Thursday, May 9, 2013

B.A.F.F.L.E.D. Fashion Law

The Battle of Counterfeits in Big Cities, Part 2--

Last week we talked about the fight big cities are having against counterfeits.  Places like Chicago, New York, and Atlanta--largely because of their transportation centers--are consistently working to keep the counterfeit market in check within their borders.  Today, we're going to talk about how the counterfeit chain begins.

How do counterfeits come to the market in the first place?
Counterfeits are considered products purporting to be part of a popular designer brand, but sold in what we'll call a shady way.  Designer items are sold directly from their source, or through licensing agreements permitting items to be sold in other outlets.  An example of such licensing would be Christian Louboutin shoes being sold at Bloomingdale's.  Bloomingdale's has an agreement with Louboutin allowing them to sell their shoes in the store.

What happens in the counterfeit market is contrary to direct sales or licensing agreements.  Items which look a lot like the real deal show up in places the designer has not authorized, and the price is always far less than the true value or market price of the item.  Often, counterfeits circulate through the market innocently, when consumers buy them from sources they trust, like friends having "purse parties" or donations to charitable organizations.  However, the source to these innocent consumers is far from innocent.  They may start at a place like Canal St. in NYC or boutiques claiming to have deals on designer items.  The items come in in droves.  Here's how the chain starts.

Gray Market Production
We know the black market is where items are sold illegally.  Well, the gray market is somewhat similar.  The gray market is created when factories licensed to produce designer goods under certain terms and conditions step outside those boundaries and create their own, infringing items.  

As an example, a factory is licensed to produce Chanel bags under the protocol provided by Chanel.  Bags are to be made from 9am local time to 5pm, using specific materials and methods.  At 5:30, the production continues, but the items are 1) unauthorized by Chanel, and 2) produced in such a way to make consumers believe the goods are Chanel, but protect the infringing bag-maker from a quick infringement, contracting, and licensing lawsuit.  The goods get shipped, and in the best cases, they're stopped at customs to protect designers and consumers from infringing products.  No worries, the lawsuit does come later.

This gray market method is one of the largest sources of counterfeit goods and is the baseline of a billion-dollar market.  To curb the negative effects of this market, a myriad of things must be done: legislation, brand vigilance, accurate contracting, policing, and more.

Share with us how you feel about counterfeits, fakes, and knockoffs.  Let's keep the conversation going.

Stay tuned for more on international production and fashion labor.

*Designer goods is a fairly loose term when used in this article.  It does not describe high priced goods only, it includes items at any price point, but specifically those protected by a trademark or brand recognition in some way.  Price is not a factor.  

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