Food Fraud: A global view of counterfeiting, false labelling and false claims...

Tania D'Souza-Culora: Hello everyone my name is Tania D'Souza-Culora and I am based in Gowling WLG's Toronto office. On behalf of Gowling WLG's Unauthorised Goods and Brand Enforcement Group welcome to the third and final in our autumn webinar series. I will be moderating this session on Food Fraud: A Global View, contrasting the position in China, Canada and Germany. All three of our webinars are available on demand for you to watch at your convenience. Joining us for this session are my colleagues from Gowling WLG's offices in Canada, China and Germany. First Lewis Retik, a partner in our Ottawa office who has advised clients on food related issues for many years. Then we have Jamie Rowlands, a partner in our Guangzhou office who specialises in IP enforcement and finally Manuela Finger, a partner who heads up our Munich office and specialises in IP, IT and commercial law.

During the session, we will be considering what food fraud is, the products commonly targeted across the different jurisdictions, how food fraud may be detected and investigated, the enforcement options available and remedies and finally some takeaways for rights holders.

Food fraud is a growing problem and industry experts recently estimated that food fraud costs the global food industry around $30-$40 billion annually. To put that in context this is around four times the estimated trade in illegal fire arms at roughly $8.5 billion a year and roughly a quarter of the estimated annual trade in cocaine and opiates at roughly $150 billion. Why is food fraud growing? Contributing factors include the enduring consumer demand for branded goods at bargain prices. Food and beverage products at all levels are now being faked including every day items such as orange juice and tomato juice, partly because consumers simply would not expect such items to be faked and partly because even though the profit per unit may be low, overall sales volumes are far greater than for premium products meaning higher overall profits. Another factor is the minimal outlay required to get products to market anywhere in the world aided by the popularity of online purchasing being extended to food items. Online sales effectively insulate traders from the scrutiny which comes with having physical premises. Then there is the multi-layered multi-country nature of the food business which renders it vulnerable to intervention at the sourcing, production, processing and transportation stages. Today shrimp caught in Australia will likely be sent somewhere in Asia to be peeled before being reimported for sale to Australian consumers. Finally the international scale and complexity of the food industry, which is now a very lucrative business, makes it more vulnerable to organised criminals especially as the penalties for counterfeiting are currently far more lenient than for say drug trafficking. The Italian mafia has been implicated in the distribution of fake olive oil and premium cheese and in central America drug cartels have been buying low grade food ingredients and relabelling them for sale at a premium product equivalent. So for the purposes of our discussion what is food fraud? What are its ingredients?

During our discussion we are going to focus on economically motivated food fraud, rather than for example, terrorism type fraud whether as a deliberate intention to harm consumers specifically, adulteration or lowering of the quality of a food by introducing an extraneous substance which may also be harmful for example sugar syrup in supposed Manuka honey or ethanol in vodka. Substitution, replacing all or some of an ingredient with a cheaper item, for example horse meat for beef, or ocean perch for red snapper. Diversion, using a food stuff or other substance for an unintended purpose for example animals unfit for human consumption entering human food channels or the re-dating of a food beyond its use by date. Finally misrepresentation or false claims which involve the selling of a product as something it isn't in terms of either its origin, quality or characteristics, for example an ordinary hard cheese as Parmigiano Reggiano cheese. In the majority of food fraud cases the adulterant is neither readily identifiable nor a food hazard as this would defeat the fraudster's aim.

Moving on to Canada and commonly targeted products. Lewis, what sort of food fraud do we see in Canada?

Lewis Retik: Well in Canada much of the food fraud revolves around false and misleading representations. So for example, country of origin claims is a major issue in Canada. As many people know Canada is a cold climate, many of our fruits and vegetables are imported from other countries, and certain countries have higher values to Canadian consumers than other countries. So for example, we will see foreign fruit, vegetables, fish and meat labelled as products of Canada or other high value countries, possibly instead of the actual countries of origin.

The other issue that comes up a lot are substitute of products. So this is the substitution of lower value products for higher value products such as meat or fish. For example, we sometimes see tilapia labelled as red snapper or chicken parts as turkey parts as well as extra virgin olive oils containing other vegetable oils or lesser quality olive oils. Other examples include false organic product labelling, where a product is labelled as organic when it is not, and recently there was a major case involving false kosher claims where kosher labels were placed on non-kosher cheeses and sold at a far higher market price that kosher food gets.

