Counterfeit

A few days ago my colleague Rigel Celeste wrote an interesting story about what your handbag says about you. In the story she posited that "carrying a knock-off bag can say that you're putting a fake front to the world." According to an intriguing story on Bloomberg, a study done by Renee Richardson Gosline, an assistant professor of marketing at MIT's Sloan School of Management, showed that if you want to get away with wearing a fake you need to have a certain attitude. Her research revealed that people are more likely to peg a handbag as being a real designer bag if the woman carrying it is wearing expensive clothes or has an aura of wealth.

Her methodology involved showing 100 owners of luxury handbags photos of bags alone and photos of bags worn by people in social settings. The study subjects were more able to ascertain an item's authenticity and potential cost of the item when it was in context. Gosline, who also happens to be a former brand manager for LVMH Moet Hennessey Louis Vuitton, found that even a nice fake won't fool many consumers if the rest of the package doesn't match up. I would suggest that a similar principle is often in effect with jewelry. A costume piece can appear more or less authentic depending on the person wearing it. Individual pieces of a person's wardrobe seen in context can elicit very different reactions from observers.

Gosline's research also showed that people are willing to pay twice as much for an item that they think will impress others and can be used to trumpet wealth and status. In another study she found that many purchasers who buy knock-off bags later gone on to buy real ones. Quoted in the Bloomberg article she says that the counterfeit served as a "placebo for brand attachment" leading people to become attached to a certain brand even though they never actually owned it.

Art crime is running rampant around the world. More of the modern Russian art on the market is fake, according to an ArtInfo report, and authenticity is a problem in Vietnam, as well. There are lawsuits here in the United States, as well. So, ArtInfo asks the fair question: why are the wealthy, usually financially savvy so vulnerable when it comes to art?

Excitement is certainly part of the problem. The high prices, limited supply and egos involved create an emotionally charged environment. As hedge fund spouse Danielle Ganek observes in her (rather painful) novel, Lulu Meets God and Doubts Him, "Art is the new cocaine." Yep, and that leads to some hasty decisions.

Experience usually makes a difference in protecting collectors from fakes. New collectors rush into the bidding process, not always understanding the quality or history of what they're buying, though there's also plenty of room for seasoned buyers to make mistakes. For the newcomers, the risks include wanting to gain access to what is seen as an exclusive club, social pressures to abide by this subculture's conventions and an unwillingness to ask questions ... mostly because of those social pressures.

Yet, for all the regrets that top collectors have related about impulse buying, there are others who lament not having been faster on the paddle.

Illegal cigar factories, called "chinchals," have been among the few alternatives for Cubans looking for work in the midst of this global economic crisis. Risking time in prison, employees roll counterfeit Havana cigars in order to make a living. The risk may be worth the return, but it's hard to say.

One roller refused to reveal the extent of his pay raise when moving from state factories to the black market ... but "raise" was implied. Working in the legit world, this employee earned $17 a month. Counterfeit cigars tend to sell for $30 to $40 per box of 25, a price that's up to five times lower than the official price set by the Cuban government.

The price competition is only one reason for the government's distaste for the counterfeit cigar business, but it's a powerful one. Cuba's official cigar company, Habanos S.A., saw a 3 percent drop in sales last year. The government also cites the need to protect the image of the brand and fight corruption on the island. Authorities confiscate 1,500 to 1,700 boxes of illegally manufactured cigars every month.

It could be a losing fight, however. Barriers to entry are low, as supplies are easy to secure. And, desperation plays a role. When you need to put food on the table, risks become more realistic.

Every luxury watch brand has knock-off versions, in varying degrees of quality and effort, but if you want a timepiece that can't be copied then the Quai de L'ile by Vacheron Constantin is for you. The Qaui de L'ile is named after the watchmaker's historic address in Geneva and has a laundry list of high-tech features that are said to make the watch "counterfeit-proof." Some of the most interesting are tiny words printed with special inks like those used to make money, laser engravings on the dial so small they can't be seen without a magnifying glass, and layers of invisible markings that only show up clearly under UV light (you can almost see one, a sun symbol, in the picture above between the 1 and the 2 on the dial).

