Counterfeiting luxury goods

Ludovica Cesareo, Alberto Pastore and Patti Williams

Chapter 9 in Handbook of Research on Counterfeiting and Illicit Trade, 2017, pp 193-222 from Edward Elgar Publishing

Abstract: Counterfeiting is one of the oldest crimes in history. In ancient Rome, wine traders counterfeited wine trademarks on amphorae, selling inexpensive local wine as fine Roman wine. By the 13th century, counterfeiting had become so common that, in some European countries, copying a trademark was punished with torture and death. Today, counterfeiting hits almost every sector, from pharmaceuticals to toys, from auto-parts to content goods (movies, music, software, video games, etc.), but luxury and fashion goods are often the preferred targets of counterfeiters. These products are the most illegally reproduced worldwide for a multitude of reasons, linked to both demand and supply. On the demand side, counterfeiters exploit the heritage of meanings associated with the original goods, enticing status-seeking consumers who cannot afford the authentic goods into buying false versions in order to project the same prestige, high brand image and social status as the authentic goods. Some consumers of counterfeits may think they are “smart shoppers†, getting a great deal on a product that resembles an original. Still others may hold “anti-big-business†sentiments towards luxury brands, perceiving them as distant corporations charging unreasonably high prices for their products. On the supply side, counterfeiters are very interested in reproducing luxury goods since they are part of a very lucrative market with significant margins yet require relatively simple, mass-production technologies. Thus, counterfeiting may imply large profits with small investments and limited risks, given that the probability of being caught is rather small, and even if caught, the conviction rates are low and penalty rates often light. For these reasons, counterfeiting is especially flourishing in emerging economies, where Intellectual Property Rights (IPRs) enforcement is still in its infancy and local governments are oftentimes permissive with local “entrepreneurs†, particularly when these countries may be more focused on more immediate needs, such as hunger, employment, safety, and transportation. As a result, complying with international policy and enforcing the IPRs of global, luxury companies is certainly not a priority. The consequences of these instances are dramatic for legitimate brands, as “loxury†products, meaning counterfeit luxury goods, not only reduce revenues and profits, but also tarnish the brand’s image, equity, and reputation, which are the essence of what a luxury brand really is.

Keywords: Business and Management; Economics and Finance; Law - Academic (search for similar items in EconPapers)
Date: 2017
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