Made as a college presentation, this slide show tells you how luxury fashion brands are affected by the counterfeiting of goods that happens on a frequent basis.

1. INFLUENCE OF
COUNTERFEITING ON
LUXURY BRANDS
FARIDA BAKKALLA

2. INTRODUCTION
 Luxury has always been associated with exclusivity, status and quality. Luxury
goods have a well-known brand identity and enjoy high brand awareness. For
this reason, brand management and protection has become an important factor.
 Showing possession of a branded product is a way to gain social approval and
the increase od people’s aspiration for the same has led to the phenomenon of
counterfeiting.

3. HISTORY OF COUNTERFEITING
 Counterfeiting is not a new business phenomenon and has been affecting trade
for at least 2,000 years.
 Coins were one of the first items to be counterfeited.
 The advent of trademarks created the opportunity for counterfeiting.
 Products such as pottery, vases, oil lamps, and opals were counterfeited.
 The earliest trademark infringement was in 1584, when woolen clothing marked
with the letters J.G. were counterfeited.
 Even food items such as counterfeit cacao beans were sold in the Aztec Empire.

4.  Domingo Navarette, a Spanish priest, noted the Chinese ability to copy products. He complained that the Chinese had
“imitated to perfection whatsoever they have seen brought out of Europe”.
 Items such as books were also copied and passed of as originals.
 The English textile industry grew rapidly based on the invention of the water spinning frame by Richard Arkwright.
 The British wanted to be sure that this invention never reached America since it was the world’s largest exporter of
cotton but had no manufacturing industry of its own.
 Slater, born in England in 1768, started as an apprentice in a cotton mill owned by a former partner of Arkwright and
eventually became a supervisor.
 After reading in a Philadelphia newspaper of a £100 bounty paid to the designer of an inferior cloth-making machine,
Slater came to New York in 1789. He was able to reconstruct the entire English mill from memory and eventually, with
the support of a Rhode Island merchant, built the first water-powered cotton spinning mill in America.
 Although creating a system of patents and copyrights was a priority for George Washington, the Patent Act of 1793 did
not provide protection for foreign inventors. This meant that an American could copy any product patented in a foreign
country and then apply for a US patent

5. AKWRIGHT’S WATER SPINNING FRAME

6. THE CONCEPT OF LUXURY
 What defines a luxury brand?
Luxury products have more than necessary and ordinary characteristics compared to other
products of their category, they are :
RARITY SYMBOLISM
AESTHETICS EXCLUSIVITY
EXTRAORDINANCE PRICE

8. GROWTH OF COUNTERFEITING
Low Investment, High Profits
Expansion of Channels and Markets
Consumer Demand
Globalization and Lower Trade Barriers
Weak International and National Enforcement
Powerful Worldwide Brands
High Tariffs and Taxes

9. LOW INVESTMENT, HIGH PROFITS
 From the manufacturers‟ perspective, counterfeits of luxury brands do not require much effort to
be sold, nor do they require much money to be manufactured.
 The amount of money and time original luxury brand owners spend in establishing brand equity
is huge, which these counterfeit goods manufacturers do not have to incur.
 Furthermore, the premiums charged from the consumer by the legitimate manufacturers of
luxury goods are generally very high from what manufacturers of counterfeits charge to
their customers
 Consumers, who buy products on the basis of functional attributes of the product, seem to value
more on the price than rest of the factors.

10. Gucci in 1980s expanded its output and made its products widely accessible in many
stores which tarnished its image due to non-exclusivity of the products, and then came
the counterfeits which damaged the brand even more. It had to withdraw its products
from the markets in 1990s.

11. Globalization and Lower Trade Barriers
 The rapid growth of world trade and the reduction of barriers to financial and merchandise flows
has opened up opportunity for counterfeits.
The high number of imports in many countries make it impossible for Customs Services to track
down fake products.
 Free trade zones serve as safe havens for counterfeiters.
 The free flow of financial resources has also been helpful to counterfeiters.
Wire transfers and ATM cards are also advantageous factors.