Tania: Thank you Lewis. Jamie, how does this compare to China?

Jamie Rowlands: Essentially, in China pretty much all food is at risk of fraud, it's absolutely everywhere and it's across all food groups without restrictions. I am going to just give a flavour of some examples that are very well known on the China market and I am going to start with the most infamous scandal, which relates to adulteration in the dairy products sector. It revolves around infant milk powder and this scandal really led to the Government tightening up legislation very very strongly and indeed the surrounding enforcement as well. The scandal involves some of China's biggest milk producers who were lacing the powder with a substance called melamine and this led to a very significant number of sick children. Estimates put the figure at around 300,000, some of those very seriously ill and there were some reported deaths. So that was a really big moment in China food fraud and as I say it did lead to a tightening of regulations and enforcement and I am going to touch on that later on in this webinar.

A second example relates to cooking oils. This is an example of diversion and involves the gutter oil scandal and this is where old and discarded oil was reused, using very simple and basic processing techniques, and then was resold mainly into the restaurant trade. Again, given the way that the product had been treated, it led to a lot of issues and a lot of illness and in fact, new regulations were set up and established in 2012 as a direct result of the gutter oil scandal with the maximum penalty of death for some of the processors and sellers of these substances.

A third example is around agricultural products and it was mentioned earlier resulting or in relation to the use of expired foodstuffs. Here we have two major brands that were recently caught up in a scandal in China it was McDonald's and KFC who both got caught up in a scandal involving their main meat supplier who was found to be supplying local branches in China with expired meat products, so again a very serious incident and this is something we see a lot of in China.

I have also lifted out health foods and supplements. Food supplements have become extremely big business in China, they fall now under the definition of health food and with the very large and fast growing of the middle class there has been a huge increase in the desire for what is known as health foods and of course there comes an opportunity, the opportunity for the food fraudsters to false certify and false label. So the consumer believes that they are purchasing genuine health food ingredients but in fact substitution may well have taken place and again this is a regular occurrence in China.

My final example revolves around alcohol and wine is a particularly good example of this. Again, in China there is a very well known black market trade for empty bottles of genuine wine so that they can be refilled and recorked and obviously refilled with much cheaper ingredients but sold as Tania mentioned earlier a premium product when in fact it is far from that. A leading wine importer estimates that approximately 30,000 bottles of fake wine are sold per hour in China and that just gives an indication of the level of the problem out here in China.

Tania: Thank you Jamie that is quite a scale to bear in mind and Manuela how do things look in Germany what sort of things do you normally see?

Manuela Finger: Yes in Germany and more broadly in the EU the horse meat scandal of 2013 has been the wake up call. It related to undeclared horse meat in beef products and started with beef burgers which tested at 29%25 horse, revealed by the Food Safety Authority of Ireland, and one of the largest beef producers in Europe emerged very quickly in the course of the further investigations as being at the centre of that scandal and that processor then pointed the finger at continental suppliers and the scandal extended to the whole supply chain. To give you an example, in the course of the further investigations more companies were drawn in. A Scottish factory was later found to have supplied beef meat or that were found to be up to 30%25 undeclared pork. An Irish processor found horse DNA at levels of 75%25 in meat labelled as frozen beef trimmings of polish origin and a further meat processor and trader was found to have a consignment of meat that tested at 80%25 horse in its cold store.

Other commonly targeted products in the EU are very similar to what Lewis and Jamie said before, olive oil is probably the product most at risk of food fraud and the rewards for adulteration are substantial. For example, if you use cheap pomace olive oil, extracted from olive residue using chemicals that sells for 32p per 100 millilitres compared with £1.50 for extra virgin oil. Or you can just simply use any other oil not necessarily olive oil, colour it green and make a lot of money out of it.

