‘C’ is for commercial collaboration: enterprise and structure in the ‘middle market’ of counterfeit alcohol distribution

‘C’ is for commercial collaboration: enterprise and structure in the ‘middle market’ of... Crime Law Soc Change (2018) 70:543–560 https://doi.org/10.1007/s10611-018-9781-z ‘C’ is for commercial collaboration: enterprise and structure in the ‘middle market’ of counterfeit alcohol distribution 1 1 2 Jon Spencer & Nicholas Lord & Katie Benson & Elisa Bellotti Published online: 1 June 2018 The Author(s) 2018 Abstract This article utilising the work of Pearson and Hobbs [1] defines the middle market in counterfeit alcohol. Drugs markets have a resemblance to counterfeit alcohol markets in as much that they share the illicit nature of the product and the need to distribute the product at the ‘street’ level. Drawing on two case studies taken from a European regulator the article details the dynamics of the market, the enterprise actions of the actors and how law enforcement responses can, in certain circumstances, make the task of the distributors easier. The traditional notions of organised crime are challenged and organisation of counterfeit alcohol markets is viewed as being reliant upon those who have legitimate access to the market and are able to develop networks of commercial collaborators who by their position in the legitimate market are able to conceal their illicit actions. * Jon Spencer jon.spencer@manchester.ac.uk Nicholas Lord Nicholas.lord@manchester.ac.uk Katie Benson k.benson1@lancaster.ac.uk Elisa Bellotti elisa.bellotti@manchester.ac.uk Centre for Criminology and Criminal Justice, School of Law, University of Manchester, Manchester, UK Law School, Lancaster University, Lancaster, UK Mitchell Centre for Social Network Analysis, School of Social Science, University of Manchester, Manchester, UK 544 Spencer J. et al. Introduction Utilising the theoretical framework of Pearson and Hobbs [1], this article defines the middle market in counterfeit alcohol distribution and its associated ‘enter- prise’. Pearson and Hobbs [1, 2] discuss the problems in defining the ‘middle market’ of criminal enterprise, arguing that it is fluid and dependent on the range of actors and types of networks. They also describe how actors can acquire different roles within different strata of the market. We draw upon these insights to analyse entrepreneurial activities in the middle market of counterfeit alcohol distribution. Additionally, Shen et al. [3] provide an analysis of the structure of the counterfeit tobacco market by identifying the ‘key actors’ in the production and distribution of counterfeit tobacco. This is an important detailing of the structure of the counterfeit tobacco market and has striking similarities with the counterfeit alcohol market in terms of the role of actors. However, the utilisation of the Pearson and Hobbs analysis provides a good comparison because of the focus on dynamics of market structure and distribution. There is a considerable literature on illicit markets and their organisation see for example: Pearson and Hobbs [2], and Moreselli and Roy [4], which both address drug markets. Hornsby and Hobbs [5] analyse the structure and market organisation of the smuggled cigarette market. Van Duyne [6] develops the argument that business crime should be treated as an ‘organised crime’. Recently the journal Trends in Organised Crime published a special edition on illegal markets in the UK and von Lampe and Antonopolous [7] provide a detailed overview of the contemporary research trajecto- ries. The important work of Edwards and Gill on ‘Crime as Enterprise’ [8]is used here to develop an analysis of the entrepreneurial approach to market structure. Edwards and Gill [8]notethat: BA key challenge for developing our understanding of illicit enterprise is to pursue a more qualitative interpretation of the actual decision-making processes engaged in by illicit traders^ ([8]:218). This article engages with this challenge by analysing the market dynamics and locating the counterfeit alcohol markets within a broader context of serious crime and its organisation. The relative obscurity of counterfeit alcohol in the official discourse and within the academic research suggests that the everyday visibility of legitimate alcohol is the cloak behind which counterfeit alcohol hides. Therefore, an understand- ing of market structures that aid distribution is one means of exposing counterfeit alcohol from its hiding place. Why are we concerned with locating the middle market? A greater understanding of the market structure assists us in understanding the trading conditions and relationships [8]. It also helps us to understand the dynamic between different market elements, for example there is a production market in counterfeit alcohol and a distribution market and there is a different middle market in relation to each of these activities that will include a different range of actors, although some actors could be in both markets. However, these markets may be located in different countries and it is more likely that there is little crossover in actors between production and distribution. Understanding the structure of the distribution market provides regulators with market based ‘C’ is for commercial collaboration: enterprise and structure in... 545 knowledge that can assist in targeting investigative resources and define and support an intelligence gathering strategy. Counterfeit alcohol is alcohol that is sold as a branded product when it is not that product but an inferior one. Counterfeit alcohol is presented in counterfeit packaging to deceive the buyer into believing it to be the legitimate brand. Other types of illicit alcohol would include home distilled spirits and non-duty, or smuggled, alcohol; this paper is only concerned with counterfeit alcohol. The arguments presented here are based on an integrated script and social network analysis of the case files of a European regulator that concerned two cases of the cross-jurisdictional distribution of counterfeit alcohol. The case files raise interesting questions concerning the nature and structure of the ‘illicit’ market and the relationship between different actors involved in the distribution at the middle market level, that is, the ‘enterprise’ of counterfeit alcohol distribution and the underlying commercial collaboration. An understanding of how the processes of distributing counterfeit alcohol are organised and the necessary substantial relations of connection would ideally be informed through intensive, qualitative interviews with those involved in the distribu- tion market but the on-going, ‘live’ nature of the cases restricted this kind of access. Additionally, the financial and time constraints of the research permitted only an in- depth analysis of the full case files alongside interviews with the regulators. To build on our earlier analysis of counterfeit alcohol distribution [9, 10], in this article we seek, in line with the model of middle markets developed by Pearson and Hobbs [2], to construct an analysis of the market structure of counterfeit alcohol distribution and its associated entrepreneurial dynamics. In doing this, we integrate a market structure analysis (i.e. nature and functioning of the counterfeit alcohol market) with an understanding of micro-level actor dynamics (i.e. social/criminal networks and processes of crime commission). First, the paper addresses the issue of defining the middle market and then argues for the necessity of understanding illicit enterprise at this structural level. Second, we present two inter-linked case studies from the case files and a discussion of what these case studies tell us in relation to the distribution of counterfeit alcohol. Here, we consider the organised activities of those actors involved in the processes of distribution and movement of the illicit product at the middle market level. The final section of the paper explores how an understanding of the dynamics between the middle market and law enforcement contributes to the problems of detecting counterfeit alcohol distribution. Distributing counterfeit alcohols: the case studies In this section we outline the nature of the phenomenon of the distribution of counter- feit alcohol. We present central themes from the script [9] and network [10]analysis to provide concrete insights into the structural aspects of the market, linking these conditions and relations to the actual commission of the distribution by the identified network of collaborating actors. We first present a descriptive account of the cases before going on to connect enterprise and structure in the following section to provide insights into the functioning of the ‘middle market’. For further details on methods and data see Lord et al. [9] and Bellotti et al. [10]. 546 Spencer J. et al. The delivery case The ‘Delivery Case’ spans two jurisdictions that are adjacent. The possibility of counterfeit vodka came to the attention of regulators in Jurisdiction B and a raid on a nightclub indicated that counterfeit vodka was for sale; the vodka was a common brand. Empty bottles, caps and packaging were found at the premises. Investigations into the origin of the vodka revealed that the product was sourced from Jurisdiction A and the relevant regulator was contacted. The case files of the regulator in Jurisdiction A reveal a network of distribution that relies on a number of actors each with their own skills, knowledge and contacts. David owns a small delivery and courier company, ‘Delivery Ltd’, located in Jurisdiction A. He has numerous legitimate delivery and logistic contracts and delivers across both jurisdictions. The files indicate that David receives or arranges for the collection/delivery of the counterfeit vodka to a storage premises that he either owns or has access to, however, the location of these premises and the origins of the counterfeit vodka prior to David receiving it are unknown. David receives the counterfeit vodka bottled and labelled, so ready for distribution. He arranges for the product to be transported from Jurisdiction A to Jurisdiction B using legitimate logistical systems, Parcel Network, Crossland, Freight Inc. and Bard Transport. The description of the counterfeit vodka is falsified and the consignment wrapped in opaque plastic. David arranges for the delivery of the counterfeit vodka to the logistics hub of Parcel Network, so the storage location that he collects it from remains undisclosed. David has previ- ously arranged for consignments to the same region delivered to a range of premises. Once David has delivered the product to the logistics hub his role in the operation is over. As logistic companies have no responsibility to ensure the veracity of the consignment description the embedding of the counterfeit product into the legitimate logistic system is relatively easy and with a low risk of apprehension. David had a legitimate relationship with the logistic company as he has sent many legitimate consignments, so he was a bona fide customer. The counterfeit vodka, whilst with the legitimate logistics company, is not in the control of the distributors; to regain control of the counterfeit product it is delivered to MB Testing, which is not the destination. When the load arrives at MB Testing an employee asks for it to be forwarded to premises around the corner: Food Wholesalers Ltd. owned by Paul. This tactic disguises the actual delivery address as the delivery location is not the final delivery address, thus distancing the counterfeit load from the destination. Once at the destination the counterfeit consignment is broken down into smaller consignments and distributed, however, the case files contain only scant information on the lower or street level distribution. David does have some cross- jurisdictional contacts with John and Andrew (Jurisdiction B) which are concerned with delivery arrangements. In Jurisdiction A there is contact with Stephen and Sean who are brothers, and they have involvement in trading in sub-standard wine which David has been involved in