In June 2024, numerous Taiwanese media outlets reported on a scandal involving a distributor of a certain water dispenser brand. The distributor was accused of substituting filtered water samples sent to government agencies for testing, while also allegedly failing to use genuine filters as required by contract. To make matters worse, the responsible individuals from the involved companies have been referred to judicial authorities for investigation. The damage to a brand that has operated for nearly six decades is considerable, as one can imagine.
In the water purification equipment manufacturing industry, brand manufacturers play a crucial role. They are responsible not only for ensuring that their products meet consumer demands in terms of production and quality but also for guaranteeing the accuracy and authenticity of water quality tests, as these directly impact a brand’s market reputation. Unfortunately, some brands or distributors may resort to fraud due to cost pressures or other reasons, which can lead to severe trust crises and legal risks. Therefore, understanding and addressing the crisis of fraudulent water quality testing and sample substitution is a critical issue that all brand manufacturers, as well as OEM/ODM factories, must take seriously.
On 25 April 2024, the French Directorate-General for Health ordered the destruction of 2 million bottles of sparkling water by [Brand X], and a criminal investigation was launched. Prosecutors accused [Brand X] of using illegal methods to purify their mineral water.
(Source: https://reurl.cc/xvvKRb)
Additionally, in September 2015, a well-known German manufacturer, [Brand Y], was caught by the US Environmental Protection Agency for installing special software in their car engine control units to cheat official inspections. If even German car manufacturers engage in such practices, what can we expect from businesses in other countries?
(Source: https://reurl.cc/2jjln4)
In ancient China, merchants were often referred to as “unscrupulous traders”. In the past few decades, this trend of fraudulent practices has significantly improved, as most businesses strive to shake off this derogatory label. Many companies have since adopted “integrity” as a core value or business philosophy. Whether they genuinely uphold this value or merely pay lip service to it, the constant reminder to act with honesty in business is beneficial to the broader corporate environment.
We still remember the 2014 tainted oil scandal in Taiwan, where several Taiwanese edible oil manufacturers were exposed for using waste oil, adulterated animal feed oil, and low-quality cooking oils. This cast a dark shadow over Taiwan’s food industry. Only under intense public pressure and government crackdowns were the people’s confidence in edible oils restored.
Of course, we cannot guarantee that similar incidents won’t happen in the future. However, at the very least, it has raised public awareness of food safety, leading to collective oversight of food and edible oil production factories, which is certainly a positive development.
While other industries may still experience occasional fraudulent incidents, the regular exposure of illegal activities serves as a warning to companies across sectors. The severe consequences of fraud continue to have a deterrent effect, reminding businesses that such practices can lead to disastrous outcomes.
Water testing is a requirement imposed by the Taiwanese government on manufacturers or vendors of water purification equipment. This applies when selling equipment to government agencies or in the commercial market for bottled water and water refill stations, with the aim of ensuring clean drinking water for the public. It not only pertains to product compliance but also impacts consumer health and safety. However, due to fierce market competition and the pressure to control costs, some OEM manufacturers may tamper with the test results to reduce expenses. Such fraudulent practices not only violate industry regulations and legal requirements but can also lead to consumer complaints, product recalls, and even legal action. Ultimately, this could damage the market reputation of both the brand and the OEM manufacturer, and may even threaten the company’s survival. Therefore, understanding and effectively preventing such crises is crucial to safeguarding a business’s long-term interests.
Figure 1: General Inspection Process (Reference source: SGS)
Figure 2: Water delivery test falsification.(Reference source: SGS)
In light of the recent water testing fraud incident in Taiwan, we will now discuss how OEM/ODM water purification equipment manufacturers can build trust with their brand clients. Could we be at risk of similar fraudulent activities? And how can we prevent such incidents? According to the author’s knowledge, this fraud was perpetrated by a distributor of a water dispenser brand, who was caught on video by an internal employee while swapping water samples and reported to a local representative. The water dispenser brand should devise strategies to prevent other distributors from repeating such actions and ensure better distributor management. The author suggests that OEM/ODM water purification equipment manufacturers can adopt the following methods to prevent fraud and gain the trust of brand clients:
Strict Audits Based on International Certifications
Products should undergo audits for various international certifications such as NSF, Water Mark, BSMI, WQA Gold Seal, UL, CSA, KC, CE, SASO, FDA, API, ETA, EAC/CU-TR, FCC, RCM/SAA, PSB. Certification bodies conduct these audits by randomly inspecting products to ensure they meet the original testing standards, preventing fraud and substitution. Some certification bodies also require the applicant to disclose their production facilities, especially if they are merely a sales company. Representatives will visit and audit the production facility before allowing the product to enter the certification process. Furthermore, these bodies only accept complete product submissions, not just water testing. They also require the submission of material specifications, properties, and formulas, and once certification is granted, the applicant is prohibited from changing suppliers, materials, or components. Regular audits ensure compliance, and any detected issues will result in fines or mandates for re-testing or improvements. This stringent process helps ensure that fraud or substitution is unlikely and encourages adherence to regulations.
OEM/ODM Manufacturers with Quality Management System Certifications
OEM/ODM manufacturers should possess multiple certifications for product quality, environmental safety, occupational safety, and hygiene, such as ISO-9001, ISO-14001, and ISO-45001. These certifications ensure that OEM/ODM water purification manufacturers undergo regular audits and corrective actions, keeping them on the right path.
Comprehensive Laboratory Equipment
OEM/ODM water purification equipment manufacturers should invest in comprehensive laboratory equipment. Having such facilities demonstrates a commitment to quality control, allowing manufacturers to detect and block substandard products or abnormal raw materials on their own.
Submitting the Entire Water Purifier for Testing, Not Just Water Samples
When OEM/ODM water purification manufacturers submit products for third-party testing, they must submit the entire machine, not just water samples. The third-party organisation will produce water for testing during the process. There are risks associated with submitting only water or machines for testing, and expertise is required to discern whether testing is comprehensive. Refer to the article “How to Judge the Content of SGS Water Purifier Water Quality Tests” for more details.
Verifying Water Sample Submission Processes with Other Employees
Since water testing is so crucial, if the submission of water samples is permitted (rather than the third-party agency collecting the samples), an internal SOP must be established. Employees must strictly follow this SOP during water testing, and ideally, it should require signatures from at least three internal parties. Witnessing the sealing of the water container by all three individuals should help prevent fraudulent sample submissions.
Disclosing Raw Material Suppliers and Internal Production and Quality Control Processes
A robust management system must be in place to select qualified raw material suppliers and enforce stringent internal quality control measures. This includes IQC, IPQC, FQC, and OQC inspections at every stage, from incoming material checks to final product delivery. Records of every batch should be kept, and a production traceability system should be implemented to allow tracking of every product’s manufacturing process. OEM/ODM water purification manufacturers must frequently remind their employees that if the company owner makes a misguided decision leading to fraud, they should immediately intervene and advise the owner to stop. Establishing a mutual warning mechanism can help prevent fraud.
Independent Directors and Legal Compliance
To prevent major errors or fraud within the OEM/ODM water purification company, independent directors and a legal compliance department can offer guidance and perform regular internal audits to ensure that all controls are in place.
The author believes that if water purification equipment manufacturers can implement the strategies outlined in section four, they should be able to avoid the risk of fraud.
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