Other popular and lucrative frauds include diluting honey with cheap sugar syrup, passing off methanol, as vodka is actually an example of where the role of criminal networks in the food chain has proven fatal. In 2012 more than 40 people were killed by methanol contaminated vodka and rum in the Czech Republic, Poland and Slovakia, several persons also died elsewhere in the EU and many others suffered permanent health damage. The UK Trading Standards Department has warned that there has been a five-fold increase in seizures of counterfeit alcohol since 2009 and fakes have been found to contain a whole range of dangerous contaminants, including isopropanol, methanol and chloroform. Just recently in Germany in the beginning of 2017, the German Customs Investigations Office discovered vodka containing 15g methanol per litre that means it exceeded the admissible limit 400 times.

Finally, other examples include mixing inferior rice with premium basmati or as my co-presenter has already said switching cheap fish with expensive alternatives.

Tania: Thank you Manuela.

Well as we have heard food fraud now extends across a very broad range of goods. It is also worrying that the actual incidents of food fraud is likely far higher than current statistics suggest. Why might this be? Well first, consumers are often unaware they have bought a sub standard food and so seldom report offences. Secondly, food fraud especially substitution often has no immediate health impact thus often escaping detection and finally in some cases food companies that suspect they have been a victim of food fraud may be reluctant to report the incident externally for fear of damaging their reputations. So what can and should the food company do to try and tackle the issue. Keep in mind that in addition to the investigation and detection options within a jurisdiction, the food company also needs to be cognisant of the vulnerability of the food industry to the vagaries of climate events internationally, as such an event across the other side of the world could well impact the local market.

So, Jamie how do you suggest one go about detection and investigation in China?

Jamie: Well Tania as you rightly have just mentioned it is a difficult area and I would say no more so than in China. As I mentioned a moment ago, food fraud is endemic in China and really it does occur with regularity at all stages in the supply chain so you know you start with production, you have issues around particular pesticides being used in the growth stage, you turn to manufacturing, we see the use of cheap alternative ingredients. At the transport stage you may get involved with dirty storage or falsifying records and then of course you turn to the sort of final frontier being the consumer facing stage and there again you have the opportunity for false labelling to sell products that are out of date and gutter oil being a good example of that. So you have got all these issues and then compounded I think in China by the fact and just the very nature of the market itself. One of the biggest issues in China is just the size of China, to be able to monitor and enforce. So one example of that would be limited prevention measures. Food fraud requires technology effectively to try to beat the fraudsters but the reality is that the food fraudsters are always going to try to be one step ahead and it takes a huge amount of investment and time to adapt clinical detection to the array of new materials being used to purposefully contaminate food and there lies an issue. Volume of production is another problem and it really is China specific. We have got 1.3 billion people living in China and of course there becomes a huge issue when it comes to monitoring and as a company to kind of investigate and food production in China is growing at a rate which is really quite staggering and China is now the world's largest food producer, or at least one of the largest food producers for many staple products. So for example, pork, chicken, fish, milk, eggs, rice, wheat, fruit, vegetables, corn and of course tea and all those products can and will have been tampered with at some point and therefore the size of the problem is really staggering, add to that China has an extremely fragmented food industry. Whilst there are a number of large scale farms, very large scale manufacturers and indeed suppliers, in reality by far the largest majority of the food industry in China revolves around very small scale businesses, so local farms, small manufacturers and relatively small suppliers and of course this again leads to a challenging landscape to monitor and importantly to regulate those players.

Finally for the problems of the investigation and such, it is the competitiveness of the market. The China food market is extremely competitive and inevitably this competitiveness gives an opportunity for food fraudsters on the basis that cost is a key issue and therefore at all levels of supply this cost driver does allow food fraudsters to get involved. And so these are all significant problems for the China market and so one has to think about what one can do within that context and it is not all bad news and there certainly are things being done and things that can be done on the China market. I think one of the most important things is quite a generic point really, but it is what I would describe as use of internal and external intelligence. So internally there needs to be education within companies and there needs to be procedures set up such as whistleblowing regimes to try to make food fraud as transparent as possible and ultimately this can help investigation and detection. But it should not just be internal it should be external as well and so there are means and facilities that can be used in order to help detecting food fraud and that should very much be established as part of companies' policies in order to aid the investigation.

