Text by Norman McFarlane and Carrie Adams.
Source: This article was taken from the May 2011 issue of Wine Magazine
They say imitation is the sincerest form of flattery, but in the wine industry the unscrupulous practice of counterfeiting has severe consequences for the winemaker and wine investor.
With knockoffs of expensive designer-label clothing and accessories – Armani-lookalike sunglasses and Louis Vuitton travel bags spring to mind – it was inevitable that the world of wine would fall prey to the same kind of scurrilous practice and, if what is happening overseas is anything to go by, it is becoming a major headache for premium producers.
Not only have wines been manipulated for many years, but since the 1980s counterfeit labels have become more and more prevalent. Economic circumstances have, in previous years, forced a number of producers to sell their wine in bulk to merchants. They have, in turn, for years, blended in wines from other vintages in order to ‘pep up’ a particular wine. So there’s a possibility that the fabulous older wine you tasted, which had such remarkable freshness, is the product of such chicanery.
In some bizarre cases, there have been sales recorded from some properties that far outnumber the total quantity of bottles actually produced, which all points in the direction of wily merchants reprinting labels and affixing them to wines they have purchased in bulk! Another source of counterfeiting comes in the form of using empty bottles from some of the more desirable properties. This is particularly prevalent in the Far East, where an empty First Growth Bordeaux bottle in mint condition, including the label, can fetch up to $1500. The bottles are filled with cheap red wine, corked, re-capsuled and sold as the genuine article. One can but imagine the stratospheric profits that the bootleggers make.
The new Asian and African markets that have emerged over the last 10 years or so have supplied fraudsters with a lucrative platform. If you consider that a First Growth investment would have offered you (on balance) a 42 to 45% return over the past five years, it is definitely not an investment to be sneezed at – provided it is real. Even reputable auctioneers and traders worldwide have fallen foul of clever tricksters.
Arguably the most famous case of label fraud is that of a number of bottles of 1787 Chateau Lafite that bore the initials TJ’ on the label, and were purported to have come from the cellar of Thomas Jefferson, noted for his love of fine wines.
The wines came into the possession of an eventually infamous German music promoter-cum-wine merchant, Hardy Rodenstock, who apparently refused to divulge how he had acquired them.
In 1985, a single bottle was sold by Christie’s auctioneer Michael Broadbent for $156 000, because of an impromptu bidding war between Kip Forbes, son of wine collector and publisher Malcolm Forbes, and Wine Spectator publisher Marvin Shanken.
American billionaire industrialist Bill Koch acquired four bottles, apparently for some $200 000 each, but became suspicious as to their authenticity after indulging in some research into their origins. He engaged his not inconsiderable resources – he actually hired an ex-FBI agent – in order to come up with answers. To his horror, he discovered that not only did the record books (meticulously kept) of Jefferson’s cellar not include the bottles, but on further investigation, it was found that the initials TJ’ so cleverly recorded on the original labels were fake: Jefferson used the initials Th.J, rather than TJ.
“An empty First Growth Bordeaux bottle in mint condition, including the label, can fetch up to $1 500.”
Koch set about suing Rodenstock and the case still resides in the federal courts of New York to this day. That is the story in a nutshell, but so compelling is this case of outrageous wine-label fraud that it has been recorded in a book entitled The Billionaire’s Vinegar: The Story of the World’s Most Expensive Bottle of Wine by Benjamin Wallace, and a movie is planned for release in 2012.
A less well-known but more recent case saw American wine giant E.& J. Gallo successfully sue 12 French wine producers and traders in a French court in 2010 for deliberately mislabelling 13.5 million litres of a Merlot and Syrah blend (cheaper) as Pinot Noir (much more expensive). Gallo sold the wine under its popular Red Bicyclette label as 85% Pinot Noir.
The fraud was discovered in 2008 during a routine audit of one of the wine traders in the chain, and resulted in hefty fines for all involved and suspended prison sentences for six. This case amounts to ‘reverse label fraud’, because Gallo was unaware that what it was were putting in the bottle was not what it had accepted in good faith – and paid a premium for – from its French suppliers.
