The Facts on Fakes!
By Adele R. Meyer
What a bargain! Wait ‘til you see the deal I got! This is too good to be true! . . . all common expressions from shoppers who thought they bought a $700 designer handbag for $100. Then there are those who remark . . . Yes, I know it's a fake, but "everyone" buys them!
Welcome to the world of counterfeit goods! Whether you label them fakes, replicas, look-alikes, reproductions or knockoffs... it is still called product counterfeiting and it is BIG business. According to the Department of Commerce, losses to U.S. businesses from the counterfeiting of trademarked consumer products are estimated at $250 billion a year.
In the resale industry we most often think of knockoff designer purses, shoes, jeans, watches and scarves when we consider counterfeit merchandise. However, that is not the whole story . . . counterfeit products, along with the repercussions and dangers they present, are far more widespread. Common counterfeit products include auto parts, airplane parts, apparel, cosmetics, sunglasses, computer software, fragrances, children's toys, medicines, health and beauty aids, food products . . . and more. Most people do not even consider the potential hazards of counterfeit products. Acts of counterfeiting can and do create severe public health risks and safety hazards as well as economic harm.
Here are a few examples of the threat counterfeiting poses to our safety and economy:
- Counterfeit auto parts, notably brake pads, have caused deaths.
- Counterfeit shampoo sometimes contains bacteria and has caused hair loss.
- Replica children's clothing is usually not flame retardant and can be a fire hazard.
- Counterfeit toys with small, sharp, breakable parts pose a choking hazard to small children.
- Baby formula with counterfeit Similac labels was reported to have caused rashes & seizures.
- Counterfeit sunglasses are generally not shatterproof and usually lack ultraviolet protection.
- Product counterfeiting costs jobs for Americans and can benefit organized crime and terrorists.
- Some counterfeiters pay only a fraction of their true income tax liability, if they pay any at all.
So, as you can see, the sale of counterfeit products has far reaching effects. Counterfeiting is no longer a victimless crime that only affects large corporations. Unwary consumers have suffered. A few have died and in some cases, the profits from counterfeiting support other operations including drug trafficking and terrorism. Counterfeit goods are just plain bad business!
What is counterfeiting?
Counterfeiting is first of all the imitation of a product and unauthorized use of another's trademark (registered brand name, logo, scent, design, etc.). The counterfeit, identical in appearance, gives the impression of being the genuine product from the real manufacturer. Of course a knockoff is only meaningful if the genuine article is well-known and in demand. Therefore, most knockoffs are of luxury goods carrying a well known trademark. They are a deliberate attempt at deceiving consumers into thinking they are buying products made by a reputable manufacturer when they are, in fact, purchasing inferior copies. The counterfeiter sets out to make money by deception . . . deliberately assuming the identity of an established, reputable manufacturer. Thus, he saves the normal capital investment required to produce a genuine, high quality product. The counterfeiter does not have to invest in expensive quality materials or quality control since he is producing an inferior product. He has no need to spend money on research and development, or advertising and marketing since he is riding the shirttails of a manufacturer who has already invested heavily in developing and promoting their brand. So, his overall costs are low in comparison with those of the genuine manufacturer, allowing him to sell his product copies more cheaply.
Is imitation really the sincerest form of flattery?
Counterfeiting deceives the consumer and tarnishes the reputation of the genuine manufacturer. Brand value can be destroyed when a trademark is imposed on counterfeit products of inferior quality—hardly a form of flattery! Therefore, prestigious companies who are the targets of counterfeiters have begun to battle an industry that copies and sells their merchandise. They have filed lawsuits and in some cases have employed private investigators across the nation to combat the counterfeit trade. A quick search of the Internet brings up dozens of press releases from newspapers throughout the country, all reporting instances of law enforcement cracking down on sellers of counterfeit goods by confiscating bogus merchandise and imposing fines.
A look at trademark laws:
The basic rules for resolving disputes over who is entitled to use a trademark starts with determining who owns the trademark registration for the products in question. A federal registration gives nationwide effect to the owner of the registration. If a dispute is not settled based upon a simple registration review, the resolution is likely to come from federal and state courts' decisions. These rules usually favor the business that first used or registered the mark when the second use would be likely to cause customer confusion. A number of additional legal principles used to protect owners against improper use of their marks are derived from federal statutes known collectively as the Lanham Act (Title 15 U.S.C. §§ 1051-1127). In addition to laws that specifically protect trademark owners, all states have laws protecting a business against unfair competition. These include the use of a name in a context likely to confuse customers. Under federal and state laws known as "anti-dilution statutes," a trademark owner may go to court to prevent its mark from being used by someone else if the mark is famous and the later use would dilute the mark's strength—that is, weaken its reputation for quality (called tarnishment) or render it common through overuse. The Federal Trademark Dilution Act of 1995 expanded the scope of rights granted to famous and distinctive trademarks under the Lanham Act.
President Clinton signed the Anti-counterfeiting Consumer Protection Act of 1996 (Public Law 104-153). This law, which had the International AntiCounterfeiting Coalition (IACC) behind it, was drafted to make counterfeiting a more heavily penalized crime. Under this law, trafficking in counterfeit goods can result in the imposition of criminal penalties found in the RICO (Racketeer Influenced and Corrupt Organizations) Act. The RICO Act permits increased jail time, higher fines and asset forfeiture. The Act also allows greater involvement by all federal and local law enforcement in fighting counterfeiting, including enhanced authority to seize counterfeit goods.
