The menace of fake luxury goods

To commence the discussion of this highly important topic, it is imperative to set the record straight by defining counterfeiting and its boundaries. There are four levels of the luxury faking business:

1 A counterfeit product refers to a 100 per cent copy of the original product made to deceive consumers into believing that it is the genuine product.

2 A pirated product is a copy of a genuine item but produced with the knowledge that the consumer will be aware that the item is fake.

3 An imitation product is not 100 per cent identical to the original product but is similar in substance, name, design, form, meaning or intent and consumers are often aware that it is not the original product.

4 A custom-made product is a replica of a trademark design of branded products made by legitimate craftsmen who may have some connection with the brand.

Having clarified these definitions, it is obvious that the luxury goods sector battles all four groups of fake products, albeit in differing degrees. On the first level, counterfeit goods are sold in some markets by people who claim to be authorized agents of luxury brands. These goods are traded everywhere, from the kitchens of housewives in San Francisco to side-street stalls off Oxford street in London; Canal street in Manhattan and various market 'hot-spots' in Hong Kong like the Temple street market; and also in China and Taiwan. Imitation and custom-made fakes hold a minor proportion of the trade in fake luxury goods. For example, the Hermès Birkin and the Vuitton Speedy bags have been greatly copied by other non-luxury designers who have quoted the brands as their sources of inspiration. Do these products represent fakes?

Fake products, whether counterfeits, imitations, pirated or fake custom-made pose an ongoing problem for luxury brands. Apart from the legal implications, which are important, fake goods cause enormous harm to brands, consumers and also their vendors and manufacturers. It damages a brand's image, over-exposes high-end brands, reduces a brand's equity and costs companies a lot to curtail. Fake goods also lower the self-image of counterfeit product consumers and add to their mental stress by creating an increased desire for products that they might not be able to afford. For the vendors and manufacturers, there is the continuous fear of being caught by increasingly vigilant authorities.

These adverse effects not only exist within the luxury sector, they also affect governments and economies. In 2003, the counterfeit goods market cost New York City more than $1 billion in taxes, an immense weight on the state's economy. This led to increased vigilance and seizures of counterfeit goods across the USA. Counterfeiting of fashion goods is a menace and has no justification. It is similar to pirating CDs, DVDs and Video Games and also stealing intellectual property like Copyrighted materials.

Counterfeits have been a problem for the luxury and prestige industry for centuries. In 2005, the international trade of counterfeit goods was estimated to be worth €500 billion, which is a significant jump from its 1997 worth of $90 billion. New York City alone accounted for $23 billion in sales of counterfeit luxury goods in 2004, while Italy has an annual counterfeit goods trade of approximately €3.1 billion. This rapid growth rate is also evident in several Asian markets and shows no signs of abating. In Hong Kong, there is a high demand for counterfeit luxury goods mainly from white-collar workers between the ages of 25 and 34 and other age groups. In China, the case is more serious and although statistical evidence remains inaccurate, it is considered a major world centre for counterfeiting and the worst violator of intellectual property rights. However, the Chinese government has recently taken measures to contain the trade through introducing new laws and launching visible raids on factories. Other major producers of counterfeit luxury goods are found in Turkey, Thailand, Morocco and South Korea.

The ongoing question of how to curtail counterfeiting in luxury fashion seems to have received no clear answer. Several luxury brands believe that this is a losing battle so instead of trying to win against the violators, they have initiated different means of making the trade more expensive to operate. Luxury brands such as Louis Vuitton and Burberry have proactively channelled substantial resources towards dealing with the supply aspect of fake luxury products but have almost ignored the growing demand facet. These brands work in collaboration with law enforcers such as the New York Police Department's Trademark Infringement Unit and the Chinese government authorities. They often raid stores and factories; and arrest counterfeit goods suppliers and distributors. An example is the recent closure of the Shanghai Xiangyang Road Market, which is considered an abode for replicas of luxury brands, by government authorities. Other brands such as Hèrmes have warning messages on their website informing consumers that products are sold exclusively in Hèrmes Boutiques, approved retailers and on the official Hèrmes website and therefore purchase of Hermès goods outside these three channels would not guarantee that the products are genuine. The result of these efforts is that the counterfeiting trade is now more expensive for the suppliers but despite this, the demand continues to grow.

So how can the demand aspect be curtailed in addition to the supply of fake luxury goods? An example of how this may possibly be done can be taken from the French government, which is a notable pioneer of curbing the demand for fake luxury goods. While several government authorities have made the manufacture and sale of fake luxury goods illegal, the French government has gone a step further. It has introduced legislation covered under criminal and customs law which makes not only the manufacture and distribution of fake luxury products a crime, but also their ownership and possession. Therefore a consumer possessing a fake Louis Vuitton bag can be arrested on the streets of France and stands the risk of spending a minimum of two years in jail. Although this measure may be perceived as drastic by some authorities, it has guaranteed an almost 100 per cent absence of fake luxury goods in France. Italy is also another country that has shown seriousness in fighting counterfeiting although the country is also a manufacturing centre of fake luxury goods. Representatives of several Italian luxury brands are often found at major Italian airports informing travellers of their risk of being fined for purchasing fake luxury goods whether at home or abroad.

Luxury brands however need to move beyond focusing on winning the battle against the suppliers of fake luxury goods. Making the ownership of fake luxury goods illegal just as pirated CDs and DVDs is a step towards this. In addition, an understanding of the demographic and behavioural profiles of the counterfeit luxury consumers will provide a platform for creating better counter-strategies to eradicate the demand for the goods.