One very interesting technological development that has been seen recently in China, I mean something that Walmart is currently doing, and they are using Blockchain, the technology most usually used in relation to Bitcoin, but Walmart are using this technology to track its pork through the entire supply chain within China. This allows and provides Walmart with the ability to check the origins of particular pork products in a matter of seconds so that's great control for the supply chain but it has another very useful attribute as well and that is if there's ever a call for a recall because there has been some contamination, the technology allows the recall to happen very quickly in real time and that can be a real benefit from a PR perspective, as well as just ensuring the products are off the market. Interestingly Alibaba, owner of the largest e-commerce platforms out here in China, there is talk around this company also introducing Blockchain technologies to help with monitoring its food production and supply on its e-commerce platforms.

Another positive and an attribute that is going to be useful in the detection of food fraud is there has been a very significant increase in funding in order to set up and work with companies to control and enforce food fraud. So there really is a drive from the Chinese Government to try to tackle this problem and investment is going to be really beneficial in this area. It's still a little bit needle in a haystack at the moment but there really are some positive signs that this investment is actually leading to positive outcomes.

Finally from a China perspective in relation to investigation and detection there are increased projects being established in China that allows consumers to test food to ascertain whether it contains any illegal food additives or similar and there have been a number of programmes around this in 2017 and again this demonstrates a drive from the Government in order to really try to tackle food fraud and these test systems have been seen as a really positive start in order to aid consumers trying to get to the bottom of food fraud in China.

Tania: Well thank you Jamie, while there is as you say a huge problem with scale in China it is heartening to hear about the various methods available and intriguing to hear about these who have Blockchain within the industry.

Lewis, what is the position for us in Canada?

Lewis: Well from a Canadian perspective detection is often picked up through competitor and consumer complaints. This places a great responsibility on brand owners to monitor what is going on in the market and that really is a key way to get regulators to look at particular issues.

Another area that there is significant detection in Canada is frankly at the borders, Canada has only one land border but it's also the world's largest undefended border and that is between the United States and Canada and a lot of the sources of products may flow over the US border even if that is not the starting jurisdiction.

In terms of authority or investigative authority, Canada being a federation has a very complex web of regulators that may or may not be involved in a particular situation and there seems to be a lot of overlapping authorities. At a high level, when we talk about food fraud issues strictly speaking with respect to food, there are two levels of government, you have the federal level where you have the Canadian Food Inspection Agency and they will typically investigate with respect to inter-provincial and international trade and I want to be clear about typically because that is not a universal statement. Likewise, at the provincial level, you have provincial authorities, specifically provincial food authorities across the country. For example, we often use the acronym spanning Quebec we have MAPAQ and in Ontario we have OMAFRA. So with respect to other food fraud issues the Canadian Food Inspection Agency has the jurisdiction to investigate false and misleading representations or labelling in violation of the Consumer Packaging and Labelling Act as it pertains specifically to food.

Then as we discussed the CFI does not have a universal jurisdiction, just as neither do the provincial authorities. So in Canada we also have the Competition Bureau and the Competition Bureau also has the authority to investigate violations of the Competition Act, the Competition Act regulates both false and misleading representations and fraudulent performance claims. The importance or the significance of the Competition Bureau and its role is that under the Competition Act the finds available to it are much more significant than with respect to the Food and Drugs Act which is the Act that regulates food. For example, you could have fines up to $10 million per incident with respect to false and misleading representations under the Competition Act. You also have the various provincial authorities that may investigate issues under consumer protection legislation.  So we talked about the specific food related authorities, such as MAPAQ and OMAFRA, but we also have separate from that consumer protection authorities and the consumer protection authorities which go under various names across the country have the ability under provincial law to investigate false performance claims, false and misleading representations.

Tania: Thank you Lewis. Manuela, what is the position with respect to detection and investigation in Germany and maybe more broadly in the EU?

Manuela: Yes thank you Tania.

I would like to focus on the means that a company has to identify and prevent food fraud and the ingredients we need and Jamie already touched upon a couple of these. So in terms of country and relating to food safety there are various lab aids and institute solutions for the detection of adulterants and the analytical techniques include, for example, sensory, surgical, chemical, DNA base, chromatographic and spectroscopic methods. Then we need forensics, we need to investigate the criminological characteristics of food fraud. We need horizon scans and intelligence gathering and implementing whistleblowing schemes for the internal detection of food fraud maybe helpful as well. Then in terms of management companies need to do a vulnerability assessment, I will come to that later in this webinar and following that assessment implement a proper risk management scheme.