President Bush signed H.R. 32, the Stop Counterfeiting in Manufactured Goods Act, on March 16, 2006. It is the most significant anti-counterfeiting legislation in more than 20 years, setting a new world standard for anti-counterfeiting protection. The Act is a direct response to the increasingly pervasive and dangerous international counterfeiting problem that is threatening the U.S. economy, costing the U.S. jobs and harming U.S. citizens. According to the U.S. Customs and Border Protection, the U.S. has lost over 750,000 jobs due to the manufacture, sale and distribution of counterfeit goods.
What about knockoffs without labels?
A strict reading of the law instructs that counterfeit goods are those that bear marks that are identical to or substantially indistinguishable from the registered trademark. This has the advantage of making counterfeiting civilly and criminally actionable as a form of trademark infringement. A Supreme Court case, Wal-Mart v. Samara Brothers, established that although a product's design is distinctive, it is protected under law only if the knockoff version features "any symbol or device likely to cause confusion as to the origin." These include the signature Gucci "G" and the "Kate Spade New York" tag on the front of each bag. When the imitator uses a trademark that is confusingly similar to that of the original product (such as; Kade Spade instead of Kate Spade), it is trademark infringement. However, if the trademark is entirely different from the original or somewhat similar, but not confusingly so, then trademark law may offer no basis for intervention. These cases may have to be dealt with under the rules of unfair competition. Lastly are the products, sold mainly on the Internet, most commonly referred to as "inspired by" replicas. They do not bear any counterfeit labels or trademarks—the imitator does not hide behind the original manufacturer, but trades under his own name. They are usually easily distinguishable from the genuine product and the Web sites include disclaimer statements explaining that they do not represent their products to be originals or exact copies. This keeps them on the right side of the law in regards to trademark infringement.
How To Spot A Fake
The International AntiCounterfeiting Coalition offers consumers five tips to help avoid purchasing counterfeit goods. Keep an eye out for:
• Labels that are blurred or torn.
• Product names that are misspelled or altered.
• Unannounced changes in product content, color, smell or packaging.
• Missing codes, 800 consumer numbers or trademarks.
• Products lacking the usual guarantees and/or licensing agreements one should find.
What is the harm in selling or buying knockoffs?
In addition to the important issues of safety hazards and economic harm, let's consider some of the more "everyday" fallouts. You would think that everybody knows these "too good to be true" bargains are fakes, but some people are not as well informed. As proof of this, most handbag manufacturers report receiving dozens of counterfeit purses weekly from persons requesting warranty repairs. Unaware consumers later find their "deal of a lifetime" was manufactured using inferior components and shoddy workmanship. Their fantastic bargain barely lasts a season because the one thing lacking in counterfeits is QUALITY! They probably paid close to $100 for an item that would have sold for $15 or $20 if it did not carry that name brand label. Paying for a "label" only to discover that it is bogus adds insult to injury! When consumers realize a business sold them a counterfeit product, they lose their trust and wonder what else the store is being dishonest about. In addition, counterfeit merchandise originally sold in a market where the first-time buyer knows they are not getting the genuine product, can later be passed on as the genuine article.
Is it really illegal?
Yes, allowing counterfeit items to enter the marketplace is illegal. Some people mistakenly believe that if counterfeit merchandise is identified on the sales tag as being "fake", "faux", "look-a-like" or "replica" it is alright to buy or sell it. Not true . . . a counterfeit is still a counterfeit and it is still illegal. You can find them for sale on street corners in major cities, at house parties, out of the trunks of luxury autos or perhaps "from behind the counter" or "under the table" at legitimate stores. Let us be clear—it is still trademark infringement and it is illegal. Counterfeiting is punishable by fines, confiscation and prosecution—so protect yourself and do not buy or sell any goods that you suspect may not be genuine.
NARTS is publishing this information to educate consumers and stress the significance and potential repercussions of buying, selling, trading or possessing counterfeit merchandise. It is our goal to work together as an industry, doing our part, to raise awareness and help rid the marketplace of counterfeit goods. In doing so, we will ensure security in an economic sense and bring peace of mind to consumers who rely on trademarks as indicators of quality, reliability and safety.
Remember . . . everyone loves a bargain, but counterfeit
merchandise does NOT represent a bargain!
Report Fake Goods
Links to report retailers selling fake good in the U.S.
The Authentics Foundation fights against the sale and promotion of counterfeit goods
Authentication services for luxury handbags and other accessories.
eBay Admits It Banned A Whistleblower Warning Shoppers About Fake Products
Published in Business Insider
What You Need to Know Before Buying a Designer Handbag at a Consignment Shop
Published in Glamour Blog
A federal court in Chicago awarded Coach Inc. a $257 million judgment in a lawsuit against nearly
600 companies and individuals selling counterfeit merchandise with its trademark
Harper's Bazaar Fakes Are Never in Fashion Campaign
The Harper’s Bazaar campaign is dedicated to exposing criminal activities connected to the
sale of counterfeit luxury goods—child labor, drug trafficking, and even terrorism.