Top Vietnamese silk brand on shut-down following Chinese counterfeit scandal

Vietnamese garment brand Khaisilk has closed all of its stores following an inspection last week that uncovered fake products made in China at one of its Hanoi outlets.

In Saigon, the brand's flagship store on Dong Khoi Street now displays a sign saying: "We are closed for inspection and stock checks." Another shop in the Lotte Legend Hotel on Ton Duc Thang Street has also been closed since Thursday.

The Khaisilk shop on Dong Khoi Street in Ho Chi Minh City has been temporarily closed. Photo by VnExpress/Vien Thong.

Khai Duc Co. Ltd. said the recently inspected shop on Hang Gai Street in Hanoi had started withdrawing products and refunding customers. Customers in Saigon will be able to return Khaisilk products from November 10 at the brand's restaurant on Vo Van Tan Street in District 3, it said.

"Khaisilk shops in Ho Chi Minh City are temporarily closed for authorities to inspect," a Khaisilk hotline operator said. "Shops will only reopen when inspections have been concluded and an official conclusion has been delivered."

Khaisilk's owner Hoang Khai has also withdrawn from a reality TV show that features aspiring entrepreneurs competing before a panel of investors.

"Hoang Khai, one of the guest investors on Shark Tank Vietnam, has decided to withdraw from the show to focus on his corporation," the TV show's organizers announced on Saturday.

Khaisilk is a renowned high-end brand with a history of over 30 years, famous for its supposedly high-quality "made in Vietnam" products. The scandal has come as a shock to many customers, reinforcing widespread doubt over the capability of local market management authorities.

Hoang Khai, owner of Khaisilk Corporation, on Shark Tank Vietnam.

The brand's crisis started when a business in Hanoi took to Facebook on Monday to complain about products it had bought from the brand saying they were actually made in China.

According to the post, the company bought 60 Khaisilk-branded scarves at the Hang Gai shop in Hanoi for VND644,000 ($28) each, but one scarf had two tags: “Khaisilk Made in Vietnam” and “Made in China.”

The company said it had checked the rest of the scarves and found signs that “Made in China” tags had been removed.

Trade inspectors and police in Hanoi subsequently inspected the Hang Gai shop last Thursday and found evidence of trade fraud. Suspected counterfeit products worth VND30 million ($1,320) were seized from the shop.

Khai later admitted that half of the silk used by Khaisilk came from China, while the rest came from Vietnamese craft villages. He also insisted that his company always used high-quality material.

Khai has apologized to customers and offered compensation.

Minister of Industry and Trade Tran Tuan Anh has ordered market watchdog and competition management units to look into the matter for further signs of counterfeiting.