12. CONSUMER DEMAND
 The more the demand of counterfeits would be, the more counterfeits would be produced by the
criminals who indulge in this tax-free business.
 The driver for increasing demand is the aspiring attitude of consumers who wish to buy latest
luxury branded products but cannot afford the original luxury goods.
 When consumers start giving more value to the insignia of a brand on the product instead of the
other product attributes, they tend to buy more low-price low-quality counterfeits instead of
originals.
 The more successful the brand name would be, the more likely it is to have counterfeits.
 The collectivist desire to belong to a certain group presents reasons for growing counterfeit
purchases

14. Expansion of Channels and Markets
 With the growth of world trade, manufacturers have penetrated many markets which they were
unable to serve only a few years ago.
 Counterfeiters have three major distribution outlets to customers:
 Established retail shops,
 Informal channels such as “flea markets,” sidewalk vendors and clandestine shops, and
 The Internet.

15. COUNTERFEITS BEING SOLD ON STREETS AND ONLINE

16. Powerful Worldwide Brands
Globalization has made it possible to develop truly global brands. Brands like The North Face,
Cartier, Hermès, Levi’s, Tiffany & Co, Coach, Ugg, Polo Ralph Lauren, Michael Kors, Gucci,
Chanel and probably the most counterfeited luxury brand worldwide, Louis Vuitton, are
recognised all over the world and have become hugely valuable assets.

17. Weak International and National Enforcement
 The risk of starting a counterfeit products business is rather low in many countries for one very
good reason: weak enforcement of intellectual property regulations.
Although there are a number of national laws and international agreements designed to protect
intellectual property rights, according to Chaudhry and Walsh (1996), “legal remedies available to
the victims of counterfeited or pirated goods historically have been inadequate.”

18. High Tariffs and Taxes
Lowering trade barriers has increased trade, creating opportunities for counterfeit product to be
made in one country and exported to others. At the same time, while it may seem counterintuitive,
high tariffs and taxes can create opportunities for counterfeiters as well.
Extensive advertising and highly visible retail outlets create demand but high prices deter most
consumers from purchasing the products. This umbrella is one counterfeiters will most happily
step under where investment and potential penalties are limited and rewards are significant.

19. INFLUENTIAL FACTORS OF LUXURY COUNTERFEIT
PURCHASE AND CONSUMPTION
Factors Influencing Consumption
Consumer interest in counterfeit luxury
products is perpetuated by the process
of moral disengagement, where
unethical behaviour such as purchasing
illegal counterfeit products is
rationalized
Factors Influencing Purchase
Goods with designer labels surely send the right
brand signals into society for status-seeking
consumers, but at what maybe an impossible
price. A counterfeit of that label may also send
the same signals but not to the ones who value
authenticity.

20. Impact of Counterfeiting on Luxury Brands
•According to the IPR Seizure Statistics in 2014, wearing apparel and accessories continue to be
the No.1 commodity classification based on number of seizures
•Movement into growing emerging markets represents a great opportunity for fashion or luxury
brands, but that opportunity comes with risks
•Counterfeit goods represent a huge problem for fashion retailers, shoppers or even the
government. Today, counterfeiting has had an extensive impact on fashion brand with
technological advancements.

21. The Effects of Counterfeits on Consumers
Counterfeiting of origin or of a trademark:
the counterfeiting of a garment refers to the production of a manufactured product which is very
similar to the original. Just the reading of a detailed label does not give us any guarantee on the
product’s originality
Counterfeit products which harm our health
The use of harmful substances in counterfeit clothing, is now well-known. The risks are
extremely high, also because over time, the chemicals are gradually absorbed by the skin. In the
counterfeit goods, it is easy to find out very wide the range of detergents, coloring and fixing
agents which leave traces on the cloths

22. IMPACT OF COUNTERFEITING ON THE
GLOBAL ECONOMY
COSTS TO THE RIGHT HOLDER
COSTS TO THE COUNTRIES WHERE
COUNTERFEITING TAKES PLACE
COSTS TO COUNTRIES WHERE COUNTERFEITS ARE
SOLD
SOCIAL COSTS

23. CAN COUNTERFEITING BE GOOD FOR
LUXURY BRANDS?
Counterfeit products have the power to stimulate innovation in the fashion industry and benefit
consumers
counterfeits in the market can stimulate authentic producers to improve aesthetics for high-
income consumers and improve affordability for low-income consumers. In these cases, many
consumers are, in fact, better off
When counterfeiters fool too many customers, authentic brands step up their design game. The
authentic producers make the most of their cost advantages to produce more highly differentiated
goods from the counterfeits, which shoppers can easily identify as real. In fashion, this
differentiation strategy can mean an increased investment in aesthetics. Consumers benefit from
this strategy because part of their satisfaction derives from superior aesthetics