the delivering. There is thought to be a link between Paul, the owner of Food Wholesalers Ltd. and John; this being the case there is a link across the jurisdictions to Stephen (Fig. 1). It was agreed by the authors with the providers of the data that the jurisdictions and the identity of the Regulatory Authority would be anonymised to ensure confidentiality and operational integrity. ‘C’ is for commercial collaboration: enterprise and structure in... 547 Fig. 1 Delivery case network The north case The ‘North Case’ occurs prior to the ‘Delivery Case’ and is detected when a consign- ment of counterfeit vodka is seized by customs in Jurisdiction B. The destination of the counterfeit vodka is the same as in the ‘Delivery Case’. However, David is not involved in the case. Once again legitimate logistic networks are used to move the counterfeit 548 Spencer J. et al. vodka across jurisdictional boundaries. In this case, the arrangement is made by a third party, James, who instructs a logistics broker to move an assignment of bottled water. This shipping/logistics company sells the contract forward stripping out their profit as they go. This happens on three occasions before the contract is purchased by an individual haulier, Jim’s Trucks, who collects the load and transports it. On crossing the border, the haulier is stopped and the load searched and over 17,000 l of counterfeit alcohol seized. This was a relatively simple operation and the final delivery address was not concealed as in the ‘Delivery Case’ and the ‘North Case’ does not appear to require the same level of organisation. It appears that the seizure of the load in the ‘North Case’ resulted in the organisation of the movement of the counterfeit vodka as detailed in the ‘Delivery Case’ which is a more sophisticated approach to the movement of the counterfeit vodka. What is striking is the speed with which the second delivery process was initiated and established. This is reflected by the adaptability of the network to restructure itself to ensure the delivery of the counterfeit product. The speed of the organisation also suggests that the movement of counterfeit product is a repetitive action and not simply a one-off opportunistic crime (Fig. 2). Understanding the middle market in counterfeit alcohol What do these two cases tell us about the market in counterfeit alcohol? There is a lively market for the product. This is not surprising given the increase in seizures reported in Operation OPSON V where during the operation over 385,000 l of counterfeit alcohol was seized ([11]:13) and there are numerous press reports, espe- cially in 2012 and 2013 claiming the dangers of counterfeit alcohol (see for example: [12, 13]). However, sizing the market is problematic and McKee et al. ([14]: 10) note that ‘the scale and nature of illegal alcohol production and sale are impossible to ascertain with certainty, but the UK customs authorities believe the problem is increas- ing and, in association with the UK Border Agency, have recently updated their strategy to tackle it’. As counterfeit alcohol imitates the product that it is faking, the counterfeit alcohol is not immediately obvious: BMany are similar in composition to the products they imitate, and the major risk to health probably comes from excessive consumption of ethanol because of the cheap price. It is impossible to tell without testing, however, which of these products contain other potentially toxic contaminants.^ (McKee et al. 2012: 10) The key point is that there is an active market and to sustain and expand it will require a consistent supply of the illicit product. In this way, the counterfeit alcohol market has some similarities with the illicit drug market (see [2]). Ensuring supply is a critical entrepreneurial function if the profit is to be taken from the market. One problem for the counterfeit alcohol entrepreneur is that a considerable amount of counterfeit alcohol is Operation OPSON is a Europol INTERPOL joint operation targeting fake and substandard food and beverages. ‘C’ is for commercial collaboration: enterprise and structure in... 549 Fig. 2 North case network transported between different jurisdictions and this has to be done, as illustrated in the case studies, by disguising the product as something else. The clandestine movement requires knowledge, resources and organisation, again similar to the movement of drugs, that takes places in the middle market of the enterprise. Nature and dynamics of the middle market The case studies suggest that the market may also be organised like a drug market. In both investigations, there was no indication of how the counterfeit vodka was distributed at the street level. However, there existed a street form of distribution as the counterfeit product was discovered in night clubs and in a series of raids the fake vodka was found in other small retail outlets across a significant geographical area. The case files chart the movement of the counterfeit vodka from the post-production phase to the distribution phase, and the focus of the case files is at a middle level in the market. Once the counterfeit alcohol arrives at the destination it is then broken down into smaller consignments for distribution. A 20,000-l consignment might be broken down into small 12 case lots (144 l) for sale in pubs, clubs and small retail outlets. It is these types of outlet where the fake vodka was found when such premises were raided. The case files also suggest a significant regional market penetration and for this to be achieved it would be necessary to break the initial consignment down into smaller lots. Therefore, the analysis of the case files provides a window onto a middle market operation, there is no detail of how the counterfeit product is sold on or distributed at the ‘street level’. What the case files illustrate is the movement of the counterfeit vodka from the producers or those in close contact with the producers to those who organise the distribution of the illicit product. These are two different networks with a ‘bridging node’ that is able to facilitate the purchase and movement of the fake vodka from one network to another. The middle market distribution network is relatively small, enlarged out of necessity once the strategy for transportation in the North Case had been discovered. This 550 Spencer J. et al. enlargement of the network to conceal the movement of the counterfeit vodka brings associated risks, simply by the need to increase the size of the network increases the risk of detection. However, the Delivery Case network remains relatively compact with Stephen acting as the bridging node between the networks. Stephen was connected to the brothers John and Andrew who, the case files indicate, are linked to Paul the owner of Food Wholesalers Ltd., the final point of delivery for the counterfeit vodka in both cases. Structure and enterprise in middle market dynamics The work of Pearson and Hobbs [1, 2] is concerned with drug markets where they define the typical form of criminal organisation concerning the middle market as involving criminal networks that are ‘typically small, with a small number of suppliers and customers…They are more usefully understood as networks or partnerships of independent traders or brokers’ ([2]:vi). Thus, in terms of structure,they propose a four-tier level of classification; importers, wholesalers, middle market drug brokers and retail level dealers [2]. This four-tier system does not imply B…that there are always and only four links in the supply chain, since some individuals occupy dual roles (e.g. import and wholesale), while middle market drug brokers are sometimes known to collect and import drugs from wholesale storage systems in continental Europe. At other times, there are numerous linkages and intermediaries. However, the four-tier classification is a simple and usable definition of distinctive market roles and functions.^ ([2]:vi) The counterfeit alcohol case files indicate a potentially similar classification except that ‘producer’ could replace the ‘importer’ classification if the counterfeit alcohol is being produced (distilled in the case of spirits) in the same country or jurisdiction as the wholesale activity. The case files provide no clear indication of where the counterfeit product was produced but the regulator’s provisional analysis indicates that it was imported to the jurisdiction for bottling and onward transportation. In terms of the middle-market actors, there are clear similarities in the structural relations of the criminal networks. By ‘market structure’ then, we are referring to the structural actor relations in the context of illicit commercial collaboration and their substantial connec- tions and interactions. However, the counterfeit alcohol market is significantly different to a drug market in several ways. Most importantly, drugs are a proscribed product and so any market should be hidden and protected, where possible, from the actions of law enforcement. Counterfeit alcohol must be sold as being something that it is not – a branded product – when it is usually of an inferior quality and not produced by the brand owner. Counterfeit alcohol is placed within a legitimate market and so rather than existing in a clandestine market, counterfeit alcohol has to be placed for sale in an open and legitimate market. These market dynamics imply a need for ‘enterprise’ by those involved. That is, the collaborating actors require an understanding of, and ability to react to, processes of supply, demand, regulation and competition for their activities to be financially rewarding (see [15]). Structure and enterprise are central to the middle market of counterfeit alcohol distribution. ‘C’ is for commercial collaboration: enterprise and structure in... 551 The counterfeit alcohol in the cases we analysed was thought by the regulator to have been imported ‘industrial’ or imported distilled alcohol but labelled as ‘industrial alcohol’ as a means of duty evasion. At a makeshift bottling plant, the alcohol was bottled into counterfeit bottles, labels and cap closures applied along with fake boxes for the next part of the fraud, the placing of the counterfeit product in the market. Collaborating for commercial gain in the middle market In their analysis of drug markets and the involved actors, Pearson and Hobbs [2]note that ‘it is a mistake to see these organised crime networks as unified entities – monolithic and hierarchical’. Instead, the approach is to ask questions on how the crime is organised, under which conditions, and how the illicit product is distributed into the market. Paoli [17] details the argument against viewing organised crime as solely hierarchical and van Duyne [18] argues that serious crimes are organised: B…to keep the crime trade going there has to be a continuous process of organizing: identifiable crime-organizations may therefore well be considered the outcome of organizing one's forbidden trade and industry, an outcome which is often not even intended or which consists of a post hoc legal construction by the police or prosecutor.