DELOITTE
18 December 2007
Counterfeit Luxury Goods Can Bring Tough Penalties And Fines
Consumers found with counterfeit goods on their return home from foreign trips could face tough penalties, according to business advisory firm Deloitte.
Neil Hargreaves, counterfeit specialist at Deloitte in Leeds said: “Those travelling to Europe - the home of the major luxury brands - in the run up to Christmas may be tempted to buy fake goods. Buying handbags, jewellery and watches as gifts can be an easy option as size is not an issue. Also these items can be worn on many occasions and some will see them as a worthwhile investment.
“But counterfeiting is taken seriously. In France for example, travellers are reminded that the purchase or possession of counterfeit goods is punishable by a fine of up to €300,000, about £200,000, although in practice the fine is often around double the value of the ‘genuine article’. In Italy, the situation is much the same with fines for purchasing a single counterfeit item reaching as much as €10,000, or about £7,000.”
Retailers are also likely to feel the pinch as a result of the demand for luxury with the UK market for counterfeit goods expected to reach £14 billion this year, up 10 per cent on 2006*.
According to the Deloitte Christmas Retail Survey 19 per cent of consumers surveyed intend to buy a designer handbag or shoes as a gift for friends and family this year. A further 19 per cent also have designer items on their Christmas wish list and 31 per cent of these are women aged 16-31. Sixty six per cent of people expect to buy clothes as a gift for someone this year, while 53 per cent are planning to purchase jewellery.
Most fake goods are manufactured in the Far East and South America. Market stalls and auction sites are a major source of fakes. The most popular counterfeit goods are clothing, followed by shoes, watches and leather goods and jewellery.
“Many consumers are not aware of what happens when they hand over money for fake goods or the implications,” said Mr Hargreaves. “Counterfeiting is often run by highly organised criminals. Selling counterfeit goods can be a highly profitable crime and a low-risk way of raising funds for more serious criminal activity. In the UK alone it costs the economy in the region of 4,000 jobs a year*.
“Most luxury brands have extensive anti-counterfeiting programmes in place and use private investigators, lawyers and accountants to work with local authorities and custom agents to combat the manufacture, sale and export of fake products.”
The global luxury market looks set to continue its recent strong growth but serious challenges remain around how brands can become more assertive in protecting their reputations and profit margins from counterfeiting. The Leeds office has now expanded its forensic accounting team to seven to meet the demand for its services from clients, including brand owners both in the UK and internationally anxious to combat the problem and protect the integrity of their brand.
“To maximise growth many luxury brands have established franchise and licensing networks to expand quickly into new markets,” said Mr Hargreaves. “Markets such as India and Russia present huge opportunities for high end brands. However, caution should be exercised, make this move unwisely and it can be detrimental to the positioning of the brand through the lost control of both product and distribution beyond domestic markets.
“Luxury brands can take steps to preserve integrity and combat sale and distribution of counterfeit goods. Attention must be paid across an organisation’s weak spots. Licensing and distribution agreements must be water tight and security gaps in the supply chain need to be plugged and regular checks carried out across the distribution networks around the world.”
Mr Hargreaves said brand owners, trading standards, law enforcement and other agencies must adopt an organised approach to fight back against those who are defrauding consumers and rights owners. Ends
For further information please contact:
Les Able at Appeal PR 01423 569999
*A report by law firm Davenport Lyons published in 2007
*According to the Anti-Counterfeiting Group
About this survey
The survey findings were based on consumer data obtained by market research undertaken by TNS on behalf of Deloitte. Over 1000 adults aged 16+ were interviewed on 31 August 2007 - 2 September 2007. The respondents were selected according to a quota sample designed to be representative of all UK adults. Replies were also received from questionnaires sent out to over 350 of the United Kingdom’s retailers. The retailers were from a cross-section of the industry.