Counterfeit Luxury: EU Turns To Luxury Industry For Solutions

In the ongoing battle to curb the lucrative trade in counterfeit luxury goods, the European Union recently announced that it plans to adopt no further legislation. Instead, it will look to the luxury industry itself for effective methods to combat the illegal trade. The statement was made recently by Charlie McCreevy, EU Commissioner for Internal Market and Services, during a high-level conference on counterfeiting and piracy supported by the European Commission. The EU's policy reasoning is premised on the belief (well-founded in my opinion) that more legislation will not help and that the industry itself is best-placed to identify the fake products and to uncover the production and distribution network used to make and sell the counterfeits. (Source) According to figures cited by McGreevy and compiled by the OECD (Organization for Economic Cooperation and Development), European customs seized approximately 75 million counterfeit articles including luxury items such as sportswear, watches and jewellery in 2005. By 2007 that number rose to 128 million. McCreevy suggested that better cooperation between the luxury brands themselves and EU member institutions would be more effective than adopting further regulation which would be virtually out-of-date by the time they were enacted. Such is the nature of the counterfeit trade.

Still think buying a counterfeit luxury handbag is a victimless crime?

This policy stance makes a certain amount of sense. The luxury industry including not only the brands themselves but also the fashion press - have more control over the situation than one might think. While the problem is admittedly a complex one, it can be addressed by focusing on supply and demand. A necessary first step however is to clean house so-to-speak. The pink elephant in the room when it comes to the counterfeit luxury trade is that often, the very same factories that turn out the "fakes" also turn out (in part or in whole) the genuine articles. This would explain why the fakes have become so good and increasingly difficult to identify from the genuine product. The fact that many luxury brands while publicly trumpeting their venerable history and commitment to traditional forms of craftsmanship quietly subcontract various aspects of production to a diffuse and sometimes shadowy network of small factories throughout China and Italy contributes to the problem. They have effectively compromised their once-jealously guarded control over their designs and production processes in the interest of turning out ever more products that have become essential to their expansion plans and profit margins. In some respects, they have become the victims of their own success. Until they own up to this, they will continue to be plagued by the counterfeiting trade. More importantly, until they come clean, they will lack the moral authority to dissuade consumers from purchasing fakes, especially when those fakes are made by the very factories who are churning out the genuine articles.

Leaving the subcontracting issue aside, at least part of the solution resides in curbing the demand for the products. In December 2007, The New York Times published a story about the latest trend to take hold among Manhattan's fashionable set referred to as "counterfeit chic": People who clearly can afford the real thing who opt to buy a convincing fake because they can and because they find it somehow cool or fashion forward. Trends such as this one arise at least in part because there is a belief on the part of consumers of fake luxury goods that they are doing nothing really wrong. There are a number of factors that contribute to this mindset. First, many fakes are sold "in the open" whether online or in markets suggesting that the transaction is perfectly legitimate. Secondly, some of the craftier sellers suggest or state outright that the goods are "genuine". This approach usually entails suggesting that they've purchased overstock from the manufacturer or have purchased directly from the factory thereby cutting out the middleman and passing on the savings to the customer. These tactics rely on the ignorance of the customer who is usually unfamiliar with luxury distribution channels. Finally, some customers do in fact know they're purchasing a fake but mistakenly believe that it is in essence a victimless crime.

In short, while there may be countless compelling reasons not to purchase counterfeit goods, the average consumer is for the most part unaware of them. If potential customers actually knew the truth about that cute counterfeit Goyard bag, that it is the product of organized crime, that it was most likely made by child labor, that it is linked to human trafficking, that it supports terrorism networks and contributes to loss of legitimate employment and tax revenue, they might not think it was so cool or fashion-forward. The Luxe Chronicles suggests that luxury brands could significantly curb the problem of counterfeiting if they invested as much of their talent and resources in making counterfeits uncool as they invest in cultivating the public's demand for their products. A brand's value would be all the stronger for it. The truth is, most luxury brands have entire departments with very generous budgets dedicated to devising clever ways to make us lust for their products. How about directing a little of that cash towards a campaign designed to make us recoil from counterfeit luxury products?

To be fair, the industry has taken some measures recently to address the problem rather than merely relying on legislators. For instance, France's Comite Colbert , a lobby group for the French luxury industry, has joined forces with French customs officials to ensure a stricter and more consistent application of existing French legislation pertaining to trade in counterfeit goods. The strategy is two-pronged: Educate potential buyers of counterfeit goods of the legal ramifications of their purchase and train France's customs officers to identify fakes and make arrests accordingly. The Paris Airport Authority (Aeroports de Paris) and Air France, an associate member of the Comite Colbert, have also joined this initiative. Also, certain luxury brands such as Hermes and Dior have stepped up their efforts to hold online marketplace eBay, an important distribution channel for counterfeit luxury goods, accountable for the transactions involving counterfeit goods. (Source) Yet, these measures are a mere drop in the bucket when it comes to curbing an extremely lucrative and growing trade. While pursuing the counterfeiters and educating the public are important components of a cohesive strategy, stamping out the demand should be the ultimate goal for the luxury industry.

Sincerely,

The Luxe Chronicles

Comments

[Helene]

You raise some very good points Ms. P&C. Thank you.

I sometimes get the impression that some (not all, but some) luxury brands would rather just sweep the matter under the carpet. While I welcome this new, tougher stance some brands including Dior Couture, Louis Vuitton and Hermes are now taking vis-a-vis eBay, I think they should have taken legal action long ago. While they sat there pondering the question, they allowed counterfeiters to grow the eBay platform into one of the most significant distribution channels for counterfeit goods in the world. Why they waited, I really don't know.

As for your point about Louis Vuitton at the Brooklyn Museum of Art, I too wondered what the reasoning was behind Louis Vuitton's party theme - at the very least, it seems to send a message that LV doesn't take the issue of counterfeiting seriously which is odd (I'm sure they do take it seriously but that certainly didn't come across in the press reports of the event).

As always, I value your insights. Thanks again.

Helene

[Ms. P&C]

Brilliant post!

I think the main issue is that no one is truly stepping up and taking responsibility in this matter. The brands leave it up to the law-makers/law-enforcement (and while the EU penalties are much more strict than those in the U.S., they still don't do enough,) the law thinks the brands need to get involved more, the sales venues (eBay, etc.) claim that they're "just the marketplace - we have no control, etc.", and the consumers are still blinded by the goods to see the many evils underneath.

I must say, the brands really aren't doing enough. As I wrote this week, Louis Vuitton's "counterfeit street" installation at the Brooklyn Museum of Art made the whole counterfeit issue seem cool and subversive. I know this was not the intent, but this is a touchy issue and it's always better the weigh in on the side of taste, finesse and awareness than the "cool avant-garde."

Why isn't everyone working together? It seems to me that an independent foundation needs to be formed as a sort of task force to determine the roots, causes, controlling interests, and image of this issue. It should be fashion people, retailers, law enforcement members, human rights advocates, maybe even someone from the U.N. to give it some clout. The group should do a comprehensive study and then create a marketing plan for public service announcements to change the perception of counterfeit goods.

There needs to be a united front where all parties take responsibility. Until that happens, I'm afraid housewives everywhere will still be having their precious purse parties.