Tania: Thank you Manuela. So staying with Germany, the next thing for us to consider is what the enforcement options are and whether or not the local authorities have the appetite to assist. So having identified an instance of food fraud in Germany what should a food company do, how should they proceed there Manuela?

Manuela: Well so where IP infringement is involved this is possibly the most straightforward case as that can easily be detected by Customs. There is Customs action predominantly under the product piracy regulations and companies are advised to file respective applications for Custom action, but in some cases you may need a national application as well, for example when it comes to intra-community trade, which is not covered by the EU product piracy regulations. Customs action is really helpful to the tagged and false products from the outset and there is definitely an appetite of Customs authorities to assist. What you should do in this respect is work closely with Customs and educate them with regard to typical counterfeits and how to identify them, maybe communicate known infringers etc. What you should not do, according to our experience, is to annoy Customs by frequently relieving infringing goods for no specific reason. If in a certain case you have to relieve infringing goods it is really crucial to explain the reason to Customs because otherwise, although it is not really legal, they might be less keen to assist in the future, that is at least our experience.

Apart from Customs action IP infringement can also be enforced by civil law infringement action, IP infringement also constitutes a criminal offence. If we look at the regulatory side there is a really complex food regulation in place which also covers protection against deception and other cases. Again, Customs can stop food or means of transportation with food in the case of import, export or while in transit. There is also the possibility of initiating civil law action because many regulatory offences at the same time establish a violation of unfair competition or establish an act of unfair competition and finally again regulatory offences also constitute a criminal offence and can be punished with a fine or prison after three years or in serious cases of up to five years. That is more on the local side. Then I would like to alert you also to development within the EU and the European Commission has adopted the official controlled regulation in 2017 which replaces the old regulation on official controls of 2004 and the aim of that updated regulation is tackling the growing phenomenon of food fraud, improving food tradability and restore consumer trust in the integrity of the agri food chain. It provides for more independent inspection and a single EU wide framework will apply to official controls along the whole food chain at all stages of production, processing and distribution. The new official controls regulation entered into force in April this year and the new rules will apply from December 2019.

Tania: Thank you Manuela. Jamie, how does that compare to the enforcement landscape in China?

Jamie: Yes thanks Tania. In some ways what Manuela has just gone through is indicative of what happens on the China market as well. I am going to start briefly with intellectual property enforcement and the possibilities of using such remedies in China, particularly in relation to counterfeit goods and I think this is a fundamentally point when you are talking about China. If one wants to enforce in China it is absolutely possible to do so, but one must register IP rights. Whilst it is possible to enforce non-registered rights in China, via for example the Anti-Unfair Competition Act, it is more challenging given the high evidence requirements, registered rights are easier to enforce. I think the other thing to remember when it comes to IP infringement and enforcement in China is that China is a first to file country and therefore it's again fundamentally important for those that intend to do business in China, or are doing business in China, that they register their rights, they register that trademark, the all important trademark for when we are talking about counterfeit products and one registers that as early as possible. Armed with registered rights companies can enforce via civil Courts in China. I think it is worth pointing out and noting as well that the IP landscape in China has much improved in recent years. There are still challenges, but the reality is that specialist IP Courts have been set up in jurisdictions such as Shanghai, Beijing and Guangzhou, they have been now set up for a number of years and actually earlier this year in 2017 some additional IP specialist IP Courts have also been set up in some other jurisdictions away from the east coast of China and that is a really positive development for particularly foreign companies wanting to enforce in China.

Jurisdiction is important here before any action is started for counterfeit goods it is really important that local advice is sought to try to get yourself in the best possible Court for the right of action that you are intending to enforce.