24. Measures Taken to Curb Counterfeiting
IP PROTECTION
EXPORTS AND CUSTOMS
SUPPLY CHAIN, MANUFACTURING AND DISTRIBUTION
RETAIL

25. IP PROTECTION
A strong IP portfolio is clearly the cornerstone of an effective anti-counterfeiting strategy.
There is nothing novel about this – best practice has long dictated that luxury brands conduct
periodic audits of global registrations, paying particular attention to territories such as China,
which operate a first-to-file policy.
Just as software security firms hire hackers to test their systems, it is possible to hire trademark
and name search experts to identify potential knock-off registrations as a first line of defence

26. EXPORTS AND CUSTOMS
The need to work with customs officials has also been recognised as a key component of an
effective anti-counterfeiting strategy.
Given the cross-border issues, it is essential to stem the flow of counterfeits into and out of key
markets. This involves registering trademarks with Customs and, perhaps more importantly,
spending time educating and training customs officials on how to spot counterfeit goods.

27. SUPPLY CHAIN, MANUFACTURING AND
DISTRIBUTION
Since so much leakage occurs in the manufacturing, supply and distribution chain, effective
controls are important. However, this can prove a challenge for some brands.
Brands need to understand where counterfeit products are coming from whether third party
factories or authorised production facilities that produce unauthorised originals at the end of the
working day.
They also need to understand how counterfeit products get to market. This frequently involves
auditing distribution or production facilities or working with investigation agents in emerging
markets to identify third-party manufacturers.

28. RETAIL
MONITORING ENFORCEMENT
ENGAGEMENT
WITH
CONSUMERS
TECHNOLOGY

31. COUNTERFEITING AND INDIA
Louis Vuitton, Hermès, and Gucci are just a few of luxury and fashion brands that have been re-
establishing themselves in India in recent years in light of a revival of the country's economy
Flipkart – India’s version of Amazon, which raised $4 billion from the likes of Japan’s SoftBank,
China’s Tencent and eBay and Microsoft in 2017 – has emerged as a dominant player in the
online fashion retail space, thanks, in at least part, to its fashion-specific subsidiary, Myntra.
India's rising income and shifting consumption patterns are not, however, without drawbacks
With the growth of e-commerce has come a market for counterfeit and other infringing products,
which, under the guise of anonymity provided by the online market interface, has been able to
thrive.

32. Hermès, which took Indian leather goods company, Da Milano, to
court in 2013 to stop the sale of handbags that resemble Hermès’s
famed Birkin Bag. The French luxury brand was granted a preliminary
injunction in 2013 from the Delhi High Court, thereby preventing Da
Milano from continuing the sell the bags at issue and further infringing
Hermès’s intellectual property rights.
Hermès v. Da Milano

33. REAL VS. FAKE HÈRMES

34. Christian Louboutin v. Nakul Bajaj & Ors
Christian Louboutin also received protection from the Delhi High
Court in connection with its own trademark. In that case, Paris-based
Louboutin filed suit upon learning that the defendants were selling
shoes online, claiming that they authentic Louboutin shoes, and using
the mark CHRISTIAN LOUBOUTIN prominently on their websites.

35. AUTHENTIC FAKE

36. Cartier International Ag & Others vs Gaurav
Bhatia & Ors
The case of Cartier International Ag & Others vs Gaurav Bhatia & Ors centered
on the defendant’s sale of counterfeit Cartier goods online at a massive
“discount.” The marks at issue included CARTIER, PANERAI, VACHERON
CONSTANTIN, and JAEGER LECOULTRE. Considering the evidence on hand,
including screenshots from websites, and complaints made by several customers
to authorities, the Delhi High Court granted Cartier a permanent injunction,
monetary damages, and ordered that the defendant produce for Cartier all of the
details of any transactions it entered into with consumers in connection with
Cartier’s trademarks.

37. REAL CARTIER LOVE BRACELET VS. FAKES

38. CONCLUSION
There is a saying: “Monkey see, Monkey do.” In today’s world, it seems that it’s only natural for
humans to imitate what they see works in society. Though there are beneficial facets for imitating,
there are also damaging consequences. Counterfeit is a strong word that describes companies that
forge bills or create fake fashion goods, electronic items, and even pharmaceuticals.
Though fashion has continuously changed, been reinvented and some even being dubbed
‘classics’, one thing will always remain: a designer’s ability to express creativity. Fashion is
mainly dictated by trends whether they are past, present, or future, making counterfeiting in the
fashion industry is a very lucrative, multibillion industry.