On any given day in New York’s Chinatown, hordes of eager shoppers can be seen bustling through cramped stalls, checking out "genuine leather” goods and haggling over prices. For some the lure of knock-off goods at knock-down prices is too tempting to pass up. Many leave with designer labels stamped on their purchase - Coach, Prada, Hermes - for about a tenth of what the real thing would cost.
In recent years, counterfeiters have upped their game by making their fakes harder to spot. Cash-strapped consumers and shady dealers have turned the illegal practice into a multi-billion-dollar industry.
Now, a new controversial study claims counterfeits might actually be good for business. Few are buying it.
“Counterfeiting is stealing,” designer Rebecca Taylor said. Taylor showed her Spring 2011 line Sunday at New York’s Fashion Week.
Taylor, who launched her label in 1996 with business partner Elizabeth Bugdaycay, has an enviable fan base. Her popularity – clients include Reese Witherspoon, Katherine Heigl and Sarah Jessica Parker – puts her at risk of being ripped off by people trying to make a quick buck using her name.
“No matter how you slice it, I believe it is wrong and hurtful to any brand,” Taylor told FOX Business Network.
The European Union-backed study, which was released in August, claims there is no proof that black-market bags hurt high-priced fashion houses.
“There is also evidence that it actually helps the brands, by quickening the fashion cycle and raising brand awareness,” said Professor David Wall, who co-authored the report. He questions the validity of previously calculated figures on the financial damage done by counterfeiters and says the real number is probably only one-fifth of what’s been estimated.
According to Harper’s Bazaar, which holds an annual anti-counterfeiting summit, up to 7% of the world’s annual trade - about $600 billion worth - is counterfeit or pirated. In the U.S. fakes are directly responsible for the loss of more than 750,000 jobs and cost companies $250 billion in intellectual property theft. American businesses take a $20 billion hit from the sale of counterfeit goods.
In the study, Wall also refutes claims that the counterfeiting market funds terrorism and crime.
Industry experts say the making, selling and buying of forgeries is hardly harmless. They maintain it has been linked to child labor violations, drug trafficking and other crimes.
Wall further fans the flames by saying authorities shouldn’t waste time trying to take down professional fakers.
“We should be focusing on the trade in counterfeit drugs, dodgy aircraft parts and other stuff that really causes public harm,” he said.
New York City Police Commissioner Ray Kelly says cracking down on counterfeiters will only work if companies do a better job of informing the public of the harms counterfeit goods cause.
“Until we change the central dynamic of the industry, namely rich rewards and absurdly low risk, we’ll be hard pressed to do more than manage a tidal wave of counterfeits flooding the market here in New York,” he said during a Harper’s event. “This is a sobering fact.”
And companies are slowly fighting back.
After seven long years of legal wrangling, a California court awarded Italian fashion house Versace a record $20 million in a counterfeit suit earlier this year. The payout stems from a 2003 complaint over the sale of fakes bearing the Versace brand. Law enforcement officials seized 72 stores and arrested 110 people.
In a statement, CEO Gian Giacomo Ferraris called the award ''historic'' and said it shows that the trade in counterfeiting goods can be successfully ''taken on and defeated.''
Earlier this month a Paris appeals court upheld a counterfeiting conviction against eBay (NASDAQ:EBAY) in a 2008 case brought by French luxury giant LVMH, but reduced the amount eBay has to fork over in damages. The online auction house had initially been ordered to pay 38 million euro ($49 million) in damages because counterfeit goods were sold on the site. The new appeals court ruling cut that sum down to 5.7 million euro.
The action prompted both sides to claim victory.