Disappointed customers may shun legitimate designers, costing more than 210,000 American jobs a year

FASHION COUNTERFEITERS PRODUCE SHODDY MERCHANDISE

May 21, 1992|By Trish Donnally | Trish Donnally,San Francisco Chronicle

In broad daylight in downtown Manhattan,, a man starts running. An undercover agent picks up the chase. The first weaves through the crowd and darts down an alley. The second is hot on his heels.

A cocaine bust? No, an attempt to seize bogus Fendi bags.

Though it may not seem a serious offense, witness what's at stake. The current explosion of counterfeit goods costs the United States $61 billion and more than 210,000 American jobs a year, according to Johannes von Schilcher, executive director of the International Anti-Counterfeiting Coalition.

Fashion is particularly hard-hit. Companies with big-time, worldwide successes are most vulnerable, including Chanel, Cartier, Louis Vuitton, Fendi, Nike, Reebok and Levi Strauss & Co.

The parasites are banking big bucks on the magic of a name. The white Chanel T-shirt, for instance, is knocked off more often than any other Chanel product, even though the French house hasn't had a logo T-shirt in its collection since 1986.

Design firms don't take kindly to people pirating their creations.

* In 1990, Cartier staged a shirt burning in Madrid of 2,000 knockoff shirts. Cartier has never made shirts.

* Last summer, Cartier held a counterfeit-watch crushing and steamrolled 10,000 fakes into a flat pile of metal in midtown Manhattan.

* This year, Chanel confiscated more than 100,000 handbags in a single case.

* Louis Vuitton seized 29,000 copies, mostly handbags, in South Florida and Texas flea markets in the first quarter of this year alone.

* Since January 1991, Levis has seized almost 2 million pairs of counterfeit jeans made in China.

The Far East, excluding Japan, is the biggest hot spot for counterfeiters. Imagine a place so plastered with fakes it's actually called "Chaneltown." This market in Seoul, South Korea, is an avenue lined with counterfeit goods of luxury brands including Nina Ricci, Christian Dior and, of course, Chanel.

"Before the China phenomenon came upon us, in a typical year we would seize from 200,000 to 250,000 pairs of counterfeit jeans," says Dave Saenz, Levis' special counsel in charge of security.

"In February, we had 13 separate raids in China itself from Kwangtung to Liaoning, showing that this is running from the south to the north of the country."

The audacious copycats aren't just making obvious copies, either. The fake Levis have labels that say their "colored tab and stitched pocket design are registered trademarks to help you identify garments made only by Levi Strauss & Co." They also falsely claim they are made in the United States to trade on the cachet a "Made in America" label carries in Eastern Europe, which is where most of the counterfeit jeans go.

What does this piracy cost a company? Cartier, for one, spends $10 million a year and employs a network of detectives worldwide to combat counterfeiters. But that's just the beginning.

"People who enjoy fine things, as our customers do, can see the crude workmanship. But in the long run, it associates the Cartier name with low-class, cheap and inferior merchandise. That's the problem," says Simon Critchell, president and chief executive officer of Cartier Inc.

Shoddy counterfeit merchandise can erode consumer confidence and affect future sales for authentic goods. The legitimate company subsidizes a counterfeiter's advertising, research and development.

Says Mr. Saenz of Levis, "We've lost the business, our people lose jobs, the consumer loses because he gets an inferior product, and China's image is blackened in the international business community.

"Our company has been in business for 140 years. We have a worldwide reputation for quality. . . . There's no way you can put a value on the reputation of a company."

"These people pay no personal income tax, no sales tax, no state tax, zero," says Bill Spence, senior vice president of Chanel Inc. and chairman of the anti-counterfeiting group.

"It's a plague on the business community. Our competition plays by a completely different set of rules that leads to a loss of jobs, a loss of taxes, and it's undermining American business."

Los Angeles-based lawyer Jeffrey Gersh of Zimmerman, Rosenfeld & Gersh has won substantial settlements from eight counterfeiters in recent court cases he fought for Michael Hoban of North Beach Leather in San Francisco.

"We won on a theory of trade dress, which is an area under federal regulations that deals with unfair competition. . . . By virtue of people copying North Beach jackets identically, they are unfairly competing," Mr. Gersh says. "The North Beach Leather copies were identical, with the same graphic designs and the same color combinations.

Mr. Gersh realizes the fight against counterfeiters is an unending battle.

"As fast as you shut somebody down, somebody else is starting up," he says.

Fraudulent goods can leave consumers confused and feeling ripped off with no recourse. An unknowing customer who takes his purchase to Cartier for repair when the watch stops ticking may be shocked to find he spent $75 for a fake that cost $2 to make.

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