Behind the (Criminal) Scenes: Fake Fashion

February 07, 2020
fakefashion

“If a deal looks too good to be true, it probably is. A $1,000 bag is never going to be on sale for $200.” That mantra, pronounced by intellectual property lawyer Heather McDonald, who has spent her career busting copycats, should be adopted by every consumer searching for the best deal. And there’s a reason this expert chose to illustrate her words with a fashion accessory: It reminds us that the fashion industry is one of the most affected by counterfeiting. An OECD report, “Trends in Trade in Counterfeit and Pirated Goods,” confirms this, indicating that footwear, clothing and leather goods are the industries most impacted by counterfeit and illicit trade. In 2016, those three sectors—each belonging to the fashion industry—accounted for 41 percent of the total value of customs seizures.
 
Apart from economic loss, a real humanitarian and security threat

This illicit activity is economically significant, representing within the European Union alone a €26.3 billion loss for the legitimate industry each year, which corresponds to roughly 9.7 percent of the sector’s sales. By adding both direct and indirect effects on other industries, counterfeiting in this sector causes approximately €43.3 billion in lost sales to the EU industry. Beyond the economic consequences, it translates into a direct employment loss of approximately 363,000 jobs. According to the European Union Intellectual Property Office (EUIPO), which published that data, the number of affected jobs could rise to 518,281 if we add indirect effects. Overall, fake fashion represents €8.1 billion tax loss for European states, thus directly affecting their investment capacities.

Aside from the impact of fake fashion on the economy, this shadowy and completely unregulated industry enhances troubling practices such as child labor. According to Jan Goodwin, an investigative journalist that worked on the human cost of fakes in Asia, “If you buy fakes, you run a risk of buying something that has been produced by a child forced to work under horrendous conditions.” Those terrible conditions in which children are forced to produce fake goods have been witnessed by Dana Thomas, author of Deluxe: How Luxury Lost Its Luster: “I remember walking into an assembly plant in Thailand a couple of years ago and seeing six or seven little children, all under 10 years old, sitting on the floor assembling counterfeit leather handbags […] the owners had broken the children’s legs and tied the lower leg to the thigh so the bones wouldn't mend. [They] did it because the children said they wanted to go outside and play.”

In addition to the economic repercussions and human rights violations, fake industry also poses a national security threat to several countries. According to US officials and the secretary general of Interpol, there is a clear link between counterfeit products and organized crime. Many counterfeit organizations are known to be associated with organized crime and terrorist groups. Counterfeiting has also become a favorite method of funding for terrorist groups. Consumers are particularly unaware of those kinds of consequences when they buy fake products. But why do they buy them in the first place?

The complex motivations of consumers of illicit products

According to Dr. Haider Ali from the Open Learn University, people who intentionally buy fake have relatively little regard for the law and have negative attitudes toward big business. In an interview with the BBC, he explains: “This may be because they feel that genuine brands charge unfair prices. Those people who see themselves as being shrewd shoppers, willing and able to beat the system may also be more likely to buy counterfeits. Counterfeits may also appeal to those people who want to demonstrate their status, but don’t have the funds to do so with genuine products.”

However, if a portion of consumers of fake products know exactly what they’re getting, the real issue appears when people are fooled. It can easily happen, when prices may be lower than those for the genuine products, but close enough so that it does not signal that the goods are counterfeit. These consumers can put their own health at risk—for example, when people buy sunglasses that don’t have the recommended UV protection. According to Detective Sergeant Kevin Ives from the London Police Intellectual Property Crime Unit (PIPCU), the “vast majority” of shoppers who purchase counterfeit fashion don’t actually know they are buying fakes and believe they are getting the genuine item cheaply.

To confront misinformation (or lack of it), there are positive steps being taken: recently, the US Department of Homeland Security released its report Combating Trafficking in Counterfeit and Pirated Goods, which includes a recommendation to develop “a national public-private awareness campaign [that] should involve platforms, rights holders, and the applicable government agencies to provide education for consumers regarding the risks of counterfeits as well as the various ways consumers can use to spot counterfeit products”.

Strengthen collaboration and technology, the silver bullets against fake fashion

Fighting against illicit trade is a matter of public safety, and consumers must be protected from this rising threat. This can be applied not only to the clothing industry, but to other sectors as well. Philip Morris International (PMI), like many other private firms from different sectors, strongly mobilized to tackle illicit trade.

Other projects initiated by the private sector rely on mastering new technologies that can allow a better monitoring of the supply chain. Moreover, companies are now also turning to new technologies like blockchain. Indeed, this encryption technology could become the digital passport of fashion products, helping to authenticate them.

Another way to effectively act against counterfeit is to tackle it upstream at the distribution level. For instance, digital platforms such as e-commerce websites or social media accounts are effective and popular distribution means for fake fashion products. The fight against fake fashion requires the cooperation of internet service providers to cut those distribution channels. As explained by Heather McDonald: “We started putting them on notice. Now there is almost no internet service provider in the United States that hosts counterfeiters’ websites anymore. The key is always to disrupt the chain of commerce.”

Finally, the response could also rely on collaboration between customers and public authorities. New technologies and their democratization through the use of smartphones can lay the foundation of a consumer-based anti-fraud system. Allowing the consumer to monitor the veracity of a product through a simple code scan or to report fake sellers can prove very effective. Many initiatives, such as Stop Fakes, offer to report an online vendor selling fakes to the US agencies responsible for enforcing intellectual property laws.

Buying fake fashion goods is a more serious issue than the victimless crime it may seem to be. This activity has indirect consequences on legitimate businesses—and contributes to providing criminal organizations with funding for further illicit activities. It is essential that all actors, whether consumers, private sector firms or authorities, engage at their level to fight this scourge.

STOP ILLEGAL

Written by STOP: ILLEGAL

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