According to Clement Kaiser, CEO of Prooftag, whose product-authenticity system is used by the likes of Chateau Margaux, Chateau Latour, Maison Paul Jaboulet Aine, Domaine Ponsot and Chateau Canon-la-Gaffeliere in France and Chateau Montelena Winery in the Napa Valley, there are syndicates operating in the Far East, particularly China, that have made a lucrative business out of collecting empty premium wine bottles from restaurants, and selling them on to counterfeiters.
Mr Kaiser was in SA to implement the unique Bubble Seal authentication system for Stellenbosch boutique producer Bilton Wines. “We are about to start exporting our premium wines to the Far East. Our Far East importer advised us that counterfeiting and refilling of bottles is widespread there, and that we should take steps to ensure that our products are completely secure,” said owner Mark Bilton.
The Bubble Seal consists of a unique bubble pattern in a plastic film incorporated into a tamperproof label which straddles the capsule and bottle neck, making it impossible to counterfeit, or to refill bottles.
Premium producer Vilafonte has also been warned about counterfeiting in the overseas market. “Our Far East importers have warned us that the problem is getting worse and have advised us to ensure that the label printing plates for our Series M and Series C wines are secure,” said Vilafonte co-owner Mike Ratcliffe, adding that the Vilafonte label embossed with the Stellenbosch vineyards soil pattern is even harder to counterfeit. Despite the caution, he pointed out that there had not been any reports of counterfeit Vilafonte wines entering the black market that he was aware of.
But is counterfeiting a problem in the local market? Intellectual property lawyer Otto Gerntholtz at Dr Gerntholtz Inc thinks not. “I think it’s highly unlikely in the local market, but if it’s going to happen, it will be in the premium market, with wines such as Vergelegen V, Vilafonte and Emineo, for example,” he said. “And besides, anybody local who buys and drinks a bottle of wine at that level will probably identify that there is something wrong and contact the producer.”
Gerntholtz went on to say that it is more likely in the overseas market, but he did cite a recent case in which wine exporter Groupe LFE was found to have infringed the trademark of Swartland Winery in exporting wine to the Netherlands. “In brief, Groupe LFE was exporting wines to the Netherlands in which the term ‘Swartland’ was prominent and accordingly constituted trademark use. They were indeed trying to sell their wine as that of Swartland Winery,” he said. The case went all the way to the Supreme Court of Appeal, where judgement was handed down with costs on 4 March. While this does not constitute label counterfeiting or bottle refilling, it constitutes trademark infringement.
Wine & Spirits Board secretary Hugo van der Merwe agrees with Gerntholtz. “In the 30 years I’ve been involved in the certified wine sector, I’ve never come across an instance of label counterfeiting,” he said. “The system under which certified wine is produced in South Africa has very strict controls. That makes it virtually impossible for this sort of thing to happen.” He added that if any fraud of this nature came to the attention of the board, it would be referred to the liquor section of the Department of Agriculture, Forestry and Fisheries (DAFF).
Riaan van Zyl, head of the liquor section at DAFF, also said that in his experience it had never happened in the uncertified liquor sector either. “I do know of a case where an individual who worked at a particular producer now plans to sell wine with a label very similar to that of the original producer where he worked. If the label is submitted (to the liquor section) for approval, we’ll tell him in a friendly manner that the trademark is actually in use, and that he should clear it with the trademark owner.” He added that it was not within his jurisdiction to advise the trademark owner of the possible infringement. “That is a civil matter, between the trademark owner and the person or persons who plan to use the trademark,” he said. So there is the rub, from the South African consumer’s point of view. If any kind of label fraud occurs, even if it comes to the attention of the department, nothing is likely to be done about it.
Just how widespread the practice is in the overseas market is difficult to establish. The First Growth estates that are rumoured to have been the target of such fraud are most unlikely to divulge to what extent they have been compromised, but by way of example, Vilafonte’s Mike Ratcliffe said it was rumoured that there are more than three times as many bottles of Chateau Lafite in circulation than were ever produced.
Where does that leave the consumer? Well, that old Latin adage caveat emptor seems to rule: let the buyer beware.
BUBBLE SEAL TECHNOLOGY
The growing incidence of label counterfeiting and illegal refilling of bottles in the wine and spirit industry has prompted the search for reliable solutions to address the problem.
Bubble Seal technology guarantees both authenticity and traceability with the addition of an impossible-to-duplicate label. For more, go to www.winemag.co.za.
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