Counterfeiting? No, Thanks By Uché

If you take a walk along the cobble stone narrow streets of the fashionable Xintindi district of Shanghai, you’re most likely to come across a crowd of immaculately dressed Chinese city dwellers mixing effortlessly with foreigners from countries as wide ranging as Australia, the US, India and Belgium. Perched on the terrace cafés and open bars; and strolling along the chic designer boutiques, you are also most likely to run into some local celebrities who make habitual stops at Xintindi for the well-known ritual of “seeing and being seen”.

As much as their origins and cultures differ, this stylish crowd share one thing in common – a love designer fashion. You see, in this trendy neighbourhood, Chanel handbags, Gucci shoes, Dior sunglasses, Louis Vuitton wallets and Rolex watches are as common as baguette is in France. An iPhone is a ticket of acceptance and a luxury car like a BMW 5 series completes the validation of belonging to this urban luxury club. In this world where logos and brand symbols constitute a natural language of expression, one thing may not be apparent to the common onlooker – most of the branded products being paraded by the young beauties are fake. Yes, even the iPhones!

How, you may wonder, is it possible that a group of well-educated, upwardly mobile and exposed group of youthful world citizens could possibly possess fake luxury products? Well, the answer is simple – this is the attitude of the current carefree counterfeiting generation. In this world, it is not only okay to buy fake products but it’s perfectly fine to advertise them in public and oh, it is also quite normal to involve people in a game of guessing which of the pieces one is wearing is real or fake. Appalling? Yes. Disturbing? Well, not to a new generation of luxury consumers who don’t seem to give much thought to the possible harm caused by buying, using or ignoring fake luxury items; or those that don’t bother giving any attention to the menace of counterfeiting to their societies and economies.

Before you start wondering why I seem to be pointing fingers at China only, let me just state that the problem of fake luxury products is a worldwide issue. It is neither region-specific nor age-group specific. It cuts across countries, cultures, social groups and wealth structures; and has as much sociological impact as it has economic consequences. But why should anyone care? For several reasons, starting from the fact that the problem of counterfeiting affects the average person, whether we know it or not or whether we choose to accept it or not. But first, a quick look at what I really mean by fake luxury products or counterfeit products.

In my opinion, there are four levels of the luxury faking business, as I first highlighted in my book Luxury Fashion Branding, published in 2007.

The first group is the counterfeit products, which are one hundred per cent copies of original products, made to deceive consumers into believing that they are the genuine products. Examples abound on websites that claim to retail original luxury items, although they are sold at a fraction of the original price.  The second group is the pirated products, which are copies of genuine items but produced with the knowledge that the consumer will be aware that they are fake. The likes of the “Hi-Phone” and the “Christian D‟or” bags fall in this group. The third group are imitation products, which are not one hundred per cent identical to the original products but are similar in substance, name, design, form, meaning or intent and consumers are often aware that they are not the original products. These include all the wannabe Chanel quilted handbags and Louboutin red-soled shoes. The final group are custom-made copies, which are replicas of a trademark design of branded products made by legitimate craftsmen who may or may not have some connection with the brand.

So which of these am I discussing here? Well, all of the above, as the activities that make their collective presence viable are inter-linked. Counterfeiting in general covers any kind of infringement of intellectual property rights and touches on the market economy beyond luxury and fashion. As we all know, in addition to clothing and other luxury items pharmaceutical products, electronics, CDs, DVDs, car parts, computers and even consumer goods like tea, coffee and cigarettes are heavily counterfeited, and all fall in the top ten categories of counterfeit items. The latter group however seems to be taken more seriously than clothing, leather goods, watches and other luxury items. Why? Well, some argue that as long as nobody dies, we can all live with this practice.

And this brings me back to consumer of counterfeit products for a moment and the question of whether they are at the root of the problem. It is often said that the demand for counterfeit luxury items directly affects the supply. The parties that defend this idea blame consumers for wanting fake items and believe that the suppliers are only responding to a natural economic law. But is this actually the case?

Let’s take China as a case. This country which is responsible for the production of approximately 85% of counterfeit luxury items (most of which are exported), is also fast becoming the principal market for authentic luxury items. Italy, which is a traditional origin of authentic luxury, is also the number one supplier of counterfeit luxury items in Europe with an annual business exceeding $7.5 million. But when we look at the numbers of this trade in the US, which is the largest consumer of fake luxury items, with cities like New York and Los Angeles topping the list, we wonder if the consumer is solely responsible for this $600 billion annual business of selling illegitimate consumer goods, including luxury items*. However judging purely from the lax attitude of “if it doesn’t kill, then it’s fine”, that consumers in this region have, one may be inclined to agree.