Just some general points about IP litigation in China. Damages are generally not particularly high, often it wall fall to what is known as statutory damages because it is very difficult to prove loss of profits or an account of profits in China. But importantly for IP enforcement final injunctions are almost always awarded if the plaintiff wins a trial and that final injunction can be very valuable indeed, particularly if it relates to counterfeit food products which may be damaging or have health issues. So from an IPR perspective your options are you can either go through the civil Courts, so individual companies can sue each other with the result of some form of damages and usually a final injunction. In addition to that we have what is known as administrative actions in China for counterfeit products and therefore using trademarks one can make applications to local AICs, that is the Administration of Industry and Commerce. One goes armed with the necessary evidence to show that there is sufficient evidence around infringement and then the local administrative authority will effectively take control of that case with the ability to raid premises, to fine and confiscate and/or destroy infringing goods. The benefits of an administrative action from an IPR perspective is that they are relatively quick and indeed relatively cheap as well, so a good form of enforcement to know about and certainly to use in China.

There are indeed criminal enforcement, it is possible for IPR enforcement for what is known as serious infringements. In relation to what serious means, that depends on the facts, but for food fraud particularly around health issues you know seriousness can come into play at a relatively standard practice and that can result in a final prison.

Manuela mentioned Customs in relation to Germany and Europe, the same goes for China. Customs generally are pretty proactive in China, and given that so much counterfeit goods originate in China, Customs is a very very good tool to ensure that those products effectively stay on the China market and do not flood into jurisdictions around the world. So recording one's rights at Customs, as Manuela said educating Customs, really spending that time investing in ensuring that Customs are as well briefed and understand a company's rights, is incredibly valuable and certainly on the China market is something that we would always recommend is done.

So now moving onto the regulatory side through food law rather than IPR. Food laws in China are made up of a complex mix of what I would call key umbrella legislation and then administrative regulations both at a state level and local regulations as well and that means there is a myriad of different regulations making the food law regime quite complex in nature. However the main law around food safety in China is China's food safety law, it was introduced in 2009, really off the back of the milk powder scandal, and it really made regulations and enforcement much more robust. It has been amended a number of times, most recently in October 2015, and as the market has developed so too the law has been catching up, so it now deals with e-commerce platforms and food fraud and such issues as traceability. Under the food law there are penalties that can be enforced at a civil level, customer level can take private actions against producers and I am going to touch on that in a little while but also administrative actions and indeed criminal actions can be started under food law enforcement. How pro-active are local authorities in China? I think in many ways China is similar to the rest of the world, there are authorities, local organisations that can be very very proactive depending on the nature of the issue that they need to deal with. I think what has given some credence and sort of belief in proactivity in China is the fact that food fraud has become such an important political issue. President Xi Jinping really has raised food fraud/food safety to a sort of top level issue and therefore authorities, local authorities, do need to take it seriously and once you add into the mix the fact that a lot of food fraud can lead to health issues generally speaking proactivity of local authorities in China, in this area, is relatively positive.

Tania: Thanks Jamie.

So turning to Canada the position, certainly with respect to IP infringements, is not dissimilar to that in China and Germany. Food fraud can well likely constitute an IP infringement such as trademark infringement or copyright infringement, sometimes there may be design infringement and of course it is important to ensure that you have the appropriate registrations in place. It should be noted that copyright is registrable in China. This can be done relatively cheaply and quickly and registration of copyright certainly eases enforcement. In adulteration and substitution cases which will often be a case of pure counterfeiting, where the identical mark is used for identical goods, the enforcement options in Canada again are broadly similar to those in China and Germany. Where trademark and copyright infringement also amount to a criminal offence there is the option of enforcement via that route however as with most other jurisdictions the local police don't often have an appetite for IP infringement cases, these rating well below other more violent crimes.

If one is trying to bring a matter to the attention of the RCMP in Canada they are much more likely to take it up if you present them with a complete package supporting all aspects of a case, and if you can show consumer health implications, then it may well be easier to get their buy in. As Jamie and Manuela have mentioned, there's certainly an increase in consumer awareness and I think if that starts to gather some momentum we are likely to see an increasing appetite on the part of the authorities to take action and to be seen to be taking action. Canada does have a Customs recordal system although largely due to inadequate resourcing at present it is far less efficient than the systems in China and across the EU including Germany. Also unlike the EU where one can rely on a simplified procedure to get goods destroyed, in the absence of an objection from the importer, in Canada one needs to file a civil action to obtain destruction in addition to a rights holder also being liable for substantial storage fees over the course of a case.