Interestingly, a large proportion of luxury consumers in different markets are opposed to the sale of fake luxury goods and several consumers are even willing to join in the battle against this practice. Yet numerous other consumers would consider purchasing fake luxury goods if presented with an opportunity to do so while on holiday. In Hong Kong for example, one of the popular tourist activities is a visit to the fake luxury goods markets. This is perilous for the luxury industry and shows that even core luxury consumers could contribute to the demand for counterfeits. However, if the ownership of fake luxury goods becomes illegal, consumers will be wary of being found with counterfeit luxury goods. Luxury companies therefore must collaborate with various governments in order to make the ownership of counterfeit luxury goods illegal.

One of the biggest problems of counterfeiting is that consumers do not view the trade as a crime similar to selling fake drugs because they believe that there are no serious victims. The only casualties they see are the brands but these brands are perceived as highly profitable companies therefore consumers assume that the problem of counterfeit trade has no drastic consequences. The reality is that the problem of fake luxury goods is grave both for consumers and for brands.

Several consumers and brand analysts have argued that counterfeiting has numerous advantages. Prominent of these is the theory that if a brand is copied, it means that the brand has a strong reputation. Others have said that fake and counterfeit products are an extension of the advertisement of the true brand. Yet others have indicated that counterfeit trade provides employment opportunities for poor people in the countries where they're manufactured. These justifications have no concrete basis just as defending an apparent crime in front of a jury stands no chance.

Counterfeiting is theft irrespective of the way it is evaluated. It is similar to purchasing a fake ticket or a fake property. The buyer supports crime, steals money from the brand and governments and lies to other people and sometimes even to themselves. Contrary to popular belief, when consumers buy counterfeit goods, they are indirectly funding crime as most counterfeiters belong to organized criminal groups that are also involved in other perceived 'more serious' crimes such as drug trafficking and prostitution. Also buying fake luxury goods does not increase employment opportunities in poor countries. On the contrary, it creates misery and hardship for the people forced to take part in these criminal activities and exposes them to the risk of being caught and penalized. Luxury goods counterfeiting is theft of intellectual property and the creativity of others. To illustrate this point, let's use a piece of literary work produced by a writer after months of tenacious writing and editing that results in the creation of a masterpiece. After finally getting it published criminals steal the script and begin to illegally reprint it to sell for $1. If you think this is unacceptable, then luxury goods counterfeiting is ten times more unacceptable. Another way to look at the theft of creativity and intellectual property (to which luxury goods belong) is through the work that went into this book, which you have in your hands which included years of extensive research, writing, editing and finally publication. It involved countless hours behind the computer screen, endless days spent at libraries in different cities, constant travel, interviews, exchanges and continuous fulltime work in the luxury goods sector. Some nights I had to forgo sleeping in order to meet deadlines. Now, after going through all these relentless efforts to get the book published and available in the market, would it be a source of pleasure to discover that a vendor somewhere has reproduced it and is selling it at a fraction of its price to enrich himself? This case is similar to the sale of fake luxury goods.

Think-point for consumers: If you condemn drug trafficking, prostitution or the sale of fake prescription drugs but you turn around and purchase fake luxury goods, you are no better than the people who engage in the activities you condemn.

Several luxury brands such as Louis Vuitton are visibly working hard to contain counterfeiting. As one of the most copied luxury brands in the world and a favourite for consumers of fake luxury goods, the company has shown a firm commitment to the battle against counterfeiting. Louis Vuitton spends approximately €10-15 million a year on the battle against fake products. A part of this budget is channelled towards lobbyists, who try to persuade different governments to protect brand rights. A team of counterfeiting and intellectual property specialists has also been established at the Louis Vuitton offices in Paris and abroad, to counter this menace. The company also employs agents who scour the world in search of counterfeiters' factories and export operations, which are then reported to local authorities. Louis Vuitton has also joined forces with various French and international professional associations to educate consumers and raise awareness of the risks inherent in purchasing counterfeit goods. In addition, the company was one of the key players in the formulation of the legislation that makes the ownership of luxury goods illegal in France.

Louis Vuitton assists in seizing and destroying counterfeit materials and finished products. In 2003, the company conducted a total of 4,200 raids, leading to the arrest of nearly 1,000 counterfeiters. Louis Vuitton also helped the US Customs Service seize 100,000 fake Louis Vuitton products that were being imported from South Korea. In 2004, more than 6,000 additional raids were conducted worldwide and over 8,200 anti-counterfeiting complaints were filed by the company. One of the numerous counterfeiting victories won by Louis Vuitton is the April 2006 court ruling against French (incidentally!) supermarket group Carrefour, which was ordered to pay Louis Vuitton more than US$37,000 in damages for selling fake Louis Vuitton bags in one of its Shanghai stores.

In addition to these, Louis Vuitton continues to devise new strategies for fighting counterfeits. The company now targets landlords who rent their premises to vendors of fake Vuitton products, through filing complaints against them for turning a blind eye to criminal activities on their property. In April 2005, Louis Vuitton won a major victory against a New York landlord who owned seven stores in the counterfeit hot zone, Canal Street. This led to the eviction of the tenants and the prohibition of further fake goods retail, among other actions. The objective of this strategy is to discourage proprietors from leasing their property to fake luxury goods vendors, thereby making the business either impossible or more expensive to operate. These examples ought to be emulated by other luxury brands.

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Responses

  • ANTONY
    Why is there an increase in demand for fake luxury brands?
    8 years ago
  • Iva
    Are counterfeit luxury brands legal in france and italy?
    8 years ago
  • sophia
    Do you think the problem of fake goods and illegally copied CDs/DVDs is serious in HK?
    7 years ago

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