00:03So we're going to meet the undercover operatives right now, make the buy, walk away, hand me the
00:07product that they purchased. If anything happens, I'm supposed to go into the bank immediately.
00:12Is this the black market? It's counterfeit goods. It's illegal activity. It's black market.
00:16This is Shady. This winter, I got a tip that made my jaw drop. Car tables on the street in
00:24downtown Los Angeles lined with just-released in-demand beauty products at a fraction of
00:29the retail price, things that had just hit stores. And even to the beauty editor, they
00:34look totally authentic. So what's the deal? I headed downtown to see for myself.
00:47This is fake, but the good kind.
00:49So we can cut through to the alley here. Do you want to?
00:54All right, so we just walked to Dasanthi alley and we're going to look around.
01:07The prices in Santiali are astounding. It appears that MAC lipstick is going for $2? Urban Decay
01:13palettes for $15 instead of $50? So what's the catch?
01:17Some people are makeup artists that come down here.
01:19Really? Oh my gosh.
01:23So she says that makeup artists come down here and buy a lot of this stuff.
01:29The majority of the people we're talking to down here don't want to be on camera,
01:32but we found one woman who might talk to us. So we're going to go try to find her.
01:38So you have every brand that everyone wants. You have Too Faced, MAC, Kylie.
01:45How much, for example, is a Kylie lip kit here? It's $6.
01:49$6. And then how do you sell them for so much less than you would find them like on Kylie's
01:55website,
01:55for example? Well, not lying, everything's from China.
02:00How do you get it? Where do you order it from? Highline.
02:02Okay. A lot of people can afford a $30 lipstick.
02:06You know, so $5, $3, it's perfect to pay that. Yeah.
02:11I heard people be having reactions on things, but complaints, no. I use them myself.
02:17Oh, you do? Do you ever get scared that you don't know what's in it,
02:19or like what the conditions are like in China where they make it?
02:23Me, I think everything's just a lie. I think everything's come from the same wear, same thing.
02:28So you think a lot of the stuff that you're buying from China is replica, or they're just the same
02:34stuff?
02:35It's just the same stuff. That's what I think. Because I use it. I see the original. I see the
02:39fake.
02:39And I really don't see a lot of things that are different. You just save more money.
02:44Yeah.
02:45According to sellers, this is the secret to getting cult products at rock bottom prices.
02:50But are they really the same? To find out, I headed to the beauty capital of the country.
02:59If it feels like the beauty industry has exploded overnight, it's because you're right. The makeup
03:04category grew by 12% in 2016, and the $445 billion per year industry is growing at a steady rate
03:12of 3%
03:13per year and has proven to be recession-proof. To fulfill the demand, conglomerates like Estee
03:18Lauder and L'Oreal are purchasing indie brands at a record rate. The result is a palpable demand for
03:24expensive luxury beauty products, an atmosphere perfect for counterfeiting.
03:29It's a huge problem, and it seems to be getting bigger. I would compare this industry to, say,
03:34a drug trafficking organization. Some of the things, some of the items we've examined have been found to
03:40contain lead, arsenic, mercury, even horse urine. How are the products getting into the country?
03:46They usually come into our seaport, and then from there, they're offloaded and taken to various
03:52distribution points. We do our investigations, and we work our way back, and for the most part,
03:59it takes us to China. To find out just how easy it is to get the goods in bulk, we
04:05sent an undercover
04:06reporter into a cosmetics market in Guangzhou, a major manufacturing hub in China. Turns out,
04:12it's as easy as walking into the right store, which was the first one we tried.
04:17This is a half stock. Can I see? You need a person of a business?
04:22Well, first, I have to see the quality. Quality similar to Mac. You can ship to the US?
04:28Yes. You know what they make it with? Like, is it animal fat? Or, you know, is it just like
04:33the real?
04:34Same product? Same ingredients? A little bit different. A little bit different?
04:50Actually, what's inside is very different. The FBI reports that counterfeit cosmetics have been
04:56found to contain dangerous levels of bacteria, and reported reactions include acne, psoriasis,
05:02serious skin rashes, and eye infections. What's more, these reactions can take days to show up,
05:08which means the counterfeit products don't always get the blame they deserve.
05:13Estee Lauder seized over 2.6 million counterfeit Mac products in 2016 alone. Back in New York,
05:20we met with the man in charge of its global security team.
05:23What does the dark underbelly of this look like?
05:26I traveled to China, to Guangzhou, a couple of years ago, and my team took me around to some of
05:32the locations where these products are made, and it's just unsanitary conditions. I mean,
05:38there's no quality control. There's no, well, this doesn't right. Meet the test. Let's take it off
05:43the line. You wouldn't eat there, let alone make products there for distribution.
05:48This is just a taste of the kind of conditions that Estee Lauder's global security team finds when
05:54raiding counterfeit factories both overseas and in the U.S.
06:00MAC has such a massive problem with counterfeiting that they actually have an entire division that's
06:07set up just to try to combat it. And they have a private investigator who sort of heads finding the
06:14people who are selling it on the streets. So we are going to meet with this person now. Go.