Canada Customs recently introduced a dedicated dangerous goods hotline allowing one to report potential shipments coming into the country. However, because one needs to provide Customs with pretty specific information on a suspicious shipment, such intelligence is rarely available and as yet this hotline is unlikely to be of much additional use.

Lewis, what is the enforcement position regarding regulatory type offences in Canada?

Lewis: So from a regulatory perspective the enforcement options are much more limited. The consumers or the competitors complaining who make a complaint with the applicable regulatory authority, but once the complaint is filed they play very little role in the process of prioritisation of that enforcement. They may be called upon as witnesses depending on the situation or for additional information but they don't play a role in the actual enforcement process. There is no private right of action from a regulatory perspective, so there is a lot of work that goes into the strategising of how a complaint is filed. Obviously if a safety concern can be isolated in the complaint it increases the chance that the complaint will be prioritised by the regulator.

Tania: Thank you Lewis.

So, having identified the enforcement options what sort of remedies would be available to a food company or rights holder in these kind of instances?

Manuela can you start us off with the position in Germany.

Manuela: Yes, the most important remedy is obviously injunctive relief and in particular the preliminary injunction. So the preliminary injunction is the super weapon. It is really powerful as if all goes well you may be able to obtain a preliminary injunction without a hearing and without any hearing of the defendant within 48 hours and you can then have the infringing goods off the market immediately. The Court conducts a full assessment of the evidence, so it is not just a preliminary assessment but a full blown assessment and as such the preliminary injunction is really robust and that means that in many cases the parties then settle over all following a preliminary injunction being rendered and there is no need to actually initiate regular Court proceedings. A certain downside might be is that all evidence must be present, so you can't have witnesses or the like, and the Court must be able to decide based on the present evidence. So in many cases it's more suited for straightforward cases, in particular IP infringement, in particular trademarks or designs which can be well very easily identified and detected.

Apart from the injunctive relief further remedies include claims for disclosure of information and damages, destruction of the infringing goods, recall of products, publication of the judgement may be quite helpful in some cases. Then as I said before most of the regulatory offences also establish an act of unfair competition and all as such consumer organisations and other organisations may have standing and can take action as well.

Tania: Thank you Manuela.

Jamie how does this compare with China?

Jamie: Well again China does bear many similarities to that of Germany. I suppose one difference that it is just worth highlighting is in Germany Manuela highlighted the important of a preliminary injunction and I certainly agree with that. In China preliminary injunctions are quite difficult to come by and so…although they are in theory possible and from an IP perspective for trademark infringement probably more common that any other right but really in China it's about the final injunction that's where the value comes from a Chinese perspective.

I am going to focus just a few minutes on the sort of regulatory enforcement side. I briefly covered IP enforcement in my last set of slides. So I have listed out some of the remedies available under the food safety laws in China and they're quite wide-ranging so you can get a product seizure if there has been a breach of food safety laws, production line closures as well, so effectively it's the shutting down of the operation. Fines have been quite well defined under the law in China. So for example when it comes to producers and distributors that are in breach of the food safety laws, they can be fined between ¥50,000 and ¥100,000 which is around $7,500 to $15,000 and that's the amount if the total of the food which has effectively been contaminated is less than ¥10,000. So obviously the fine is considerably more than the value of the food as an incentive not to breach and if the value of the food, the contaminated food is higher than ¥10,000 then there is a fine or a fine can be imposed between 10 and 20 times the value of that food. So that can get into fairly serious amounts of fines for the producer.

Other remedies available, so you can go as far as revoking a business licence and that does happen and in addition to that for a company that has lost its licence in theory it is possible that senior members of that organisation can also be banned from working in the food industry for up to five years.

Other issues such as blacklisting and public announcements in relation to the fraud, so ensuring that effectively the companies take culpable responsibility again all good incentives to try to reduce the amount of food fraud in China. In addition under the food safety law, as I mentioned briefly previously a consumer can actually take a private action against other producer or distributor of non-compliant food and that's done through the civil Courts and effectively the consumer can see damages of up to ten times the purchase price of the relevant food or three times the damage caused as a result of the purchase of that food.

