No Lack of Fake Luxuries

Cartier, Rolex, DKNY… Brand-name items are all the rage on the streets of South Korean cities. But buyer beware, says this article in the Korea Herald; a great deal of these 'luxury goods' are fakes. Counterfeit items generate billions of won a year in sales, though, because savvy buyers don't seem to care that they aren't getting the real thing. