Fashion Law: IN CHINA, COUNTERFEITS STILL PLAGUE LUXURY BRANDS
Authorities in China’s Guangzhou province seized approximately 1 billion yuan ($163 million) in faux Louis Vuitton goods during a raid this month, reports China Business News. In a seizure that underscores the ongoing struggle to monitor counterfeit production in China, which consumes half the world’s luxury products, police arrested 14 suspects and shuttered 6 illegal workshops.
The Chinese government’s crackdown on faux luxury has caused some retailers to move their operations online to elude surveillance, which is exactly what the Guangzhou suspects did, setting up a fake Louis Vuitton website to sell their knock-offs.
According to the Fortune Character Institute’s China Luxury Report, in 2013 Chinese consumers purchased $102 billion in high-end goods, a sign of the country’s exponential economic growth and aspirational social climate. $74 billion of that was generated abroad, making online distribution essential to sales.
The contraband luxury market is turning out ever more sophisticated copies of designer handbags, often indistinguishable to non-experts from originals. One anonymous counterfeiter said he is one of Louis Vuitton’s top customers, and therefore has access to the brand’s newest designs before they hit the market. He buys the originals, disassembles them, and sends them to factories for replication. Complicating detection, some counterfeits are even manufactured at brand-registered factories and produced clandestinely on the “third shift.”
China continues to dominate the manufacture of fakes. The UN reports that 70% of counterfeit merchandise confiscated across the globe originates in China, and U.S. Customs says 87% of its seizures are Chinese-made. The business is hugely profitable due to low-cost production and relatively mild penalties compared to other illegal activities, says Alan Zimmerman, a professor at The City University of New York and an expert on the economic effects of counterfeit production. Quoted in Fortune, he adds that the flood of faux is incredibly difficult to suppress due to the Chinese government’s failure to consistently root out counterfeit sources and enforce copyright.
Still, contrary to China’s stereotypical image as a low-quality, high-volume industrial power, the nation’s luxury consumer class is increasingly perceptive to signs of fraud, frequently traveling abroad to obtain luxury brands within their home retail markets in Europe and the U.S.
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