Finally from me again under the food safety laws there is also a criminal perspective. The food safety law requires China's Food and Drug Authority, and any other relevant administrative agencies, they must they effectively have an obligation, to report suspect food crimes to the Public Security Bureau, that's the PSB which effectively deals with criminal actions in China and then the PSB has its own obligations then to investigate and certainly, at its most serious under food safety laws, the death penalty is available in very narrow circumstances.

Tania: Thank you Jamie.

So moving onto Canada the remedies available are largely similar to those in Germany. Preliminary injunctions can be tricky to obtain in IP infringement cases as they require the demonstration of irreparable harm but that may well be easier in food fraud cases where a damage to reputation could be argued. Permanent injunctions tend to be granted in almost all IP infringement cases as Jamie says that is similar to the position in China and where a trademark infringement or copy infringement amounts to a criminal offence. Fines or a custodial sentence may well be handed down.

Lewis, what are the likely remedies on the regulatory side in Canada?

Lewis: From the regulatory perspective there really is no private right of remedy that as discussed before or right of action beyond actually launching the complaint with the appropriate authority and this again highlights the importance of crafting the complaint to highlight any safety concerns to persuade the regulators to act upon the complaint.

Tania: Thanks Lewis.

So it's clear then from what you've heard from our various speakers that the threat of food fraud occurs throughout the food system at the production stage, may be way of adulteration or substitution. At the retail stage where there may be misrepresentation and at the disposal stage when diversion or repurposing may occur.

To finish off we would like to leave you with some takeaways, points a food company should bear in mind in looking to tackle the problem.

Lewis please start us off with some takeaways from your perspective.

Lewis: Absolutely. So the first takeaway I would highlight is to be proactive, given that at least from a regulatory perspective, the enforcement is driven very much by complaints, it's important that companies and brand owners actually monitor what's happening in the market. Second if it's not recently done, audit your IP portfolio and plug any gaps. Third implement an offline and online brand protection programme. Fourth know your ingredients and the products and the risks associated with those ingredients and products, know your suppliers and know your supply chain and conduct rigorous risk and resilience assessments, otherwise known as good implication practices. Lastly educate your customers on where your products are typically sold, how to spot imitations and equip them with an easy method with which to promptly alert you should they encounter a suspicious product.

Tania: Thanks Lewis. Manuela?

Manuela: Yeah I'm going to repeat a couple of things Lewis just said but in the first instance adopt a food fraud prevention process. So as mentioned earlier conduct a vulnerability assessment and identify your exposures. Then based on that develop and implement your mitigation strategy and implement and review that regularly for any changes that may be required. The mitigation measures may include raw material specifications, a surveillance plan, as Lewis just said, look at your supplier relationship, trusted suppliers and look at the supply chain transparency and may be simplify the supply chain. Then as mentioned earlier, educate and work closely with Customs as to typical counterfeit products, as to known infringers, characteristic of authentic and counterfeit products and last but not least, educate your customers and then always act quickly and get a reputation of really going after infringers..

Tania: Great, thank you Manuela.

Jamie, what takeaways would you like to leave our audience with?

Jamie: Well Tania I'm glad to say that it looks like Canada, Germany and China are pretty much on the same page when it comes to takeaways and I fear I may just be repeating what has already been said but I think from a China perspective registering intellectual property rights is critical, so I think that's probably the most important takeaway from a China perspective, if you don't have registered rights it is going to be difficult to enforce in China so do look at your portfolio and get rights registered as quickly as possible.

Full engagement with supply chain, it's been mentioned already I won't labour the point but it is very very important. Selecting credible and accredited suppliers. Again it's been mentioned before, I mean in China we have the Hazard Analysis and Critical Control Point, HACCP which is a certified accreditation and just ensuring that your supply chain is as qualified and robust as possible is going to put food companies in the best possible position going forward. It's not going to be the magic wand for everything but it certainly a proactive and positive start, then training staff and key suppliers, again it's been said before. Finally really it's a technology point, there is fantastic technology out and available today, Blockchain is a great example, but it's certainly not the only mechanism that can be used. Where it is possible to implement technology to improve control and management of the supply chain it really should be put in place as quickly as possible. Thank you.

Tania: Thank you Jamie and thank you to each of you for presenting and thank you to our audience for listening. We've included contact information for each of our speakers in the slide deck as you will see, so if you have any questions and follow-up we would be happy to address them. Goodbye for now.