06:21I'm driving in New York right now for the first time, so I'm going to try to get us there.
06:28This is Jimmy, Estee Lauder's private investigator. He's the real deal, and not just because people
06:33compare him to Tony Soprano. He's ex-military, served 20 years in the NYPD, and now he's hired by
06:39huge corporations to get knockoffs off the street. He's going to be showing us just how they fight
06:43counterfeiting right here in New York City. A company like Estee Lauder will reach out to me.
06:48They have an anti-counterfeiting program. What we'll do is we'll investigate leads and determine if
06:53they're counterfeit and conduct an investigation and then present it to the police. So I'm going to
06:58guess that you're not on the street buying beauty products from the counterfeiters. I do not think I'd be
07:03effective in my role to buy beauty products. In order to deliver a counterfeiting case to the police on a
07:10silver platter, Estee Lauder does the legwork. For example, Mac gets tipped off about suspicious
07:15products, often by consumers through social media. The global security team develops the leads,
07:21then they often hand them over to a private investigator. A case is developed using undercover
07:25operatives, often criminal justice students who fit an average buyer's age. Undercover footage
07:30seals the deal, and the products are inspected by a brand rep who completes an affidavit that they're
07:35counterfeit before it's all turned over to the cops. All this just to get a single seller
07:40off the corner.
07:48Hi. Hi. So actually this is Nancy Gordon with Estee Water. Hi. It's so nice to meet you. Nancy is
07:55the
07:55expert in authentication, so she's coming out with us to actually examine the products that we're buying
08:00to confirm that they're counterfeit. They can become agitated. They can become confrontational. They can
08:07escalate it to a physical altercation. So those are all the risks involved in doing an undercover
08:12operation. So they're waiting for us to get there. Okay. And that's when the girls will be waiting.
08:18Okay. Perfect. Hello? Okay. So he's set up. Great. All right, we're on the way. So the vendor is on
08:36the corner.
08:36Okay. At 181 in St. Nick. So we're going to go up there and have the operators make a buy
08:42with you. So our
08:43friend is behind that white truck. Oh, wow. On the opposite side of the corner. He's not in the,
08:50he's not hiding at all. He's just right out there. Right out there like these vendors are on. Yeah. See,
08:55this table is standing right there. I don't want to point to my phone call. All right, listen. I don't
09:05know who
09:05the undercover is. You're the undercover? Uh-huh. The girls are going to try to complain if they
09:08just act like you're dating their brothers. Okay. Like you're from college. Okay. Because you're not
09:12going to fit here. I'm going to stay here. I can see nothing. Yeah. And we're going to get closer
09:16and be careful. If anything happens, I'm supposed to go into the bank immediately.
09:43That's the Anastasia. I've heard this stuff's really good too.
09:47I like the MAC eyeliner. The MAC is the famous one that people like.
09:54Oh. 3 for 20. 3 for 20? 25. 3 for 25. How much for just these?
10:02This is 25. 25? Yeah.
10:12All right. Thank you. Thank you.
10:35So we got all, literally, they bought all of this stuff for $120. And this at the store would just
10:42be
10:43like, it would be hundreds of dollars, like easily. That's wild. I also got a couple things too.
10:51So now, catch Nancy goes for a thing. Can you tell it's counterfeit yet? Oh, sure.
10:58You didn't even open it. You just know. I didn't need to. I can tell by the packaging.
11:06Nancy, what are you thinking about that one?
11:09Pretty obvious. The label. Take a look at how sheer tone is spelled.
11:13Sheer Tione. You guys, they spelt tone wrong on the packaging. Tone. T-I-O-N-E is how they
11:21spelt it.
11:22So, uh, what is the final verdict? Counterfeit.
11:26All of it. So far, but I'm sure that they will be.
11:32What is going to happen to this guy? Well, after the police conduct our investigations, then
11:37make the determinations of our findings, as what we see here, that he is selling counterfeit goods.
11:42He broke the law. So, he will be arrested.
11:46Jimmy was right. The New York seller got arrested by NYPD using the evidence Estee Lauder collected,
11:52and his goods were seized. But he pled down to lesser charges to avoid jail time. It's hard not
11:57to think it was all just a drop in the bucket. All that work for one tabletop of products. So,
12:02what's the long-term solution? Awareness. The consumer must be aware of the counterfeit
12:09ingredients of the products of inferior quality that are out there. Ultimately,
12:14if you eliminate the demand, you address the supply. Some may say that's easier said than done,
12:21especially when the efficacy of our cosmetics seem to be growing less valuable than the name on the
12:25package. So, what's more important? Your skin or the name printed on your makeup? It's just, I think,
12:31the brand. People just want the brand. People just want the brand. It's like a fake Louis Vuitton.
12:36Yeah. People just want to carry a fake Louis Vuitton. Yeah. People just want to carry a fake lipstick.
12:41That's it.
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