A police operation in China has uncovered the biggest fake Penfolds operation in the country to date.

Guangzhou police discovered a network of criminals have been selling counterfeit Penfolds wine over three years and made $26 million. The network used a registered legitimate company as a shell to sell the fake Penfolds wines online through the country’s e-commerce platforms. Substandard wines ranging in value from $10 to $40 were resold for as high as $950 through online platforms.

Local media said the operation involved nine different counterfeit wine manufacturing workshops in Guangdong, Shanghai, Jiangsu and Zhejiang provinces in eastern China, as well as Yunnan and Guangxi provinces in southwestern China.

So far, police have detained 21 people – 16 have been arrested and five have been released on bail.

The case follows the Chinese government introducing tariffs ranging from 107-200% on Australian wine, following the preliminary findings of an anti-dumping investigation. China’s Ministry of Commerce launched the investigation in August to review whether imported Australian wines were being sold below “fair” prices and hurting China’s wine industry.

Treasury Wine Estates was slapped with a 169.3% tariff and recently said in a fact sheet submitted to the Australian Securities Exchange the Chinese market was worth $12.9 billion. In late November the company said it was diverting wine to other markets as a result of the tariffs.

“We are extremely disappointed to find our business, our partners’ businesses and the Australian wine industry in this position,” chief executive Tim Ford said.

“There is no doubt this will have a significant impact on many across the industry, costing jobs and hurting regional communities and economies which are the lifeblood of the wine sector.”

China is the largest buyer of luxury wine from Treasury Wine Estates and about one-quarter of Penfold bottles are sold on the Chinese market.