New York Ups Ante in Counterfeit Crackdown

Hundreds of customers scour the Garment District of New York City everyday looking for brand name handbags, watches and other items priced a fraction of their retail cost. Recently, however, police have found a new way to crack down on the lucrative trade in fake designer goods: shut down buildings that are rented to counterfeiters.

In New York, the U.S. city the most affected by counterfeiting, disreputable landlords rent old buildings to counterfeiters who split them into dozens of shops. In response, New York Mayor Michael Bloomberg's administration began an anti-counterfeiting initiative aimed at the landlord problem.

"Landlords make incredible amounts of money," said Richard Plansky, the New York Deputy Criminal Justice coordinator. "They put no money in the tenure of the building and get money from counterfeiters."

Since the anti-counterfeiting program began, Plansky's unit has cracked down on 13 buildings in the city. Each time the process is the same. The unit, made up of policemen and fire and health inspectors, arrives early in the morning, forces open the doors and seizes the counterfeit merchandise.

Then the landlord is taken to court. The building -- which Plansky said virtually always violates fire security rules -- is shut down and only reopen when the case is solved and a legitimate tenant has been found.

"Since we began, we collected $800,000 in penalties," said Plansky, adding that many cases were still pending.

The program has also led to the seizure of $47 million of counterfeit goods, including the two largest such seizures in the department's history, according to Plansky.

Companies Pitch In

The secret of this success: generous funding and the help of luxury companies. Mike Zaneis, director of congressional and public affairs for the U.S. Chamber of Commerce, explained that fake products are sometimes so similar to real products that the Landlord program unit actually needs a representative from trademark companies to determine whether the items are fake or legitimate.

The trademark owners' contribution is also key to fight counterfeits in China, where 80 percent of fakes are manufactured, according to the Unifab, a Paris-based anti-counterfeiting lobby, whose members include LVMH, the mother company of Louis Vuitton, Lacoste and L'Oreal.

"Important members of the Unifab spend until $18 million to fight counterfeiting in China," said Marc-Antoine Jamet, director of the Unifab. "It is not rare that middle-size companies spend $1 million on the fight."

And all these investments pay off.

"In China, we have seen progress," said Marc Ramondi, spokesman for the U.S. Immigration and Customs Enforcement.

The efforts of legitimate companies combined with the increasing cooperation of local governments led to the closing of Beijing's Silk Alley, a counterfeit mall similar to New York's that was a tourist favorite.

Counterfeiting Means Lost Taxes, Jobs

The merchandise is cheap because counterfeiters steal good ideas, take advantage of legitimate companies' marketing campaigns and do not pay taxes, explained Marc Ramondi. They also pay workers far less than the brand name companies that make the authentic goods they mimic.

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