^ ([18]:203 emphasis in original) Understanding the organisation of crime moves us away from constructing organised crime as hierarchical trans-national crime groups. This framework for understanding the counterfeit alcohol market provides us with a structure that views the actors as being linked together in a loose network with some degree of adaptability and transience. Bright and Delaney [19] in exploring drug markets notes the need for flexibility to avoid detection and ensure secrecy and that this militates against a hierarchical structure. Our analysis of the two sets of case files demonstrated some links between the two cases (i.e. the cases do not represent discrete, independent criminal enterprise). Thus, those operating in the middle market are essentially partnerships and transactions between independent ‘traders’ and ‘brokers’. In line with empirical research into ‘organised crime’ [17, 20, 21], this moves us away from attempting to understand the organisation of the counterfeit alcohol market as being the outcome of a highly structured, monolithic trans-national organised crime group. There was no evidence in the case files that the ‘distribution’ actors were located close to the production site or were involved in the transportation of the alcohol into the jurisdiction within which they were operating. Thus, a more sophisticated analysis leads us to recognise the fluid and dynamic collaborative activities of multiple actors and networks variously structured throughout the middle market, connected through their shared goals of profit generation. These actors are concerned with their immediate activities, rather than within the functioning of the whole enterprise. However, the case file data indicate that a small number of ‘hidden’ actors that financed the distribution, For a typology of hierarchical organised crime see for example UNODC [16] 552 Spencer J. et al. did connect either side of the middle-market – i.e. post-production and pre-sale. These actors are central nodes in the collaboration [10]. To better understand the inherent illicit enterprise, we must seek to empirically validate the ‘actual decision-making processes engaged by illicit traders’ ([8]: 218) and how such decisions are influenced by market structures. More specifically, ‘…an understanding of different market structures is a necessary precursor to explaining how different traders apprehend the constraints and opportunities provided in these markets and thus why certain markets contract whilst others expand’ ([8]: 219). Our case file analysis gives us insight into the market location of the offenders and the qualitative differences between drug markets and counterfeit alcohol markets, and we are able to gain some, albeit limited, understanding of the entrepreneurial decisions made by the ‘illicit traders’. Therefore, understanding where the middle point of a market is located can be critical to understanding the activities of key actors within the market for counterfeit alcohol and the structure of the market for the illicit product. There is no doubt that the placing of counterfeit alcohol in the market is highly organised, it has to be in order to be successful. It is achieved not by the traditionally constructed hierarchical organised crime groups but by a network of actors collaborat- ing to achieve the aim of distributing the counterfeit product. A crime scripts analysis of this case (see [9]) details the actions and resources required to organise the middle market distribution of the counterfeit vodka. The offending is detailed by scenes which details the behaviours in each scene. The scripts analysis also identifies the key actors and how they are connected across the criminal enterprise. This approach is reinforced by the use of a social network analysis that identifies the integral actors to each of the scenes in the script analysis. This linking of actors within a network and within scenes provides a detailed analysis of the actions and relations between actors and between scenes and actors and between actors, scenes and product to provide a multi-layered analysis. This analysis raises critical questions in relation to the organisation of food frauds and food crimes. It is to this that we now turn. The organisation of food and drink frauds: theoretical and practical implications of middle market dynamics Flexibility and adaptation in criminal networks ‘The most useful way to characterise serious crime networks operating within middle market drug distribution is as small, constantly mutating, flexible systems’ ([22]: 67) The notion of the hierarchical organised crime group, whilst undoubtedly existing in certain locations, is not ubiquitous and much serious crime is organised in more fluid and flexible formats. The case studies presented here support Hobbs’ argument as there is a change of approach once the ‘North Case’ distribution route is discovered that demonstrates flexibility and adaptation. The networks in both ‘operations’ are relatively small and so might be characterised as a serious crime network. The crime group does ‘C’ is for commercial collaboration: enterprise and structure in... 553 not need the rigidity of the hierarchy with chains of command and the organisational problems that accompany a ‘command structure’. The network is comprised of actors who have specific roles in the commission of the offence to ensure the success of the operation. In the Delivery Case, for example, David has to organise the logistics of moving the counterfeit alcohol from one jurisdiction to another, that is his function, and once achieved he has nothing to do with the lower level distribution in Jurisdiction B. David is recruited, or given a more prominent role in the network once the North route has been discovered. This is a flexible and adaptive network. There is no evidence of hierarchy and no evidence of longevity in the network. David owns a logistics company and is a legitimate actor within the logistics market; his knowledge of the structure of logistics and his legitimacy in the marketplace makes him a valuable asset. We might anticipate that the distribution of counterfeit alcohol, as its illicit it is similar to drugs, will be undertaken by organised crime constructed in a traditional form as it is a profitable illicit product. If we do not find traditionally constructed organised crime groups in drug and counterfeit alcohol markets why is there anticipation that they are active in other areas of food industry? In the UK the Horsemeat incident of 2013 resulted in the Elliott Review [23, 24] and the final report stated: B…the serious end of food fraud is organised crime, and the profits can be substantial. The recommendations in this report will not stop food crime, but are intended to make it much more difficult for criminals to operate in the UK.^ (Elliott [24]:12) It is unclear where the ‘serious end of food fraud’ is located and in which sectors the ‘criminals’ are operating. Perhaps the horsemeat incident of 2013 is considered the ‘serious end’ and certain journalists suggested that it was the responsibility of organised crime: BExperts within the horse slaughter industry have told the Observer there is evidence that both Polish and Italian mafia gangs are running multimillion- pound scams to substitute horsemeat for beef during food production.^ [25] Yet these ‘gangs’ have never been identified and the processing of the prosecutions for the horsemeat episode in British food in 2013 suggests that it was a series of actions that occurred internally to the European meat trade. The inference in the Elliott Review [24] is that there are organised criminals focused on food fraud yet the report has no detailed knowledge of how such crime groups operate, are structured or where their activities are focused. However, the Report allocates a considerable discussion as to how food fraud can be accommodated within the overall strategic response to serious and organised crime by the National Crime Agency [24]. One of the key recommen- dations in the Review was the setting up of a National Food Crime Unit (NFCU) to be located within the Food Standards Agency (FSA). The NFCU was established in 2015 and has no operational or prosecutorial powers and essentially acts as an ‘intelligence The Horsemeat Incident 2013 occurred when horsemeat was found in a number of processed meat products, for example beef burgers. These products were sold as containing 100% beef. 554 Spencer J. et al. hub’ in addressing issues of food crime and fraud. The aim of the NFCU is to ‘identify serious criminal threats to UK food and drink, focusing our resources in the right places and working with the right partners to get the best results’ (FSA 2016:3). The NFCU’s document that encourages the food industry to collaborate to tackle food crime notes that: ‘Threats exist at a number of levels: from random acts of dishonesty by individual ‘rogues’ to organised fraudulent activity by groups who knowingly set out to deceive consumers or expose them to harm.’ (FSA [26]:7) The main focus is on the activities of certain actors who are either ‘rogues’ or are more focused in organising frauds, but these actors are not constructed as organised criminals. The same documents goes onto suggest that: ‘[t]he barriers to gaining a foothold in the food economy make food a challenging choice for career criminals, but the threat from more organised crime is a real one.^ ([27]:7). Indicating that they do not view the food industry as a target for organised crime due to the problems with gaining an accepted role within the food economy. In certain sectors of the academic literature the problem of food fraud is seen to be worldwide and those responsible are ‘fraudsters’ (see for example [28]:9403). These fraudsters are not identified and are presented as having as their main aim the adulteration of food and that they are globally connected. There is evidence of cross- jurisdictional collaboration but it occurs only where it contributes to the execution of the offence, in other words where it ‘fits’ the script analysis of the case. There are Bmutating and flexible^ networks that can be accommodated easily in a crime script analysis [9]. A recent case where cannabis resin was packed into orange juice cartons was headlined as being the use of the international food supply chain to smuggle drugs. A reading of the media reports on the case suggest that the resin was concealed into the orange juice shipment as a form of concealment and a logistical requirement to move the resin from the north of Ireland to the UK [29]. The BBC headline suggests that this is ‘an organised crime gang’ [29]. The moving of the resin is organised but probably much more to the Hobbs’ description than that of a traditional ‘mafia style’ structured gang. There is nothing remarkable about the food distribution chain being used, it is available and an easy means of concealing illicit product amongst legitimate product, such concealment could easily occur in other distribution chains. Importantly it is apparent that the organisation of frauds in the food and drink industry are more commonly located within the industry networks rather than being the activity of externally located criminals who decide to exploit the opportunities for fraud within the food and drink industry. Within the food and drink industry networks of business, processing, production and distribution exist and this provides the opportunity for fraudulent activity including adulteration and distribution [30]. Once we move away from the worn clichés of organised crime and the notion of international networks co-ordinating food and drink frauds to an understanding based on a script and network analysis the regulatory and policy responses become much less opaque. ‘C’ is for commercial collaboration: enterprise and structure in... 555 Entrepreneurial fraud: criminal action in food and drink markets There are significant differences between many of the food fraud incidents and the distribution of counterfeit vodka. First, counterfeit vodka is very much a fake product that is produced and distributed in a clandestine manner. Many incidents of food adulteration are perpetrated within the manufacturing process and are not so clandestine as the distribution of counterfeit alcohol. This means that the organisation of the two activities is different, however, the analysis of the case files suggests that counterfeit vodka is organised by co-operating small networks. Research on food fraud suggests a similar structure but the difference being that the networks are located in the production process, so they are internal to the food industry. The networks in the production and distribution of counterfeit alcohol are located externally to the mainstream production of alcohol. Second, counterfeit alcohol relies much more on the organisation of clandestine activities within legitimate business practices used as a cover for criminal action. Work by Dorn and South [31] exploring the structure of drug markets identified seven different types of market and the one that is most relevant to the discussion here is that of a Business Sideliners. They define these operators as being: ‘…licit economic units which get involved in drug distribution on the side. Examples include doctors who combine generous prescribing with collection of a fee for services; import-export agencies which provide a cover for shipment of drugs; and businesses with social and economic ties to areas of illicit drug production. As can be seen from this description, Sideliners can operate near the upper reaches of the distribution system, and/or in the middle: their common feature is their basis in a licit business enterprise. This has advantages in terms of the managers' experience of entrepreneurial activity, access to capital, ability to funnel cash through otherwise legitimate channels, public respectability, lack of police record, etc.’ ([31]:178) In the case studies presented here we see evidence of business sideliners. The logistics company run by David is a legitimate company providing a ‘cover for the shipment’ of the counterfeit vodka. Food Wholesalers Ltd. was the destination for the counterfeit vodka but was a legitimate food wholesalers company. The company had a legitimate means of onward distribution, or access to onward distributors willing to pay for the counterfeit product as part of their own business enterprise. As Dorn and South [31] note there is a legitimate access to capital and experience of entrepreneurial activity within the relevant field of entrepreneurial activity. This would seem to securely locate both Food Wholesalers Ltd. and David at the middle market point, or at least within the ‘upper reaches of the distribution system’ [31]. An important element in understanding market structures is to recognise that not all markets in counterfeit vodka will be structured in the same way, and that markets in other counterfeit alcohols may well be different. So, for example the market structure of counterfeit alcohol will be a different niche to say wine that is of a lesser standard than it claims on the bottle. The process of sourcing inferior wine, obtaining the bottles, bottling and distribution we can expect to be different to counterfeit vodka for a number of reasons. One primary reason is that counterfeit vodka and wine are most likely 556 Spencer J. et al. sourced in different geographic locations. However, there appears to be a merging of the products into distribution networks once we investigate the middle market in counterfeit and sub-standard alcohol. We can also anticipate that the structure at each level of the market will be different and operated by different actors: ‘Recent studies of illicit drug markets reveal that a range of network structures exist …. small flexible groups operating at the mid-level of local and regional trade, and freelancing individuals hired for courier activity at the retail level’ ([32]:273) The structure of the higher levels of counterfeit vodka markets are unknown but our case studies suggest that what we are analyzing is the mid-level with small flexible groups. The distribution at the lower level is very possibly undertaken by the freelancing couriers. The middle market entrepreneurs in these two case studies are legitimate actors utilizing their resources - financial, human and knowledge - to organize the movement and distribution of the counterfeit product. These actors are far removed from the mafia style organized crime groups of popular legend and media construction. It may be within the network described in the case study that Stephen is the bridging node between the next higher level of market and the middle market as managed by the owners of Food Wholesalers Ltd. Critically, the research reported here indicates that the organization of the trade in counterfeit vodka is structured through market interactions rather than organized by hierarchical organized crime groups. The market interactions occur be- tween legitimate market actors; Morselli and Giguere [33] argue that understanding the role of legitimate actors in criminal networks is challenging. In the data presented here the roles of both David and Stephen are pivotal to the distribution enterprise. The form of market organization is interesting and tells us something about the activities of the criminal network. The second case study reported here demonstrated open and relatively simple middle market actions in moving counterfeit vodka. The logistics of moving the counterfeit vodka between jurisdictions was unsophisticated and continued until a load was intercepted. As noted earlier there was a certain rapidity in how the network ‘mutated’ in order to facilitate the movement of the vodka more clandestinely by increasing the level of sophistication. This ‘mutation’ of the network has an impact on the structure of the market and also is indicative of the interaction between law enforcement activity and criminal enterprise. Making life difficult for law enforcement As Dorn and South [31] argue, the activities of law enforcement have an influence the structure of the market. ‘New emphases in law enforcement, such as covert operations and surveillance of cashflow, tend to structure the market into a series of smaller and flexible (e.g. multicommodity) enterprises’ ([31]:176) In a form of ‘spinning’ the information to fit with the legends of organized crime we encounter news reports that reinforce the stereotypes of serious criminals as structured gangs. ‘C’ is for commercial collaboration: enterprise and structure in... 557 BAn undercover investigation by Channel 5 infiltrated the crime gangs behind the trade and found one factory in east London producing 7,000 fake bottles of Smirnoff vodka a day.’ (Daily Mail 10.07.[34]) But as Dorn and South [31]note, ‘[m]odern law enforcement may, in combination with the mass media, promul- gate the myth of the monopolistic drug distribution enterprise, but it actually discourages such a market structure’ ([31]:176) . The idea of a crime gang organizing the complete distribution chain of coun- terfeit alcohol, from production to street distribution, is not supported by the research and analysis of the data reported here. The data suggests that the organisation of the distribution is fractured, or split into a number of discrete tasks. The completion of a task by actors allows for the next task to be undertaken and at the same time the actors responsible for the completion of the task in many instances are different. In the case study David organises the logistical pathways and has no other role in the operation. The structure of the counterfeit alcohol market is relatively simple. The product is produced in one jurisdiction in large quantities. It is possible that the production of the base alcohol is legitimate, for example alcohol produced for industrial processes. The purchasing of the industrial alcohol in the production jurisdiction may also be legiti- mate. It is the movement of the alcohol and its diversion into the legitimate alcohol market as a branded product that is the fraud. The producers need to move the product into the legitimate market, or the purchasers are buying the alcohol with the intent to use it fraudulently. The alcohol once acquired need to be sold onto higher level distributors who can ‘broker’ the product into the middle market. The entry to the middle market allows for large quantities to be sold onto those who can bottle and package the alcohol as a branded product, and so the industrial alcohol now become ‘counterfeit’. Once at this level the product is moved to distribution points where it can be sold on to lower market actors with networks that enable them to sell the product easily and in a covert way. This model of distribution, from production to lower level distribution, accounts for the spread of the fake product across a significant number of geographical locations. This market structure also appears to be relatively efficient; it allows for market distribution and penetration, anonymity of purchasers and sellers at the lower level, and is adaptive to shocks, for example the seizure of a consignment. Understanding the more fractured structure of the counterfeit market and its different levels provides a window onto how the counterfeit operations can remain hidden. A number of transactions in the supply chain, even though conducted with criminal knowledge and intent, are legitimate transactions and therefore not of interest to law enforcement. For example the production of industrial alcohol is a legitimate process, the sale of such alcohol is also legitimate and so of no interest. These legitimate transactions may be the foundation of the counterfeit operation. Once the consignment is split and diverted into a number of different locations, and with an organisation of actors that are task orientated, many having legitimate roles, makes the job of law enforcement extremely challenging. In order to meet this challenge, it may be, as Dorn 558 Spencer J. et al. and South [31] argue, it is the operational activities of law enforcement that result in the structure and illicit activities adapting to remain out of their sight. Conclusion There is a phenomenon of counterfeit alcohol. The figures from Operation Opson V suggest increased seizures. The case study of Greece reported in the Operation Opson Report describes a counterfeit vodka operation as follows: B… Police dismantled two illicit production sites of famous brands of alcohol (mainly whisky and vodka). … The fake bottles were sold in night clubs and bars in the Attica region. … Substandard alcohol was produced in clandestine labo- ratories. Genuine empty bottles were smuggled from Bulgaria. Police also dis- covered a second organised criminal network led by the deputy director of a chain of liquor stores. Both criminal groups developed a business partnership to sell the illicit bottles.^ ([35]:21emphasis added) This report suggests that the actors, or some of the actors, were legitimate operators within the alcoholic drink sector, that the distribution network was across a region and possibly utilising networks developed from the ‘chain of liquor stores’. There is also a development of the criminal enterprise between the two levels of operation. The seizures were made after an informant provided information to law enforcement. This suggests that there is a difficulty in discovering these cases other than by intelligence or by good fortune. These networks appear too efficient and successful and not easily detected. The difficulties in detecting such networks might be due to the market structures. The markets encourage fragmentation and at the same time co-operation between networks. It may also be that the ‘middle market’ is a critical point of distribution and discovering its location provides a way into revealing the associated distribution networks. The research presented here, and the subsequent discussion, reiterate the theoretical discussions by Paoli [17]. Paoli argues that the supply of illegal commodities takes place in a ‘disorganised way due to the constraints of product illegality’ ([17]: 52) and if we combine this with Dorn and South’s[31] analysis of how the interventions of law enforcement shape market conditions it becomes visible that the counterfeit vodka market is disorganised, adaptive and flexible to changing trading conditions and law enforcement activity. One speculative finding from the research reported here is that the dynamic between law enforcement and the market, which takes place to apprehend criminals, may significantly contribute to the difficulties they experience in being able to effectively close down distribution chains of counterfeit vodka. Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and repro- duction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. ‘C’ is for commercial collaboration: enterprise and structure in... 559 References 1. Pearson, G., & Hobbs, D. (2004). ‘E’ is for enterprise: Middle level drug markets in ecstasy and stimulants. Addiction Research & Theory, 12(6), 565–576. 2. Pearson, G. & Hobbs, D. (2001). 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‘C’ is for commercial collaboration: enterprise and structure in the ‘middle market’ of counterfeit alcohol distribution

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Crime Law Soc Change (2018) 70:543–560 https://doi.org/10.1007/s10611-018-9781-z ‘C’ is for commercial collaboration: enterprise and structure in the ‘middle market’ of counterfeit alcohol distribution 1 1 2 Jon Spencer & Nicholas Lord & Katie Benson & Elisa Bellotti Published online: 1 June 2018 The Author(s) 2018 Abstract This article utilising the work of Pearson and Hobbs [1] defines the middle market in counterfeit alcohol. Drugs markets have a resemblance to counterfeit alcohol markets in as much that they share the illicit nature of the product and the need to distribute the product at the ‘street’ level. Drawing on two case studies taken from a European regulator the article details the dynamics of the market, the enterprise actions of the actors and how law enforcement responses can, in certain circumstances, make the task of the distributors easier. The traditional notions of organised crime are challenged and organisation of counterfeit alcohol markets is viewed as being reliant upon those who have legitimate access to the market and are able to develop networks of commercial collaborators who by their position in the legitimate market are able to conceal their illicit actions. * Jon Spencer jon.spencer@manchester.ac.uk Nicholas Lord Nicholas.lord@manchester.ac.uk Katie Benson k.benson1@lancaster.ac.uk Elisa Bellotti elisa.bellotti@manchester.ac.uk Centre for Criminology and Criminal Justice, School of Law, University of Manchester, Manchester, UK Law School, Lancaster University, Lancaster, UK Mitchell Centre for Social Network Analysis, School of Social Science, University of Manchester, Manchester, UK 544 Spencer J. et al. Introduction Utilising the theoretical framework of Pearson and Hobbs [1], this article defines the middle market in counterfeit alcohol distribution and its associated ‘enter- prise’. Pearson and Hobbs [1, 2] discuss the problems in defining the ‘middle market’ of criminal enterprise, arguing that it is fluid and dependent on the range of actors and types of networks. They also describe how actors can acquire different roles within different strata of the market. We draw upon these insights to analyse entrepreneurial activities in the middle market of counterfeit alcohol distribution. Additionally, Shen et al. [3] provide an analysis of the structure of the counterfeit tobacco market by identifying the ‘key actors’ in the production and distribution of counterfeit tobacco. This is an important detailing of the structure of the counterfeit tobacco market and has striking similarities with the counterfeit alcohol market in terms of the role of actors. However, the utilisation of the Pearson and Hobbs analysis provides a good comparison because of the focus on dynamics of market structure and distribution. There is a considerable literature on illicit markets and their organisation see for example: Pearson and Hobbs [2], and Moreselli and Roy [4], which both address drug markets. Hornsby and Hobbs [5] analyse the structure and market organisation of the smuggled cigarette market. Van Duyne [6] develops the argument that business crime should be treated as an ‘organised crime’. Recently the journal Trends in Organised Crime published a special edition on illegal markets in the UK and von Lampe and Antonopolous [7] provide a detailed overview of the contemporary research trajecto- ries. The important work of Edwards and Gill on ‘Crime as Enterprise’ [8]is used here to develop an analysis of the entrepreneurial approach to market structure. Edwards and Gill [8]notethat: BA key challenge for developing our understanding of illicit enterprise is to pursue a more qualitative interpretation of the actual decision-making processes engaged in by illicit traders^ ([8]:218). This article engages with this challenge by analysing the market dynamics and locating the counterfeit alcohol markets within a broader context of serious crime and its organisation. The relative obscurity of counterfeit alcohol in the official discourse and within the academic research suggests that the everyday visibility of legitimate alcohol is the cloak behind which counterfeit alcohol hides. Therefore, an understand- ing of market structures that aid distribution is one means of exposing counterfeit alcohol from its hiding place. Why are we concerned with locating the middle market? A greater understanding of the market structure assists us in understanding the trading conditions and relationships [8]. It also helps us to understand the dynamic between different market elements, for example there is a production market in counterfeit alcohol and a distribution market and there is a different middle market in relation to each of these activities that will include a different range of actors, although some actors could be in both markets. However, these markets may be located in different countries and it is more likely that there is little crossover in actors between production and distribution. Understanding the structure of the distribution market provides regulators with market based ‘C’ is for commercial collaboration: enterprise and structure in... 545 knowledge that can assist in targeting investigative resources and define and support an intelligence gathering strategy. Counterfeit alcohol is alcohol that is sold as a branded product when it is not that product but an inferior one. Counterfeit alcohol is presented in counterfeit packaging to deceive the buyer into believing it to be the legitimate brand. Other types of illicit alcohol would include home distilled spirits and non-duty, or smuggled, alcohol; this paper is only concerned with counterfeit alcohol. The arguments presented here are based on an integrated script and social network analysis of the case files of a European regulator that concerned two cases of the cross-jurisdictional distribution of counterfeit alcohol. The case files raise interesting questions concerning the nature and structure of the ‘illicit’ market and the relationship between different actors involved in the distribution at the middle market level, that is, the ‘enterprise’ of counterfeit alcohol distribution and the underlying commercial collaboration. An understanding of how the processes of distributing counterfeit alcohol are organised and the necessary substantial relations of connection would ideally be informed through intensive, qualitative interviews with those involved in the distribu- tion market but the on-going, ‘live’ nature of the cases restricted this kind of access. Additionally, the financial and time constraints of the research permitted only an in- depth analysis of the full case files alongside interviews with the regulators. To build on our earlier analysis of counterfeit alcohol distribution [9, 10], in this article we seek, in line with the model of middle markets developed by Pearson and Hobbs [2], to construct an analysis of the market structure of counterfeit alcohol distribution and its associated entrepreneurial dynamics. In doing this, we integrate a market structure analysis (i.e. nature and functioning of the counterfeit alcohol market) with an understanding of micro-level actor dynamics (i.e. social/criminal networks and processes of crime commission). First, the paper addresses the issue of defining the middle market and then argues for the necessity of understanding illicit enterprise at this structural level. Second, we present two inter-linked case studies from the case files and a discussion of what these case studies tell us in relation to the distribution of counterfeit alcohol. Here, we consider the organised activities of those actors involved in the processes of distribution and movement of the illicit product at the middle market level. The final section of the paper explores how an understanding of the dynamics between the middle market and law enforcement contributes to the problems of detecting counterfeit alcohol distribution. Distributing counterfeit alcohols: the case studies In this section we outline the nature of the phenomenon of the distribution of counter- feit alcohol. We present central themes from the script [9] and network [10]analysis to provide concrete insights into the structural aspects of the market, linking these conditions and relations to the actual commission of the distribution by the identified network of collaborating actors. We first present a descriptive account of the cases before going on to connect enterprise and structure in the following section to provide insights into the functioning of the ‘middle market’. For further details on methods and data see Lord et al. [9] and Bellotti et al. [10]. 546 Spencer J. et al. The delivery case The ‘Delivery Case’ spans two jurisdictions that are adjacent. The possibility of counterfeit vodka came to the attention of regulators in Jurisdiction B and a raid on a nightclub indicated that counterfeit vodka was for sale; the vodka was a common brand. Empty bottles, caps and packaging were found at the premises. Investigations into the origin of the vodka revealed that the product was sourced from Jurisdiction A and the relevant regulator was contacted. The case files of the regulator in Jurisdiction A reveal a network of distribution that relies on a number of actors each with their own skills, knowledge and contacts. David owns a small delivery and courier company, ‘Delivery Ltd’, located in Jurisdiction A. He has numerous legitimate delivery and logistic contracts and delivers across both jurisdictions. The files indicate that David receives or arranges for the collection/delivery of the counterfeit vodka to a storage premises that he either owns or has access to, however, the location of these premises and the origins of the counterfeit vodka prior to David receiving it are unknown. David receives the counterfeit vodka bottled and labelled, so ready for distribution. He arranges for the product to be transported from Jurisdiction A to Jurisdiction B using legitimate logistical systems, Parcel Network, Crossland, Freight Inc. and Bard Transport. The description of the counterfeit vodka is falsified and the consignment wrapped in opaque plastic. David arranges for the delivery of the counterfeit vodka to the logistics hub of Parcel Network, so the storage location that he collects it from remains undisclosed. David has previ- ously arranged for consignments to the same region delivered to a range of premises. Once David has delivered the product to the logistics hub his role in the operation is over. As logistic companies have no responsibility to ensure the veracity of the consignment description the embedding of the counterfeit product into the legitimate logistic system is relatively easy and with a low risk of apprehension. David had a legitimate relationship with the logistic company as he has sent many legitimate consignments, so he was a bona fide customer. The counterfeit vodka, whilst with the legitimate logistics company, is not in the control of the distributors; to regain control of the counterfeit product it is delivered to MB Testing, which is not the destination. When the load arrives at MB Testing an employee asks for it to be forwarded to premises around the corner: Food Wholesalers Ltd. owned by Paul. This tactic disguises the actual delivery address as the delivery location is not the final delivery address, thus distancing the counterfeit load from the destination. Once at the destination the counterfeit consignment is broken down into smaller consignments and distributed, however, the case files contain only scant information on the lower or street level distribution. David does have some cross- jurisdictional contacts with John and Andrew (Jurisdiction B) which are concerned with delivery arrangements. In Jurisdiction A there is contact with Stephen and Sean who are brothers, and they have involvement in trading in sub-standard wine which David has been involved in the delivering. There