The Vacheron Constantin Quai de L'ile was just launched last month and, depending on features, is priced between $29,000-$60,000.

Via DVICE

Finally some good news for eBay. The company which just lost a big suit against LVMH in France is having better luck on this side of the Atlantic. The AP reports that a federal judge in Manhattan has ruled in favor of eBay over Tiffany & Co. in a trademark infringement lawsuit. In the suit Tiffany & Co. claimed that eBay's sale of counterfeit goods resulted in trademark dilution, false advertising and unfair competition. When the case opened last November, James Swire, a lawyer for Tiffany, said that a full 75% of 325 items that Tiffany has bought on eBay through a buying program the company started in 2004 were counterfeit.

But the entered by Judge Richard Sullivan at the U.S. District Court for the Southern District of New York on Monday puts the onus for policing its brand on Tiffany. The ruling said the company failed to prove that eBay was liable for the sale of the goods.

As in other cases, eBay argued that it is merely a host for buyers and sellers. That argument didn't fly in France but but Judge Sullivan said in his opinion that "Given Tiffany's choice to sue eBay, rather than individual sellers, and this Court's conclusion that eBay does not continue to supply its services to those whom it knows or has reason to know are infringing Tiffany's trademarks, Tiffany's claims against eBay must fail."

If the decision had come back in Tiffany's favor it would have been a decisive blow for eBay, showing that they were liable for the actions of their sellers. But this decision, combined with the LVMH lawsuit, which puts forth a different view, show that right now there is no clear answer in the question of who is responsible for counterfeit goods on eBay. As always, if you are buying on eBay, caveat emptor.

For the consumer who wants to avoid counterfeit merchandise on eBay, a little research can make a big difference. Looking at the feedback score of the seller and reading the comments can give you some insight into the seller's history. A feedback score of at least 99 percent is best. Also when you are in the seller's history click on the past auctions. If this seller has sold a lot of similar or even identical branded items this is a big red flag. Also, sadly, if it sounds too good to be true and the price is really low you may be looking at a fake.

We all know that counterfeit goods cost luxury companies a fortune but Forbes reports that companies such as Coach and Louis Vuitton have taken a new course of action, funding college classes on counterfeits. The International Anticounterfeiting Coalition which includes companies such as Cartier, Chanel, Calvin Klein and Tiffany gave from $5,000 to $10,000 to seven colleges for a course that instructed students in the negative effects of counterfeit goods. Colleges such as Hunter College in New York, California State University, Sacramento and the University of Miami took the money which was given for course materials. Things didn't turn out so well at Hunter College last year. Once professors found out about the class which co-taught by public relations rep., there was a bit of a protest. Check out the the article on Inside Higher Ed which details the class, including the fact that students were asked to create a fake blog that told a story about counterfeiting as seen through the eyes of a fictional college student. While it is not unheard of for corporations to sponsor certain classes or research, the particular nature of this class, which was taught by a professor with limited knowledge of the subject who was asked to present a one-sided view of the problem, has angered many.

UPDATE: In a related story, WWD reports that outside of the Brooklyn Museum Murakami event tonight, Louis Vuitton is setting up 10 street vendors to sell authentic Louis Vuitton product and special Monogramouflage canvases that Murakami has created specifically for the exhibition. The presentation is meant to highlight the issue of counterfeit goods.

Fendi has filed suit against Wal-Mart after accusing the retailer of selling counterfeit bags while representing them as the real thing. The bags in question were sold at the warehouse Sam's Club stores, which are owned by Wal-Mart. Fendi asserts that Wal-Mart never purchased products from them, nor did they inquire as to the authenticity of the goods they were buying from their suppliers. As the stores were selling the bags for 45% below retail, it  does seem quite possible that they "fell off the back of a truck" somewhere, though Wal-Mart declined to comment.

Somehow, the "don't ask, don't tell" acquisition strategy seems like it is most effective when purchasing a single bag in a back alley somewhere - though still not great from the designer's perspective - than when the world's largest retailer, already under a lot of scrutiny, starts buying them in bulk.