There is a thriving market in counterfeit Lego : The Indicator from Planet Money Counterfeit Lego kits, made illegally in China, are giving collectors a headache.
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The Great Lego Scam

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The Great Lego Scam

The Great Lego Scam

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UNIDENTIFIED PERSON, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

SALLY HERSHIPS, BYLINE: There's a massive scam going on. But this scam isn't about the coronavirus or vaccines. It is about Lego. Tom Glascoe (ph) lives in Dayton, Ohio, and he got scammed. He has three kids - 7, 11 and 16 - and they all love Lego, which is how he got into trouble. He'd been looking for a Lego X-Wing Resistance Fighter for his son. That's the spaceship that Luke Skywalker and R2-D2 fly in "Star Wars."

TOM GLASCOE: And so perusing Facebook one day, I saw an ad for it for what seemed to be a low but maybe not too low of a price. And I thought, oh, good. Let's grab that real quick.

STACEY VANEK SMITH, HOST:

Tom says at the time, X-Wings were going for about $60 or $70, but the ad he clicked on on Facebook listed it for a lot less.

HERSHIPS: The X-Wing was half price - just $30. But when the box arrived in the mail and Tom opened it, he found out that this great price - it came with a big catch.

GLASCOE: The pieces weren't the same quality. They were much more flimsy, and they didn't have the same tolerances. They didn't go together quite as nicely as regular Legos. The helmets for some of the mini-figures weren't dual-molded with transparent pieces and solid pieces. They were just all solid and painted over yellow where they were supposed to be transparent.

VANEK SMITH: Tom had bought what turned out to be a knockoff Lego set - a counterfeit. He admits he may not have paid as much attention to the ads as he should have. But, you know, like, it was this great deal, and he trusted that an ad online would just be legit.

HERSHIPS: Lego Group, the company that makes Lego, is based in Denmark. They had more than $5.5 billion in sales last year. Lego is a huge business. But this is not just a toy. Lego is an investment. The company retires its kits after a while. It stops making them. So if you buy and hold something really popular and the price goes up, you could make a lot of money.

I'm Sally Herships.

VANEK SMITH: And I'm Stacey Vanek Smith. This is THE INDICATOR FROM PLANET MONEY. On their own, Legos are just these little plastic bricks. You can see why it would be tempting to make counterfeits. It's not like trying to make a fake AirPod or an Apple Watch or something. In fact, it is so easy and so tempting to make fake Legos that there is an entire company in China that turns out tens of millions of dollars a year worth of fake Legos. But that also means collectors and investors have to be really careful when they buy Legos because nobody wants to do business with you if you are selling fake goods. So today on the show, we take a look at the seedy underworld of Legos - the great Lego scam.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

VANEK SMITH: The biggest and most notorious of these counterfeiters is a Chinese brand called Lepin. It operates completely openly. I mean, you can visit the company's website - lepinworld.com - and you will see that its logo and Lego's logo are almost identical. Both use these puffy white letters against a bright-red background.

HERSHIPS: So if you're shopping online and maybe in a little bit of a rush, you may not notice that what you're buying is Lepin not Lego. Lego has sued Chinese companies like Lepin numerous times for violating its trademark, for copyright and intellectual property laws. Last year, Chinese police in Shenzhen raided a toymaker and seized $30 million worth of counterfeit Legos.

VANEK SMITH: These knockoffs often sell for a third of the price of the real thing. But if you end up buying a knockoff, you don't just risk getting a flimsier product. You could also end up costing yourself money down the line if you are planning to resell your Legos later on.

The Lego community is enormous. There are whole websites, like brickpicker.com, BrickLink, and Facebook groups like "Star Wars" Lego Collectors USA. There are forums and online marketplaces, thousands and thousands of posts, all in different languages. And if you buy fakes, even accidentally, and try to resell them, you could get yourself banned.

HERSHIPS: To understand how the Lego scams work, I turned to another super fan, Steve Elliott (ph). He is 38 and lives in Albany, Wis.

STEVE ELLIOTT: If someone posts, like, a big $700 Lego set, people will zoom in and look to see if they can see the Lego stamp on the top of a brick, which is called the stud. And if they don't see it, they'll accuse them of it being a knockoff product.

VANEK SMITH: I stopped listening after $700 Lego set (laughter).

HERSHIPS: Lego investors have a really good reason to be so uptight about this. In 2017, something unprecedented happened in the Lego aftermarket, the secondary market. The prices of big sets - those giant boxes with, like, thousands of Lego pieces - they started dropping. And this is, according to BrickPicker, one of those Lego pricing and investment guides, unprecedented. Here is a clip from the BrickPicker YouTube channel.

(SOUNDBITE OF YOUTUBE VIDEO)

BROOK JOHNSON: Now, the elephant in the room, of course, is the Lego Millennium Falcon. And take a look at the Lego Millennium Falcon graph.

VANEK SMITH: When the Lego Millennium Falcon was first released over a decade ago, it was the most expensive Lego set ever - $499.99. And then the price shot up to almost $5,000. But a couple years ago, it dropped by more than 30% in less than a year.

(SOUNDBITE OF YOUTUBE VIDEO)

JOHNSON: In fact, buying this set was one of the worst decisions that I made in my entire collection.

VANEK SMITH: BrickPicker said there are a few reasons for this price drop and the seemingly blue chip investment in the Millennium Falcon going south. The first was an oversupply in the market. Also, Lego released an updated version of the set, so, you know, it was just less exclusive. And then also, all these fake Millennium Falcons started cropping up all over the Internet from places like Lepin. But it's not just investors who are angry about this - or BrickPickers (ph). Individual designers who come up with their own Lego designs, like for a repair shop or a train, are allowed to sell instruction manuals. And they said that the counterfeiters are stealing their designs, too.

HERSHIPS: Which really kind of sucks - a lot of the Lego fans I talked to we're pretty upset about this because, according to Lego, if the company manufactures your design, you make 1% of the net sales. So be careful out there the next time you are toy shopping. Make sure you are getting the real thing.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

VANEK SMITH: This episode of THE INDICATOR was produced by Kiarra Powell and Darius Rafieyan, fact-checked by Brittany Cronin, edited by Paddy Hirsch. And THE INDICATOR is a production of NPR.

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