But there is the other side of the same coin, which is the supply side. Are the manufacturers and suppliers of counterfeit luxury items responsible for the existence and growth of this practice and if so, can it be justified? Is it enough to point fingers at China, Turkey, Thailand or Morocco which are the provenance of these goods? Is it okay to justify their presence by sympathising with the poor people that work in the production sites who may otherwise not have any other source of livelihood? Or is it fine to say that the producers of fake luxury items are actually doing the brands a favour by indirectly enhancing their visibility, as I’ve heard time and again? Or perhaps even secretly think that the luxury brands in question who highly profitable, don‟t deserve any empathy.

Before you take sides, I’ll like to bring your attention to the fact that approximately 5%-7% of the world trade is in counterfeit goods and the global trade for counterfeit products is a $600 billion annual business. This practice costs the US government between $200 billion and $250 billion annually; and American companies have suffered $9 billion in trade losses due to international copyright piracy.

If you still think that this doesn’t directly affect you, then perhaps understanding that this practice is directly responsible for the loss of more than 750,000 American jobs will do the trick. Or maybe learning that 11% of clothing and footwear in circulation worldwide is fake; and that if you happen to purchase fake Colgate toothpaste, it may contain a poisonous chemical used in antifreeze; or your Lipton tea may be one of the many that penetrated the market before 20,000 kg of fakes that was seized by Belgian authorities several years ago. Now that I might have your attention, it will be worth it to consider that the global luxury industry loses $250 billion annually to counterfeit goods, $9.2 billion of which is directly linked to the global fashion industry. When we factor in the potentially lost jobs and business opportunities, in addition to the economic impact then it starts to get heavier.

In France where the luxury industry is the fourth largest employment sector, the impact is even stronger. Recent statistics indicate that approximately 38,000 jobs are lost annually in France due to the problem of luxury counterfeiting. This practice costs the French economy $7.8 billion annually. In the U.K., the annual reduction in GDP as a result of counterfeiting is estimated to be the equivalent of $1.2 billion. In the current economic upheaval that we live in, this sum could go a long way if it was contributed to the economy.

A recent report also showed that in 2009 alone, the U.S. Customs & Border Protection found $260.7 million worth of counterfeit goods, most of which was footwear ($99.8 million), handbags and wallets ($21.5 million), clothing (also $21.5 million), watches ($15.53 million), and jewellery ($10.5 million). In Italy, the worth of seized counterfeit items is even more appalling for the same year, at €7.1 billion. But what is more disturbing is that by 2015, counterfeiting could cost the global economy an estimated $1 trillion.

But why does it seem that this practice is growing and why does it appear like not enough is being done to combat it? Well for starters there is the problem of varying legislation and standards related to intellectual property. Although the purpose of the recent Anti-Counterfeiting Trade Agreement (ACTA) which was put in place in November 2010, is to establish international standards on intellectual property rights enforcement, the reality remains that this independent governing body may not be able to overcome the somewhat fragmented and inconsistent laws of its participating countries. Let’s not forget that participation is entirely voluntary, which is not so assuring.  Coming home to Europe where the EU directive that stipulates the ACTA is generally applied as a guideline, there still remains some consistency in the approach to the protection of intellectual property.

When we come down to specific sectors like luxury and fashion, the story changes as much as the laws and general disposition to their enforcement.

Let’s take France as a model. The French luxury sector has succeeded in lobbying for legislation against not only trading in counterfeits but also in using and possessing them. Translation: if you’re found with a fake luxury product, you risk going to jail for up to 3 years and the law doesn’t care if you received it as a birthday present from your best friend living in Turkey.  In the U.K., Italy, Germany, Spain and other EU countries, the law is not yet at this level of support for the industry.

This is perhaps why the luxury sector needs to congregate to fight counterfeiting through collective efforts. Although independent efforts are made by brands like Louis Vuitton, Burberry, Chanel, Gucci, Dior and Rolex, which are some the most copied luxury brands, to combat the counterfeit trade, the impact remains minimal. The recent anti-counterfeiting initiative of the Council of Fashion Designers of America (CFDA), which involves a campaign called “You Can’t Fake Fashion”, featuring tote bags by 50 American fashion designers seems to be heading in this direction. In France, the campaign Contrefaçon, Non Merci, initiated by the Comité National Anti-Contrefaçon, which is governed by the French National Institute for Intellectual Property (INPI), is a model for the luxury industry.

Some critics have blamed the luxury industry for not doing enough to combat this practice on a collective platform apart from presenting indirect appeals to the moral reasoning of consumers, through PR and communications. Perhaps it’s time for the luxury industry to prove them wrong but coming together in an initiative that assures its future sans counterfeiting.

To read more about this problem, please consult the following references also used to research this article

- International Anti-counterfeiting Coalition (IACC)
- Council of Fashion Designers of America (CFDA)
- Comité National Anti-Contrefaçon (CNAC)
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