consumer cannot find this CPE number in a bottle of shampoo or a tube of dental paste, it means that this product has entered the country illegally and does not comply with the appropriate health assessment and register. This is how any consumer can easily distinguish the original product from one that could pose a health risk.
More than food and personal care
“All this informality in imports impacts national production, such as the sale of auto parts, where you can see a lot of imitation of original brands, especially with lubricants that are sold in any corner, or even tires, sold even in parking lots without invoicing or monitoring from Seniat,” said Omar Bautista, president of the chamber of automotive suppliers Favenpa.
The franchise chamber, Profranchicias, is also concerned about the proliferation of stores that illegally use brands like Walmart, Macy’s, Starbucks, Amazon, Dollar Tree and Arturo’s. “We condemn the appearance of stores that use recognized international and Venezuelan brands without a license,” the association said.
The Kellogg’s Affair
Illegal use of the mark was supported by the state. A relevant case is what happened with the American company Kellogg’s, which produced cereals in Venezuela for almost sixty years until it closed its operations and laid off all its staff in 2018. The government has took over the factory and appointed a military officer as general. director, instead of keeping the promise to leave the factory in the hands of the workers. In 2019, two Kellogg’s products reappeared in stores, Corn Flakes and Zucaritas, but with Chavista propaganda in the packaging.
Kellogg’s announced that it would take legal action against the state. However, according to think tank Cedice, none of the 60 lawsuits brought by international companies against Venezuela in the courts that rule on foreign investment matters (like CIADI or the International Court of Arbitration) came from Kellogg’s. This company did not request the intervention of the World Intellectual Property Organization, WIPO.
“WIPO has a specialized intellectual property arbitration mechanism that has been used by individuals and brands in Venezuela,” said lawyer Marcos Carrillo, former vice president of the Asociación Venezolana de Arbitraje (AVA) and Professor of Arbitration and Mediation at the Business Institute. IESA.
The Case MercadoLibre-MercadoPago is an example.
“With the precedent of Kellogg’s and the infringement in the use of the mark, these companies are using the subterfuge of subtly modifying the name of the mark to avoid certain legal actions”, explains the economist Tamara Herrera, director of the law firm of Síntesis Financiera consultancy. “Original brands have no choice but to fight in the arena of media and advertising, while trying to advance the courts.”
Consecomercio demands effective customs control
Venezuelan law contains provisions that can be used by companies affected by violations of their property rights, especially on brand image, but these abuses continue to take place because the State does not do its part. in market surveillance and law enforcement.
Consecomercio and other chambers of commerce like Fedecámaras and Conindustria have repeatedly asked the government to correct these institutional flaws, without result. “The various government offices must do their job and stop this with the corresponding sanctions. Customs must be controlled effectively, for example”, asks the president of the Consecomercio.
It is also true that the Bolivarian Revolution brought new brands to the Venezuelan market that legally compete with traditional brands. This is the case with dozens of Turkish soap brands that compete fiercely with domestic products or soaps imported from North America, Latin America, Europe and Asia.
Traditional national brands must defend their market share against many new legitimate brands of coffee, cocoa, deli meats, beef, dairy, eggs, alcohol, rice and pasta. Today, there are cooperatives and small startups in Venezuela that produce personal care products, bread, desserts, beverages, and clothing.
Some of them are included in CLAP bags with foreign brands imported by the Chavista administration.
The Maduro government has just said that there are more than 370 gourmet coffee brands in the country, but that includes brands from expropriations, such as one involving the former Café Fama de América company. Some companies taken over by the state have been sold in recent years to private players close to the PSUV, according to to research by Armando.Info
In any case, there are more competitors in the current Venezuelan market, but if free competition were guaranteed, prices would tend to fall without state intervention, instead of rising. But Venezuela still has one of the highest inflation rates in the world: in May, the annualized rate was 167%, according to the Central Bank.