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Cutting the Cost and The Quality: The Effects of Counterfeit Goods

By Sophie Dehn

The hidden industry of counterfeit goods has spread throughout the world and is now worth more than $500 billion. The value of imported fake goods worldwide topped $509 billion in 2016 based on customs seizure data, up from $461 billion in 2013, which corresponds to 2.5% of global trade, according to Trends in Trade in Counterfeit and Pirated Goods, a joint report published in 2019 by the Organization for Economic Co-operation and Development ("OECD") and the European Union Intellectual Property Office ("EUIPO").

International trade in counterfeit goods persists despite extensive and frequently expensive enforcement efforts by brands much like Paris-based luxury goods conglomerate LVMH Mot Hennessy Louis Vuitton, which utilizes numerous of civil and criminal enforcement lawyers worldwide and devotes an estimated $17 million annually on anti-counterfeiting court proceedings related to its stable of brands, including Louis Vuitton, Dior, Celine, Givenchy, and Loewe, among many others. In support of their findings, the OECD and the EUIPO noted that, in terms of dollar value, footwear, apparel, leather products, electrical equipment, watches, medical equipment, perfumes, toys, jewelry, and medicines accounted for the largest portion of 2016 searches.

According to the OECD, the market for counterfeit garments, textiles, footwear, handbags, cosmetics, and watches alone was worth a staggering $450 billion in 2017 and still growing. Brands like Chanel, Louis Vuitton, Prada, Hermes, Gucci, and Dior are frequently among the most heavily targeted by counterfeit makers, a long-standing trend that has been accelerated as more consumers shop online.

It is critical to distinguish the term from those that are frequently - and incorrectly - used synonymously, including but not limited to "infringement" and "knock off". Unlike these concepts, counterfeits symbolize a particularly heinous form of copying and as a result, are held to a specific, heightened legal standard.

What exactly is a counterfeit? There are a few essential criteria that must all be met for something to be considered a fake good.

A product must, first and foremost, have another party's federally registered trademark or one that is "substantially indistinguishable" from the other party's trademark for it to be deemed a counterfeit. Any word, name, symbol, device, or combination thereof that is used or intended to be used to recognize and differentiate the goods and services of one seller or supplier from those of other sellers and providers, as well as to indicate the source of the goods and services, is referred to as a trademark. Second, the use of another party's trademark without that party's consent by the counterfeiter must be knowing and intentional. This use usually always occurs in conjunction with the counterfeiter's intention to trick the consumer by misrepresenting itself as the owner of the trademark by using a counterfeit logo, tag, etc. Third, the trademark that is being imitated must be federally registered in accordance with American law. Patent and Trademark Office, and the trademark holder must utilize it (in commerce). Fourth, since trademarks are registered according to "classes of products or services," the fake goods the maker/seller is producing and or selling must fall under that category. The use of a fake trademark must also be likely to confuse, induce a mistake, or deceive the typical consumer regarding the origin of the product.

Counterfeits are a major issue and luxury fashion houses today argue that they can harm their business in two different ways, their brand image and reputation. But more significant are the health risks affiliated to counterfeit goods. According to Chanel, research has revealed that fake cosmetics frequently include harmful compounds that can irritate your skin or leave you with lifelong scars. Of course, this problem goes beyond just shoes, handbags, and clothing.

On the French label’s website, which has an entire section devoted to warning customers against purchasing counterfeit goods, Chanel said, "Fighting against counterfeit means more than simply protecting our brand image. It also means protecting our creativity, our know-how, and the quality of our products, as well as helping to protect consumers from products that may pose health risks."
Further development of the risks is expected. Inauthentic products are frequently linked to other unlawful goods and criminal activity. According to the United Nations Office on Drug and Crime, they include the trafficking of drugs, weapons, and people. This is a result of criminal organizations producing, distributing, and selling of these fake goods.

While producing and selling counterfeit goods involves a number of immoral practices, the industry is still expanding. According to a survey, 10% among all items relating to fashion in Europe are fake. This implies that the original creators lose out on around $28.5 billion USD in income annually. Jobs are impacted by the fake fashion market as well. According to a study, the repercussions of fake fashion are expected to result in job losses ranging from 363,000 to 520,000. Italy is particularly impacted by fake fashion sales. The nation loses over 50,000 jobs per year and $4.9 billion in USD. Additionally, the EU is also impacted by this. The economic damage would increase to a total loss to the EU of around $47.6 billion USD if all secondary effects on other industries and lost tax revenue were added together.

Why do counterfeit goods continue to expand at their current rapid rate if it is so damaging for businesses everywhere?

Many times, people knowingly purchase counterfeit goods to fit societal norms. If you own designer goods, you are placed at a higher pedestal in the eyes of the public, as it shows social class. However, I believe that to be wrong. Personally, I think less of you if you knowingly buy a fake good. That tells me that you would rather have others think highly of you than acknowledge your own self-worth without the help of the public.

Even after reading an article about the negative effects of counterfeit goods, many will continue to knowingly purchase fake goods, simply because of their cheaper prices and higher status they may give us. Knowing all of this, what steps will need to be taken until the public finally understands the negative repercussions of these goods?

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