is thought to be a link between Paul, the owner of Food Wholesalers Ltd. and John; this being the case there is a link across the jurisdictions to Stephen (Fig. 1). It was agreed by the authors with the providers of the data that the jurisdictions and the identity of the Regulatory Authority would be anonymised to ensure confidentiality and operational integrity. ‘C’ is for commercial collaboration: enterprise and structure in... 547 Fig. 1 Delivery case network The north case The ‘North Case’ occurs prior to the ‘Delivery Case’ and is detected when a consign- ment of counterfeit vodka is seized by customs in Jurisdiction B. The destination of the counterfeit vodka is the same as in the ‘Delivery Case’. However, David is not involved in the case. Once again legitimate logistic networks are used to move the counterfeit 548 Spencer J. et al. vodka across jurisdictional boundaries. In this case, the arrangement is made by a third party, James, who instructs a logistics broker to move an assignment of bottled water. This shipping/logistics company sells the contract forward stripping out their profit as they go. This happens on three occasions before the contract is purchased by an individual haulier, Jim’s Trucks, who collects the load and transports it. On crossing the border, the haulier is stopped and the load searched and over 17,000 l of counterfeit alcohol seized. This was a relatively simple operation and the final delivery address was not concealed as in the ‘Delivery Case’ and the ‘North Case’ does not appear to require the same level of organisation. It appears that the seizure of the load in the ‘North Case’ resulted in the organisation of the movement of the counterfeit vodka as detailed in the ‘Delivery Case’ which is a more sophisticated approach to the movement of the counterfeit vodka. What is striking is the speed with which the second delivery process was initiated and established. This is reflected by the adaptability of the network to restructure itself to ensure the delivery of the counterfeit product. The speed of the organisation also suggests that the movement of counterfeit product is a repetitive action and not simply a one-off opportunistic crime (Fig. 2). Understanding the middle market in counterfeit alcohol What do these two cases tell us about the market in counterfeit alcohol? There is a lively market for the product. This is not surprising given the increase in seizures reported in Operation OPSON V where during the operation over 385,000 l of counterfeit alcohol was seized ([11]:13) and there are numerous press reports, espe- cially in 2012 and 2013 claiming the dangers of counterfeit alcohol (see for example: [12, 13]). However, sizing the market is problematic and McKee et al. ([14]: 10) note that ‘the scale and nature of illegal alcohol production and sale are impossible to ascertain with certainty, but the UK customs authorities believe the problem is increas- ing and, in association with the UK Border Agency, have recently updated their strategy to tackle it’. As counterfeit alcohol imitates the product that it is faking, the counterfeit alcohol is not immediately obvious: BMany are similar in composition to the products they imitate, and the major risk to health probably comes from excessive consumption of ethanol because of the cheap price. It is impossible to tell without testing, however, which of these products contain other potentially toxic contaminants.^ (McKee et al. 2012: 10) The key point is that there is an active market and to sustain and expand it will require a consistent supply of the illicit product. In this way, the counterfeit alcohol market has some similarities with the illicit drug market (see [2]). Ensuring supply is a critical entrepreneurial function if the profit is to be taken from the market. One problem for the counterfeit alcohol entrepreneur is that a considerable amount of counterfeit alcohol is Operation OPSON is a Europol INTERPOL joint operation targeting fake and substandard food and beverages. ‘C’ is for commercial collaboration: enterprise and structure in... 549 Fig. 2 North case network transported between different jurisdictions and this has to be done, as illustrated in the case studies, by disguising the product as something else. The clandestine movement requires knowledge, resources and organisation, again similar to the movement of drugs, that takes places in the middle market of the enterprise. Nature and dynamics of the middle market The case studies suggest that the market may also be organised like a drug market. In both investigations, there was no indication of how the counterfeit vodka was distributed at the street level. However, there existed a street form of distribution as the counterfeit product was discovered in night clubs and in a series of raids the fake vodka was found in other small retail outlets across a significant geographical area. The case files chart the movement of the counterfeit vodka from the post-production phase to the distribution phase, and the focus of the case files is at a middle level in the market. Once the counterfeit alcohol arrives at the destination it is then broken down into smaller consignments for distribution. A 20,000-l consignment might be broken down into small 12 case lots (144 l) for sale in pubs, clubs and small retail outlets. It is these types of outlet where the fake vodka was found when such premises were raided. The case files also suggest a significant regional market penetration and for this to be achieved it would be necessary to break the initial consignment down into smaller lots. Therefore, the analysis of the case files provides a window onto a middle market operation, there is no detail of how the counterfeit product is sold on or distributed at the ‘street level’. What the case files illustrate is the movement of the counterfeit vodka from the producers or those in close contact with the producers to those who organise the distribution of the illicit product. These are two different networks with a ‘bridging node’ that is able to facilitate the purchase and movement of the fake vodka from one network to another. The middle market distribution network is relatively small, enlarged out of necessity once the strategy for transportation in the North Case had been discovered. This 550 Spencer J. et al. enlargement of the network to conceal the movement of the counterfeit vodka brings associated risks, simply by the need to increase the size of the network increases the risk of detection. However, the Delivery Case network remains relatively compact with Stephen acting as the bridging node between the networks. Stephen was connected to the brothers John and Andrew who, the case files indicate, are linked to Paul the owner of Food Wholesalers Ltd., the final point of delivery for the counterfeit vodka in both cases. Structure and enterprise in middle market dynamics The work of Pearson and Hobbs [1, 2] is concerned with drug markets where they define the typical form of criminal organisation concerning the middle market as involving criminal networks that are ‘typically small, with a small number of suppliers and customers…They are more usefully understood as networks or partnerships of independent traders or brokers’ ([2]:vi). Thus, in terms of structure,they propose a four-tier level of classification; importers, wholesalers, middle market drug brokers and retail level dealers [2]. This four-tier system does not imply B…that there are always and only four links in the supply chain, since some individuals occupy dual roles (e.g. import and wholesale), while middle market drug brokers are sometimes known to collect and import drugs from wholesale storage systems in continental Europe. At other times, there are numerous linkages and intermediaries. However, the four-tier classification is a simple and usable definition of distinctive market roles and functions.^ ([2]:vi) The counterfeit alcohol case files indicate a potentially similar classification except that ‘producer’ could replace the ‘importer’ classification if the counterfeit alcohol is being produced (distilled in the case of spirits) in the same country or jurisdiction as the wholesale activity. The case files provide no clear indication of where the counterfeit product was produced but the regulator’s provisional analysis indicates that it was imported to the jurisdiction for bottling and onward transportation. In terms of the middle-market actors, there are clear similarities in the structural relations of the criminal networks. By ‘market structure’ then, we are referring to the structural actor relations in the context of illicit commercial collaboration and their substantial connec- tions and interactions. However, the counterfeit alcohol market is significantly different to a drug market in several ways. Most importantly, drugs are a proscribed product and so any market should be hidden and protected, where possible, from the actions of law enforcement. Counterfeit alcohol must be sold as being something that it is not – a branded product – when it is usually of an inferior quality and not produced by the brand owner. Counterfeit alcohol is placed within a legitimate market and so rather than existing in a clandestine market, counterfeit alcohol has to be placed for sale in an open and legitimate market. These market dynamics imply a need for ‘enterprise’ by those involved. That is, the collaborating actors require an understanding of, and ability to react to, processes of supply, demand, regulation and competition for their activities to be financially rewarding (see [15]). Structure and enterprise are central to the middle market of counterfeit alcohol distribution. ‘C’ is for commercial collaboration: enterprise and structure in... 551 The counterfeit alcohol in the cases we analysed was thought by the regulator to have been imported ‘industrial’ or imported distilled alcohol but labelled as ‘industrial alcohol’ as a means of duty evasion. At a makeshift bottling plant, the alcohol was bottled into counterfeit bottles, labels and cap closures applied along with fake boxes for the next part of the fraud, the placing of the counterfeit product in the market. Collaborating for commercial gain in the middle market In their analysis of drug markets and the involved actors, Pearson and Hobbs [2]note that ‘it is a mistake to see these organised crime networks as unified entities – monolithic and hierarchical’. Instead, the approach is to ask questions on how the crime is organised, under which conditions, and how the illicit product is distributed into the market. Paoli [17] details the argument against viewing organised crime as solely hierarchical and van Duyne [18] argues that serious crimes are organised: B…to keep the crime trade going there has to be a continuous process of organizing: identifiable crime-organizations may therefore well be considered the outcome of organizing one's forbidden trade and industry, an outcome which is often not even intended or which consists of a post hoc legal construction by the police or prosecutor.