Inside the $500B World of Counterfeiting

Act 1: Aside from being fake, many counterfeit products can be dangerous and contain heavy metals.
7:53 | 06/14/14

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Transcript for Inside the $500B World of Counterfeiting
We take you inside the stealth teams out to bust the fakes in every corner of the country and we're not just talking about those handbags and fake rolexes, are refer day item notice medicine cabinet. You were there on the inside. This is hurting everyone in the family, husbands, wives, children, all targeted with fakes. Tonight we head to the lab, what's really in the counterfeit makeup? What is that that fake viagra? The ingredients will stun you. Not to mention shampoo, soaps, what are you really putting on your face? You're about to see it all go down. Reporter: In every corner of America tonight -- families getting their shopping lists ready for the weekend. And who isn't hunting for a steal? But tonight, you're about to see what happens when that real deal isn't the real thing. This was manufactured in China by a criminal organization. Reporter: You're about to watch as "20/20" takes you on the inside. Come down here so we can at least block this path here. Reporter: We join the elite teams who bust the fakes. Are we rolling? Reporter: The people putting your family at risk. Okay, that's the signal. Let's go! Reporter: Three different cities, and you'll see the moment they're put on the spot right here. Police. Can you stand up? Reporter: The product in your medicine cabinet that could be making your husband sick. The staple bought by women every day. And the ingredients that will stun you. And your babies -- did you buy something that's putting them at risk every time you use it? And this was the headline that got us started -- A major bust tonight involving products. What was really inside those products? Reporter: Long Island, New York just this year -- one of the biggest counterfeit busts on U.S. Soil. Authorities say two brothers selling products with names and labels we all know. Look at this. The Vicks vaporub. The chapstick. The baby oil. But all of those products customers were putting on their face were fake. And who knows what was in them? And get this. The products were being sold in stores across the country. From Florida to New York to Pennsylvania. And as you'll see tonight, investigators say that's just the start. We team up with the feds -- the international property rights center in Washington, D.C. -- where inside we are given a firsthand look at products fooling American families every day. Do you think Americans would be shocked to know just how much of what they're buying is actually fake? I think most Americans have no idea. Reporter: It's a dirty little business? It's a very, very lucrative business. Reporter: Director lev Kubiak takes us into the room where they pulled out the fakes -- what they've seized from store shelves and internet sites across this country. So, all of these are everyday American products? Everyday American products. Reporter: Perhaps you would expect luxury knockoffs -- the fake ugg boots next to the real ones. The beats headphones -- fakes too. But tonight here, we reveal the dangerous fakes. The ones right in your bathroom. The ones your family uses every day. Coming from low wage factories all over the world, where they steal the labels and place them on their own products. These fakes are made in China. Reporter: The shampoo. The bathroom soap. The razors. Even the condoms. Guaranteed to protect you. But in this case, investigators say they used substandard materials. And then a brand name we all know. But in this case, really head and shoulders above the rest? So, this shampoo is in showers across this country, but this isn't the real thing? It's not. What are you really putting in your hair? Heavy contaminants, heavy metals. So you could be putting metal contaminants into your hair without even knowing it? Things that a legitimate company would never introduce. Reporter: He says it's a mistake that can be toxic. That if you're shopping in a discount store, a dollar store, and you're getting a trusted brand name for far less you should ask yourself -- is this really the real thing? So, if you're paying a dollar for this when you normally pay a lot Mo S, ithould be a red flag? It should be a red flag. Reporter: And look at this tonight -- also found in a discount store. An extension cord for a lot less. The same color. The same packaging. Even the safety seal to seal the deal. They even put on this underwriter laboratory seal to make sure the public feels that it's been tested or there is some security there. The safety seal. The safety seal. Reporter: But they're about to show us what happens even with that seal when a counterfeit cord is put to the test. Investigators say the copper wire is so thin it can't even carry the electrical current coming from the living room wall. And he tells me it's not just what you buy for your home. It can be in your car, too. If you've ever been given a great deal on a repair, driver beware. Even the replacement airbag can be a fake. This is going to scare a lot of people. Reporter: And watch what happens side by side. On the left, a real air bag, fully deploying. On the right, the fake airbag, disintegrating right into your face. Bursting into pieces. Nothing there to protect you. How do they know if they've got a fake airbag in their car? Take it to an authorized dealer or a repair shop that you really trust and have them check it. Reporter: Tonight here -- with all of those fake goods pulling in $500 billion a year -- Ready to rock. Reporter: -- We're with the teams out to protect your family. We start with mom. And we head to a discount store, not unlike so many do across America. This one right here in the heart of New York City. And our team heads right in to buy Mac cosmetics, a brand name you can trust. But we wanted to know what's really in that rainbow of colors. We buy it -- You got some great stuff here. -- And take it to the lab. The "20/20" test. Is this eye shadow pretty? Or pretty dangerous? We're told we'll have to come back for the results. And tonight, we're also out to protect your husband with something else in the medicine cabinet. Why would you let something like erectile dysfunction get in your way? Reporter: That's right. Authorities tell us viagra is one of the most counterfeit medication sold in America. But investigators ask -- in counterfeit bottles, what's really in some of those little blue pills? In fact, we've all heard the warnings in those commercials -- one line in particular. Authorities say it's in there in part because of possible fake ingredients. Too little or too much of something can lead to an unintended consequence. Seek immediate medical help for an erection lasting more than four hours. Reporter: And just like the makeup, we're about to learn tonight what's really in these little blue pills discovered by investigators. And while we wait for those results, investigators aren't standing down. We're given exclusive access right there with them in Phoenix, in New York, in Los Angeles. It's another hot day in L.A. And they're about to turn up the heat, trying to snuff out the fake-outs. L.a. County sheriff sgt. Janice Munson and her team getting ready -- This is going to be operation "Wrong time." We're going after an individual who's selling Rolex watches. Reporter: In the room with them, we meet private investigator Kris Buckner, who hunts down the fakes and then turns them over to the L.A. Sheriffs' department. Well, that's kind of our job, we're on the ground, we identify the targets that are selling or making this stuff. Reporter: First up, one of the most common fakes of all. But time's up for the fake Rolex. And we listen in as they tell the team the signal to watch for when they catch their guy. As soon as the hat comes off, the hat is the sign that we have product. Once the hat comes off and it's a go. Questions? Are we rolling? Reporter: They're on the way. The cops arrive at the parking lot. Unmarked SUVs -- we're in one of them -- putting up the visor to keep our cameras out of view. That's the customer right there. He's actually working undercover -- waiting. Now, will the seller show up? And right on cue, he pulls in. Everyone inside the cars, including us, now studying that cap. Okay, that's the signal. Let's go. Reporter: The suspect under arrest. And the fake watches about to fetch him thousands could tonight fetch him jail time. The next stop, this parking garage. Tucked in the back corner. Fake bags that could fetch $150,000. We're right there, tonight, two more under arrest.

This transcript has been automatically generated and may not be 100% accurate.

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