Fashion Market: Financial Loss to Counterfeit
The fashion industry, including clothing, footwear, and accessories, bears a loss of €26.3 billion ($29.46 billion) in revenue and 9.7% of sales to counterfeits.
COUNTERFEITING IN FASHION/LUXURY GOODS
- The counterfeit fashion industry, which includes clothing, textiles, footwear, handbags, cosmetics, and watches is worth about $450 billion globally.
- According to the Global Brand Counterfeiting Report 2018, total counterfeiting globally reached $1.2 trillion in 2017 and is bound to reach $1.82 trillion by the year 2020.
- According to the report, "The estimated losses due to counterfeiting of high-end consumer goods amounted to $98 billion, which includes counterfeiting from offline as well as online mediums."
- The total losses incurred by luxury brands due to the sales of counterfeits through the internet amounted to $30.3 billion.
- According to the European Intellectual Property report, the fashion industry loses €26.3 billion ($29.46 billion) in revenue and 9.7% of sales annually to counterfeits.
INSIGHTS INTO FASHION BRANDS
- LV budgets about €15 million annually ($16.86 million) for its fight against counterfeit products, and they have an internal legal department dedicated to the battle.
- LV suffered losses in a counterfeit case in the European General Court, which handed down its ruling in the two parallel cases of Louis Vuitton v. Nanu-Nana, confirming the invalidity of Louis Vuitton's two checkerboard community trademarks. There were no details on the cost borne by the brand LV.
- LV also made some gains in the counterfeits cases:
- LV v. Singga Enterprises: the awarded damages from Singga was $1.4 million.
- LV v. eBay: In Paris, eBay was ordered to pay LV €38.6 million ($41.0 million) in damages to LV.
- Salvatore Ferragamo, a luxury shoe brand, has lost around $17 million to counterfeiters, confiscating 12,400 illegal items.
- Salvatore Ferragamo won a counterfeit combat case against 150 website domains that were selling counterfeit Salvatore Ferragamo products, winning $60 million in compensation.
- Salvatore Ferragamo "constantly monitors offline markets through court and out-of-court activities, focusing its efforts on China. About 62,000 counterfeit products were seized in China last year, out of the more than 268,000 counterfeit products seized around the world."
- To guard against counterfeiting, the brand destroyed more than £28 million ($34.02 million) worth of its fashion and cosmetic products in 2017.
- According to Times, more than £90 million ($109.45 million) worth of Burberry products have been destroyed over the past five years due to counterfeits.
- The company's 2018 annual report highlights action it has taken in combating the issues of counterfeits, which includes partnering with enforcement agencies and its digital partners to minimize the visibility of counterfeits, disrupting the flow of counterfeit products by enforcing at source level, implementation of brand protection controls trademark, copyright and design registrations globally across all appropriate categories.
- In 2015, $3.2 million worth of counterfeit Hermès belts were impounded at the Port of Los Angeles.
- To combat counterfeit, Hermes has been filing lawsuits against retailers. However, Hermès, by all accounts, is one of the less aggressive luxury brands, filing only a few IP infringement lawsuits in a year in the US as compared to other luxury fashion brand.
- Sometime in 2018, the US Customs and Border Protection (CBP) confiscated 9,024 pairs of counterfeit Nike sneakers worth $1.7 million at the Port of New York/Newark.
- In 2017, the United States Department of Homeland Security initiated a lawsuit against a New York resident that tried to import approximately $250 million worth of counterfeit items involving almost 30,000 pairs of counterfeit Nike-brand Air Force 1 sneakers.
- The company is actively working with law enforcement and customs officials around the world to combat the production and sale of counterfeit products.
The research team began by searching for market research reports that share insights on the fake/counterfeit market globally and insights on various companies in the fashion industry facing losses as a result. After searching through sources like IntechOpen, ResearchGate, Research and Markets, and PR Newswire, we found two paid reports that shared insights on the overall losses in the fashion industry due to counterfeits. Additional insights on the counterfeit losses suffered by individual fashion brands were secured behind paywalls.
Additionally, news articles from various fashion and luxury forums such as Vogue, Scout CMS, The Fashion Law, and The Guardian shared information on the amount of money lost to counterfeits by brands like Burberry, Nike, Hermes, and others.
Next, to find information on the amount of money fashion brands spend/budget in combating the issues of counterfeits, we searched through the annual reports and statements of several fashion brands to identify the provisions they have made or spend on lawsuits to estimate the amount directly related to counterfeits. After going through the annual reports of fashion brands such as Burberry, LV, and Salvatore Ferragamo, we found that while these brands discussed their actions and initiatives to combat the issue, there were no relevant details on their financial provisions for lawsuits/intellect property/trademark/counterfeits. There was, however, information on the major wins these brands have had through lawsuits filed against counterfeits.
Further, we tried to find information on the amount of money fashion brands spend in combating the issues by looking for law firms/attorneys who fight counterfeit cases globally to check the amount they charge brands (fashion) for such cases to estimate the amount the brands are spending in this direction. For this, we searched through various attorneys reports and case studies to find relevant information, but most of the information available was related to their experience and skills in the counterfeit market with references to case results for past lawsuits. There was no information on their charges/fees.