^ ([18]:203 emphasis in original) Understanding the organisation of crime moves us away from constructing organised crime as hierarchical trans-national crime groups. This framework for understanding the counterfeit alcohol market provides us with a structure that views the actors as being linked together in a loose network with some degree of adaptability and transience. Bright and Delaney [19] in exploring drug markets notes the need for flexibility to avoid detection and ensure secrecy and that this militates against a hierarchical structure. Our analysis of the two sets of case files demonstrated some links between the two cases (i.e. the cases do not represent discrete, independent criminal enterprise). Thus, those operating in the middle market are essentially partnerships and transactions between independent ‘traders’ and ‘brokers’. In line with empirical research into ‘organised crime’ [17, 20, 21], this moves us away from attempting to understand the organisation of the counterfeit alcohol market as being the outcome of a highly structured, monolithic trans-national organised crime group. There was no evidence in the case files that the ‘distribution’ actors were located close to the production site or were involved in the transportation of the alcohol into the jurisdiction within which they were operating. Thus, a more sophisticated analysis leads us to recognise the fluid and dynamic collaborative activities of multiple actors and networks variously structured throughout the middle market, connected through their shared goals of profit generation. These actors are concerned with their immediate activities, rather than within the functioning of the whole enterprise. However, the case file data indicate that a small number of ‘hidden’ actors that financed the distribution, For a typology of hierarchical organised crime see for example UNODC [16] 552 Spencer J. et al. did connect either side of the middle-market – i.e. post-production and pre-sale. These actors are central nodes in the collaboration [10]. To better understand the inherent illicit enterprise, we must seek to empirically validate the ‘actual decision-making processes engaged by illicit traders’ ([8]: 218) and how such decisions are influenced by market structures. More specifically, ‘…an understanding of different market structures is a necessary precursor to explaining how different traders apprehend the constraints and opportunities provided in these markets and thus why certain markets contract whilst others expand’ ([8]: 219). Our case file analysis gives us insight into the market location of the offenders and the qualitative differences between drug markets and counterfeit alcohol markets, and we are able to gain some, albeit limited, understanding of the entrepreneurial decisions made by the ‘illicit traders’. Therefore, understanding where the middle point of a market is located can be critical to understanding the activities of key actors within the market for counterfeit alcohol and the structure of the market for the illicit product. There is no doubt that the placing of counterfeit alcohol in the market is highly organised, it has to be in order to be successful. It is achieved not by the traditionally constructed hierarchical organised crime groups but by a network of actors collaborat- ing to achieve the aim of distributing the counterfeit product. A crime scripts analysis of this case (see [9]) details the actions and resources required to organise the middle market distribution of the counterfeit vodka. The offending is detailed by scenes which details the behaviours in each scene. The scripts analysis also identifies the key actors and how they are connected across the criminal enterprise. This approach is reinforced by the use of a social network analysis that identifies the integral actors to each of the scenes in the script analysis. This linking of actors within a network and within scenes provides a detailed analysis of the actions and relations between actors and between scenes and actors and between actors, scenes and product to provide a multi-layered analysis. This analysis raises critical questions in relation to the organisation of food frauds and food crimes. It is to this that we now turn. The organisation of food and drink frauds: theoretical and practical implications of middle market dynamics Flexibility and adaptation in criminal networks ‘The most useful way to characterise serious crime networks operating within middle market drug distribution is as small, constantly mutating, flexible systems’ ([22]: 67) The notion of the hierarchical organised crime group, whilst undoubtedly existing in certain locations, is not ubiquitous and much serious crime is organised in more fluid and flexible formats. The case studies presented here support Hobbs’ argument as there is a change of approach once the ‘North Case’ distribution route is discovered that demonstrates flexibility and adaptation. The networks in both ‘operations’ are relatively small and so might be characterised as a serious crime network. The crime group does ‘C’ is for commercial collaboration: enterprise and structure in... 553 not need the rigidity of the hierarchy with chains of command and the organisational problems that accompany a ‘command structure’. The network is comprised of actors who have specific roles in the commission of the offence to ensure the success of the operation. In the Delivery Case, for example, David has to organise the logistics of moving the counterfeit alcohol from one jurisdiction to another, that is his function, and once achieved he has nothing to do with the lower level distribution in Jurisdiction B. David is recruited, or given a more prominent role in the network once the North route has been discovered. This is a flexible and adaptive network. There is no evidence of hierarchy and no evidence of longevity in the network. David owns a logistics company and is a legitimate actor within the logistics market; his knowledge of the structure of logistics and his legitimacy in the marketplace makes him a valuable asset. We might anticipate that the distribution of counterfeit alcohol, as its illicit it is similar to drugs, will be undertaken by organised crime constructed in a traditional form as it is a profitable illicit product. If we do not find traditionally constructed organised crime groups in drug and counterfeit alcohol markets why is there anticipation that they are active in other areas of food industry? In the UK the Horsemeat incident of 2013 resulted in the Elliott Review [23, 24] and the final report stated: B…the serious end of food fraud is organised crime, and the profits can be substantial. The recommendations in this report will not stop food crime, but are intended to make it much more difficult for criminals to operate in the UK.^ (Elliott [24]:12) It is unclear where the ‘serious end of food fraud’ is located and in which sectors the ‘criminals’ are operating. Perhaps the horsemeat incident of 2013 is considered the ‘serious end’ and certain journalists suggested that it was the responsibility of organised crime: BExperts within the horse slaughter industry have told the Observer there is evidence that both Polish and Italian mafia gangs are running multimillion- pound scams to substitute horsemeat for beef during food production.^ [25] Yet these ‘gangs’ have never been identified and the processing of the prosecutions for the horsemeat episode in British food in 2013 suggests that it was a series of actions that occurred internally to the European meat trade. The inference in the Elliott Review [24] is that there are organised criminals focused on food fraud yet the report has no detailed knowledge of how such crime groups operate, are structured or where their activities are focused. However, the Report allocates a considerable discussion as to how food fraud can be accommodated within the overall strategic response to serious and organised crime by the National Crime Agency [24]. One of the key recommen- dations in the Review was the setting up of a National Food Crime Unit (NFCU) to be located within the Food Standards Agency (FSA). The NFCU was established in 2015 and has no operational or prosecutorial powers and essentially acts as an ‘intelligence The Horsemeat Incident 2013 occurred when horsemeat was found in a number of processed meat products, for example beef burgers. These products were sold as containing 100% beef. 554 Spencer J. et al. hub’ in addressing issues of food crime and fraud. The aim of the NFCU is to ‘identify serious criminal threats to UK food and drink, focusing our resources in the right places and working with the right partners to get the best results’ (FSA 2016:3). The NFCU’s document that encourages the food industry to collaborate to tackle food crime notes that: ‘Threats exist at a number of levels: from random acts of dishonesty by individual ‘rogues’ to organised fraudulent activity by groups who knowingly set out to deceive consumers or expose them to harm.’ (FSA [26]:7) The main focus is on the activities of certain actors who are either ‘rogues’ or are more focused in organising frauds, but these actors are not constructed as organised criminals. The same documents goes onto suggest that: ‘[t]he barriers to gaining a foothold in the food economy make food a challenging choice for career criminals, but the threat from more organised crime is a real one.^ ([27]:7). Indicating that they do not view the food industry as a target for organised crime due to the problems with gaining an accepted role within the food economy. In certain sectors of the academic literature the problem of food fraud is seen to be worldwide and those responsible are ‘fraudsters’ (see for example [28]:9403). These fraudsters are not identified and are presented as having as their main aim the adulteration of food and that they are globally connected. There is evidence of cross- jurisdictional collaboration but it occurs only where it contributes to the execution of the offence, in other words where it ‘fits’ the script analysis of the case. There are Bmutating and flexible^ networks that can be accommodated easily in a crime script analysis [9]. A recent case where cannabis resin was packed into orange juice cartons was headlined as being the use of the international food supply chain to smuggle drugs. A reading of the media reports on the case suggest that the resin was concealed into the orange juice shipment as a form of concealment and a logistical requirement to move the resin from the north of Ireland to the UK [29]. The BBC headline suggests that this is ‘an organised crime gang’ [29]. The moving of the resin is organised but probably much more to the Hobbs’ description than that of a traditional ‘mafia style’ structured gang. There is nothing remarkable about the food distribution chain being used, it is available and an easy means of concealing illicit product amongst legitimate product, such concealment could easily occur in other distribution chains. Importantly it is apparent that the organisation of frauds in the food and drink industry are more commonly located within the industry networks rather than being the activity of externally located criminals who decide to exploit the opportunities for fraud within the food and drink industry. Within the food and drink industry networks of business, processing, production and distribution exist and this provides the opportunity for fraudulent activity including adulteration and distribution [30]. Once we move away from the worn clichés of organised crime and the notion of international networks co-ordinating food and drink frauds to an understanding based on a script and network analysis the regulatory and policy responses become much less opaque. ‘C’ is for commercial collaboration: enterprise and structure in... 555 Entrepreneurial fraud: criminal action in food and drink markets There are significant differences between many of the food fraud incidents and the distribution of counterfeit vodka. First, counterfeit vodka is very much a fake product that is produced and distributed in a clandestine manner. Many incidents of food adulteration are perpetrated within the manufacturing process and are not so clandestine as the distribution of counterfeit alcohol. This means that the organisation of the two activities is different, however, the analysis of the case files suggests that counterfeit vodka is organised by co-operating small networks. Research on food fraud suggests a similar structure but the difference being that the networks are located in the production process, so they are internal to the food industry. The networks in the production and distribution of counterfeit alcohol are located externally to the mainstream production of alcohol. Second, counterfeit alcohol relies much more on the organisation of clandestine activities within legitimate business practices used as a cover for criminal action. Work by Dorn and South [31] exploring the structure of drug markets identified seven different types of market and the one that is most relevant to the discussion here is that of a Business Sideliners. They define these operators as being: ‘…licit economic units which get involved in drug distribution on the side. Examples include doctors who combine generous prescribing with collection of a fee for services; import-export agencies which provide a cover for shipment of drugs; and businesses with social and economic ties to areas of illicit drug production. As can be seen from this description, Sideliners can operate near the upper reaches of the distribution system, and/or in the middle: their common feature is their basis in a licit business enterprise. This has advantages in terms of the managers' experience of entrepreneurial activity, access to capital, ability to funnel cash through otherwise legitimate channels, public respectability, lack of police record, etc.’ ([31]:178) In the case studies presented here we see evidence of business sideliners. The logistics company run by David is a legitimate company providing a ‘cover for the shipment’ of the counterfeit vodka. Food Wholesalers Ltd. was the destination for the counterfeit vodka but was a legitimate food wholesalers company. The company had a legitimate means of onward distribution, or access to onward distributors willing to pay for the counterfeit product as part of their own business enterprise. As Dorn and South [31] note there is a legitimate access to capital and experience of entrepreneurial activity within the relevant field of entrepreneurial activity. This would seem to securely locate both Food Wholesalers Ltd. and David at the middle market point, or at least within the ‘upper reaches of the distribution system’ [31]. An important element in understanding market structures is to recognise that not all markets in counterfeit vodka will be structured in the same way, and that markets in other counterfeit alcohols may well be different. So, for example the market structure of counterfeit alcohol will be a different niche to say wine that is of a lesser standard than it claims on the bottle. The process of sourcing inferior wine, obtaining the bottles, bottling and distribution we can expect to be different to counterfeit vodka for a number of reasons. One primary reason is that counterfeit vodka and wine are most likely 556 Spencer J. et al. sourced in different geographic locations. However, there appears to be a merging of the products into distribution networks once we investigate the middle market in counterfeit and sub-standard alcohol. We can also anticipate that the structure at each level of the market will be different and operated by different actors: ‘Recent studies of illicit drug markets reveal that a range of network structures exist …. small flexible groups operating at the mid-level of local and regional trade, and freelancing individuals hired for courier activity at the retail level’ ([32]:273) The structure of the higher levels of counterfeit vodka markets are unknown but our case studies suggest that what we are analyzing is the mid-level with small flexible groups. The distribution at the lower level is very possibly undertaken by the freelancing couriers. The middle market entrepreneurs in these two case studies are legitimate actors utilizing their resources - financial, human and knowledge - to organize the movement and distribution of the counterfeit product. These actors are far removed from the mafia style organized crime groups of popular legend and media construction. It may be within the network described in the case study that Stephen is the bridging node between the next higher level of market and the middle market as managed by the owners of Food Wholesalers Ltd. Critically, the research reported here indicates that the organization of the trade in counterfeit vodka is structured through market interactions rather than organized by hierarchical organized crime groups. The market interactions occur be- tween legitimate market actors; Morselli and Giguere [33] argue that understanding the role of legitimate actors in criminal networks is challenging. In the data presented here the roles of both David and Stephen are pivotal to the distribution enterprise. The form of market organization is interesting and tells us something about the activities of the criminal network. The second case study reported here demonstrated open and relatively simple middle market actions in moving counterfeit vodka. The logistics of moving the counterfeit vodka between jurisdictions was unsophisticated and continued until a load was intercepted. As noted earlier there was a certain rapidity in how the network ‘mutated’ in order to facilitate the movement of the vodka more clandestinely by increasing the level of sophistication. This ‘mutation’ of the network has an impact on the structure of the market and also is indicative of the interaction between law enforcement activity and criminal enterprise. Making life difficult for law enforcement As Dorn and South [31] argue, the activities of law enforcement have an influence the structure of the market. ‘New emphases in law enforcement, such as covert operations and surveillance of cashflow, tend to structure the market into a series of smaller and flexible (e.g. multicommodity) enterprises’ ([31]:176) In a form of ‘spinning’ the information to fit with the legends of organized crime we encounter news reports that reinforce the stereotypes of serious criminals as structured gangs. ‘C’ is for commercial collaboration: enterprise and structure in... 557 BAn undercover investigation by Channel 5 infiltrated the crime gangs behind the trade and found one factory in east London producing 7,000 fake bottles of Smirnoff vodka a day.’ (Daily Mail 10.07.[34]) But as Dorn and South [31]note, ‘[m]odern law enforcement may, in combination with the mass media, promul- gate the myth of the monopolistic drug distribution enterprise, but it actually discourages such a market structure’ ([31]:176) . The idea of a crime gang organizing the complete distribution chain of coun- terfeit alcohol, from production to street distribution, is not supported by the research and analysis of the data reported here. The data suggests that the organisation of the distribution is fractured, or split into a number of discrete tasks. The completion of a task by actors allows for the next task to be undertaken and at the same time the actors responsible for the completion of the task in many instances are different. In the case study David organises the logistical pathways and has no other role in the operation. The structure of the counterfeit alcohol market is relatively simple. The product is produced in one jurisdiction in large quantities. It is possible that the production of the base alcohol is legitimate, for example alcohol produced for industrial processes. The purchasing of the industrial alcohol in the production jurisdiction may also be legiti- mate. It is the movement of the alcohol and its diversion into the legitimate alcohol market as a branded product that is the fraud. The producers need to move the product into the legitimate market, or the purchasers are buying the alcohol with the intent to use it fraudulently. The alcohol once acquired need to be sold onto higher level distributors who can ‘broker’ the product into the middle market. The entry to the middle market allows for large quantities to be sold onto those who can bottle and package the alcohol as a branded product, and so the industrial alcohol now become ‘counterfeit’. Once at this level the product is moved to distribution points where it can be sold on to lower market actors with networks that enable them to sell the product easily and in a covert way. This model of distribution, from production to lower level distribution, accounts for the spread of the fake product across a significant number of geographical locations. This market structure also appears to be relatively efficient; it allows for market distribution and penetration, anonymity of purchasers and sellers at the lower level, and is adaptive to shocks, for example the seizure of a consignment. Understanding the more fractured structure of the counterfeit market and its different levels provides a window onto how the counterfeit operations can remain hidden. A number of transactions in the supply chain, even though conducted with criminal knowledge and intent, are legitimate transactions and therefore not of interest to law enforcement. For example the production of industrial alcohol is a legitimate process, the sale of such alcohol is also legitimate and so of no interest. These legitimate transactions may be the foundation of the counterfeit operation. Once the consignment is split and diverted into a number of different locations, and with an organisation of actors that are task orientated, many having legitimate roles, makes the job of law enforcement extremely challenging. In order to meet this challenge, it may be, as Dorn 558 Spencer J. et al. and South [31] argue, it is the operational activities of law enforcement that result in the structure and illicit activities adapting to remain out of their sight. Conclusion There is a phenomenon of counterfeit alcohol. The figures from Operation Opson V suggest increased seizures. The case study of Greece reported in the Operation Opson Report describes a counterfeit vodka operation as follows: B… Police dismantled two illicit production sites of famous brands of alcohol (mainly whisky and vodka). … The fake bottles were sold in night clubs and bars in the Attica region. … Substandard alcohol was produced in clandestine labo- ratories. Genuine empty bottles were smuggled from Bulgaria. Police also dis- covered a second organised criminal network led by the deputy director of a chain of liquor stores. Both criminal groups developed a business partnership to sell the illicit bottles.^ ([35]:21emphasis added) This report suggests that the actors, or some of the actors, were legitimate operators within the alcoholic drink sector, that the distribution network was across a region and possibly utilising networks developed from the ‘chain of liquor stores’. There is also a development of the criminal enterprise between the two levels of operation. The seizures were made after an informant provided information to law enforcement. This suggests that there is a difficulty in discovering these cases other than by intelligence or by good fortune. These networks appear too efficient and successful and not easily detected. The difficulties in detecting such networks might be due to the market structures. The markets encourage fragmentation and at the same time co-operation between networks. It may also be that the ‘middle market’ is a critical point of distribution and discovering its location provides a way into revealing the associated distribution networks. The research presented here, and the subsequent discussion, reiterate the theoretical discussions by Paoli [17]. Paoli argues that the supply of illegal commodities takes place in a ‘disorganised way due to the constraints of product illegality’ ([17]: 52) and if we combine this with Dorn and South’s[31] analysis of how the interventions of law enforcement shape market conditions it becomes visible that the counterfeit vodka market is disorganised, adaptive and flexible to changing trading conditions and law enforcement activity. One speculative finding from the research reported here is that the dynamic between law enforcement and the market, which takes place to apprehend criminals, may significantly contribute to the difficulties they experience in being able to effectively close down distribution chains of counterfeit vodka. Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and repro- duction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. ‘C’ is for commercial collaboration: enterprise and structure in... 559 References 1. Pearson, G., & Hobbs, D. (2004). ‘E’ is for enterprise: Middle level drug markets in ecstasy and stimulants. Addiction Research & Theory, 12(6), 565–576. 2. Pearson, G. & Hobbs, D. (2001). 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