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Fakes and Fraud

By Adrian Lane

I got acquainted with something new this week: Women’s fashion and knock-offs. And before you get the wrong idea, it’s close to my wife’s birthday and she found a designer dress she really wanted. These things are freakishly expensive for a piece of fabric, but if that is what she wants, that is what she will have. I have been too busy to leave the house, so I found what she wanted on eBay at a reasonable price, made a bid and won the item. When we received our purchase, there was something really weird … the tag said the dress was “100% Silk”. But the dress, whatever it was made out of, was certainly not silk, rather some form of Rayon. And when we went to the manufacturer’s web site, we learned that the dress is not supposed to be made from silk. I began a stitch by stitch examination of the dress and there were a dozen tell-tales that the dress was not legitimate. A couple Internet searches confirmed what we suspected. We took the dress to a professional appraiser who knew it was a fake before she got within three feet of it. We contacted the seller who assured us the item is legitimate, and all of her other customers were satisfied so she MUST be legitimate, but she would happily accept the item and return our money.

The seller knows they are selling a fake. What surprised me was (and that is probably because I am a dumb-ass newbie in ‘fashion’) the buyer typically knows they are buying a fake. I started talking to some friends of my wife’s, and then other people I know who make a living off eBay, and this is a huge market. Let’s say a buyer pays $50.00 for a bad knock-off, and a good forgery costs $200. The genuine article costs 10x that, or even 20x that. The market drives its own form of efficiency and makes goods available at the lowest price possible. The buyers know they cannot ever afford the originals, so they buy the best forgeries they can afford. The sellers are lying when they say the items are ‘Genuine’, but most product marketing claims are lies, or charitably put, exaggerations. If both parties know they are transacting for a knock-off, there is no fraud, just happy buyers and sellers.

To make a long story short, I was staggered that there is huge in-the-open trade going on. Now that I know what to look for, perhaps half of the listings on eBay for items of this type were fake. Maybe more. I am not saying that this is eBay’s fault and that they should do something about it: that would be like trying to stop stolen merchandise being sold at a flea market, or trying to stop fights at a Raiders game. Centuries of human history have shown you cannot stop it altogether, you can only hope to minimize it. Still, when eBay changed their policy regarding alleged counterfeit items, it’s not a surprise. It is a losing battle, and if they are even somewhat successful, the loss of revenue to eBay will be significant.

I admit I was indignant when I realized I bought a fake, and I started this post trying to make the argument that the companies producing the originals are being damaged. The more I look at the information available, the less I think I can make that case. Plus, now that I got my money back, I am totally fine with it. If .0001% of the population can afford a dress that costs as much as a car, is the manufacturer really losing sales to $50 fakes? I do not see evidence to support this. When Rich and I were writing the paper on The Business Justification for Data Security, one of the issues that kept popping up was some types of ‘theft’ of intellectual property do not create a direct calculable damage, and in some cases created a positive effect equal to or greater than the cost of the ‘loss’. So what is the real damage? How do you quantify it? Do the copies de-value the original and lower the brand image, or is the increased exposure better for brand awareness and desirability? The phenomenon of online music suggests the latter. Is there a way to quantify it? Once I knew what to look for, it was obvious to me that half the merchandise was fake, and the original manufacturers MUST be aware of this going on. You cannot claim each is a lost sale, because people who buy a $50 knock-off cannot afford a $10,000 genuine article. But there appears to be a robust business in fakes, and it seem to drive up interest in the genuine article, not lessen it. Consumerism is weird that way.

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Comments

I think you hit a great point, and I agree I doubt the premium luxury dressmakers are really not losing sales and instead are just solidfying interest in their product and even the premium nature of it.

You’re tempting me to tie this into movie/music industry practice, “not-really-lost-sales” and prliferation of interest, but I’ll hold back. :)

By LonerVamp


Consumerism is very weird. Who in their right mind would pay $10K for a piece of clothing?

By Rob


A couple of years ago my wife inadvertently bought a fake Kate Spade purse at a purse buying party in a friend’s home. At the time, I had previously bought my wife a couple of real Kate Spade items (wallet and bag), so I had a general idea of what the real item looked like. When she pulled the purse out of the bag, I immediately said, “That’s a fake.” We did some research online and determined that it was. The price is a dead give away, but then the quality of the material was also a tale-tell sign. A couple months later, I got her a real Kate Spade purse for Christmas. The fake sits in the closet.

By Jason Broccardo


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