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Luxury goods makers declare war on China counterfeits

By Simon Pitman , 07-Mar-2006

The counterfeiting of high-end cosmetics and fragrances in China is big business and it is hitting luxury goods makers hard. But they are now fighting back harder too, and if a recent lawsuit involving Louis Vuitton Moet Hennessy Group (LVMH) in Beijing is anything to go by, the China authorities are starting to lend more support, too.

A Chinese court recently handed out prison sentences and heavy fines to two men who were found guilty of exporting illegal copies of perfumes that are patented by LVMH.

The move is unusual and many industry experts believe that it could be a sign that, after years of lobbying by the luxury goods industry, the China authorities are starting to make moves towards clamping down on the practice.

 

According to reports in the China press, a court in Nantong, a small city near Shanghai, handed out a four-year prison sentence to Lebanese national Elbadoaoui Riad Mustapha together with a €60,000 fine, and gave a three-year sentence and a €30,000 fine to his business partner, Chinese national Chen Jun.

 

The pair were accused of attempting to ship a container of perfumes to an unspecified overseas location with a market value of up to €500,000.

 

International law firm Lovells has represented LVMH in a number of its legal battles against counterfeit goods in China, although it was not directly involved in this particular case. However, the firm does see this particular case as being an indicator that attitudes to counterfeit goods are changing in China.

 

"Counterfeiting is being taken more seriously by the government, but this is due in part to lobbying efforts by all famous brands and their governments," Douglas Clark, partner at Lovells Shanghai office told CosmeticsDesign.com.

 

Western luxury goods manufacturers have long battled the onslaught of cheaper counterfeit goods into markets where they are often sold at a fraction of the price. But inferior ingredients and packaging can damage reputations that have been built around quality and reliability.

 

"All counterfeiting is a threat to a brand," Clark added. "The improved quality and increasing international reach of counterfeiters increases the risk."

 

However, it is not only cheaper illegal imports of counterfeit goods into western markets, with the growth of the China retail market, counterfeit goods are also posing an increasing risk to sales in China.

 

The new-found wealth of China's consumers has led to a huge leap in awareness of luxury brands in the country, making premium brand cosmetics and fragrances highly desirable purchases.

 

But with average wages in China still very low compared to developed countries, the only way the vast majority of consumers can get their hands on such items is by buying them in vast street markets that often harbor a full range of counterfeit products.

 

But luxury retailers are fighting back on this front, too. Recently Chanel, LVMH, Prada, Burberry and Pinault-Printemps-Redoute Gucci successfully sued a market stall holder in Beijing for copyright infringement on a full range of counterfeit goods.

 

This was another landmark case and one that targets a brazen infringement of luxury retailers copyrights on a daily basis all over China. Although the lawsuit only scratches at the surface of this vast industry, it is hoped that it will act as an example and a future deterrent to others.

 

The manufacturing of such goods is probably always going to exist to some extent or another, but the very fact that these two lawsuits have been successfully carried out in the China courts does indicate that the authorities in China are making some inroads towards keeping tighter reins on this vast industry.

 

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