Coach targets Ocean City boardwalk shops for counterfeit sales

Lawsuits allege imitation Coach handbags, wallets and accessories sold at 13 stores

August 10, 2010|By Gus G. Sentementes, The Baltimore Sun

Ocean City's boardwalk is known for small shops hawking salt water taffy and souvenirs to vacation-goers. But a major luxury brand has accused more than a dozen shops of doing brisk trade in an illegal market: counterfeit handbags and accessories.

Over two days in June, an investigator with Coach Inc. entered 13 stores overlooking the beach and bought counterfeit bags, wallets and other items for prices ranging from $20 to $75, according to lawsuits filed by Coach in federal court in Baltimore this week. Authentic Coach handbags in a similar style are sold for more than $300, according to the company's website.

In some cases, the investigator said the shops had dozens of imitation Coach products for sale. And, in at least one instance, a shop employee admitted to the undercover investigator that the items were fake, according to the lawsuits.

"To those who traffic in counterfeit goods the message is simple: Coach is looking for you and, once found, will seek the maximum penalties available, including substantial monetary payments," said Nancy Axilrod, associate general counsel for Coach, in an email to The Baltimore Sun.

Coach and other big-name brands — from Chanel to Louis Vuitton — routinely work with federal and local law enforcement to fight a multibillion-dollar trade in counterfeit goods, many of which originate from China through organized crime networks.

But the fight against counterfeit goods has been complicated in recent years by sellers of illicit products moving online and beyond the traditional hubs of black market knockoffs in New York and Los Angeles to other foot traffic-heavy locales like Ocean City, experts said.

In at least one case this year, Coach sued a municipality — Chicago — for not doing enough to crack down on street vendors selling counterfeit company products at a city-run public market.

According to the International AntiCounterfeiting Coalition, a nonprofit based in Washington, the worldwide trade in counterfeit goods amounts to about $600 billion a year. In the U.S. alone last year, Customs and Border Patrol and Immigration and Customs Enforcement seized $260 million worth of counterfeit goods.

The top categories of seized counterfeit goods included footwear, consumer electronics, apparel, computer hardware, pharmaceuticals, toys and electronic games, according to the federal agencies.

Companies "are all very serious about it," said Robert C. Barchiesi, president of the International AntiCounterfeiting Coalition in Washington, which represents more than 200 companies. "Most consumers think it's a bargain when they buy these goods, but they need to think again because the societal costs are enormous."

Counterfeit goods lead to lost tax revenue and jobs as well as the diminishment of brands in the eyes of consumers who interact with imitation goods, Barchiesi said.

"If people are walking around with inferior bags, that doesn't go far toward protecting the reputation of these quality brands," Barchiesi said.

In its investigation in Ocean City, Coach alleges that the shops sold handbags, wallets, key chains and wristlets. The shops named in the lawsuits are: Maytalk; Beach Break; Hot Topik; Ocean Reef; Summer Breeze; Surf Beachwear; the Fashion Shop; Ocean Waves; Sunset Beachwear; New York New York; Jewel of the Ocean; Oceanfashion Boutique; and Sunglass City.

According to online federal court records, the owners of the shops had not been served with the lawsuits as of Tuesday.

Employees at several locations declined to comment, and management at those stores did not return phone calls. A manager at Oceanfashion Boutique, who refused to give her name, denied that the shop sold Coach counterfeit products.

Coach is seeking $2 million in damages for each counterfeit violation at each store or, alternatively, a court order for the store owners to pay Coach all of the profits earned from the sale of the items.

Coach's lawsuits against the Ocean City shops come as the company has launched its own nationwide campaign, now in its second year, to crack down on the sale of imitation products. Last May, the company kicked off "Operation Turnlock," a zero-tolerance civil litigation program targeting producers, wholesalers and retailers of Coach fakes.

The New York-based company is actively fighting the illegal trade of knockoffs in lawsuits against stores across the country, according to federal court records. So far, Coach has filed about 250 lawsuits and has secured court judgments and settlements for hundreds of thousands of dollars in damages, according to Coach's Axilrod.

High-profile busts of smuggling rings are routine. Earlier this month, federal authorities shut down a ring in San Francisco that was selling imitation Coach, Kate Spade, Armani and other luxury brands, worth potentially $100 million.

In March, nine people were indicted in federal court and accused of transporting, in 33 shipping containers, hundreds of thousands of fake Nike shoes, Coach bags, Cartier watches and Gucci shoes through the port of Baltimore.

gus.sentementes@baltsun.com

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