FOLLOWING THE TRAIL OF KNOCK-OFF DESIGNER HANDBAG FROM CHINA TO THE U.S.

(Reuters) - Anybody could tell right away that the Louis Vuitton shoulder bag was fake because it was delivered in a recycled box that once shipped batteries.

Warnings printed on the inside of the box read: "Danger Contains Sulfuric Acid" and "Poison - Causes Severe Burns" -- not the sort of messages that would normally accompany a product from one of the world's most iconic luxury brands.

But it sure looked real. It was dark brown, sported a braided strap with brass fittings and the Louis Vuitton monogram stamped all across the bag.

I had ordered the bag from a website called www.ericwhy.com for this special report, which explores the growing problem of counterfeit merchandise sold over the Internet.

Reuters wanted to trace the problem from a consumer in Washington D.C. to the shadowy producers based in Guangzhou China, where my colleague Melanie Lee found the illicit workshops and markets.

Ericwhy, based in Guangzhou, calls its stuff "designer-inspired alternative to actual Louis Vuitton" in a disclaimer on its website. "We assume no civil or criminal liability for the actions of those who buy our products."

Yet, U.S. law enforcement officials say this website and many others that offer a dazzling array of goods online -- clothes, electronics, footwear, watches, medicines -- are outlaws, and they plan to go after them hard.

Counterfeit commerce over the Internet has soared in the past couple of years, turning what had been an irritant to businesses into a serious competitive threat, the officials say.

The Organization for Economic Cooperation and Development estimates the amount of counterfeit goods and pirated copyrights in world trade grew from about $100 billion in 2001 to about $250 billion in 2007, the last year for which they have made an estimate. While there are no separate estimates for how much of that is sold on the Internet, authorities say it is considerable.

"The Internet has just completely changed the face of the problem, made it more complicated and more pervasive," says John Morton, assistant secretary in charge of U.S. Immigration and Customs Enforcement (ICE). "Whole industries now have been attacked, not from the street, but from the Internet."

Visitors to www.ericwhy.com can choose from more than 1,800 imitation Louis Vuitton bags, ranging from a pink shoulder tote and a tiger-colored "Whisper bag" to a simple bright red clutch.

The one I ordered cost $122 with a $40 shipping fee, so by my definition it was not exactly cheap. But comparable bags sold at a local Louis Vuitton retail store were $1,000 or more.

I entered my Washington D.C. address and credit card information, and instantly got an email from my credit card company warning of possible fraud on my account. Soon, I received a second email, this one a receipt with a Worldwide Express Mail Service (EMS) tracking number so I could follow my package.

The bag left Guangzhou, China on September 14 and arrived on my desk by the 20th. It was wrapped in a yellow sheath with the Louis Vuitton logo and smelled strongly of leather.

But in another sign something was not quite right, the English instructions that came with it read: "Louis Vuitton has created for you prestigious glazed leather" -- the sentence ending abruptly without the word "bag."

I took the bag to a Louis Vuitton store in Chevy Chase, Maryland to see how it compared with the real article. The store clerk, a tall man in a stylish suit, was restrained. "We only talk about our own products," he said icily, adding "we don't have any bags like that."

That Louis Vuitton doesn't want its store personnel to talk about how easily their products can be copied is perhaps understandable. If word got around fake bags were on the street, then people might begin to wonder if their own bags were real. Part of the brand's cachet is its exclusivity, which easily available counterfeits devalue.

Last year, U.S. customs and other law enforcement agents made nearly 15,000 seizures of counterfeit goods, 80 percent of which came from China. Handbags were third on the list, behind consumer electronics and footwear -- the top item for four consecutive years.

"They aren't just selling counterfeit clothing or electronics," U.S. Attorney General Eric Holder told an intellectual property conference in Hong Kong last week.

"They're selling defective and dangerous imitations of critical components, like brake pads, or everyday consumer goods, like toothpaste. They're conducting corporate espionage. They're pirating music, movies, games, software and other copyrighted works -- both on our cities' streets and online. And the consequences are devastating."

When it comes to making counterfeit goods and pirating brands, China is the counterfeit "workshop of the world." Along with a relentlessly widening U.S. trade deficit, which Washington blames on China's undervalued currency, rampant piracy is stoking economic tensions between two of the world's biggest economies.

SHADY FACTORIES

The grubby town of Shiling, an hour's drive from the southern port of Guangzhou, has the biggest leatherworking industry in China. In the 1980s, multinationals from various industries began outsourcing production to factories in the coastal provinces. In this part of Guangdong province, it was leather.

By the late 1990s, low-budget workshops in inconspicuous neighborhoods near the outsourcing factories had sprung up making fake versions of the products. Today, much of Shiling's leather goods are destined for the counterfeit trade.

At one such workshop near Shiling Secondary School, women and their young daughters could be seen cutting and sewing leather by the windows. Lanky men loitered on the ground floor by a "help wanted" poster seeking leather workers, serving as lookouts.

These places are occasionally targeted for police raids.

Zhou She, a private investigator whose job is to sniff out illicit hives of counterfeiting operations, told us about this cluster of workshops, but we must act discreetly, he says.

Walking gingerly around the three-storey shop-house factories and watching men and women pound metal hardware into leather in the back alleys, it feels like we are in a pirates' lair.

Police officials say organized crime gangs, sometimes called triads in this part of China, are deeply involved, given their extensive underground networks. "Of course they are involved. It is very low risk for them," Zhou said.

He works the detective gumshoe routine, spending hours trailing trucks carrying suspected cargo in and out of Shiling, conducting camera surveillance and interviews.

A former Peoples' Liberation Army intelligence officer, Zhou, who has been in the industry for 12 years, has the tanned, leathery skin and sharp crew cut of a military man. His austere presence is betrayed only by a brown, expensive-looking leather purse, which he showed off proudly -- a gift from an Italian client after he found a counterfeit workshop for them.

NOTE:  TO READ THE REMAINDER OF THIS ARTICLE CLICK ON THE LINK BELOW

COMMENTARY:  A friend of mine just received a knock-off of the unlocked Apple iPhone 2 from China. He pulled the SIM card out of his old phone, dropped it into the knockoff Apple iPhone 2 and voila.  It works like a charm.  He paid $42.00 including shipping.  It took a month, but he says it was worth it.   I also know of individuals in LA and Miami who sell Gucci, Fendi and Louis Vuitton handbags that are nearly undicernible from the real thing.    

Greed is good, Knock-offs are good, the real thing is over-priced, and you are stupid to pay $500 to $1,000 for a genuine handbag when a knock-off will cost $75 to $150.  Screw Louis.

Courtesy of an article dated October 28, 2010 appearing in Reuters

 

 

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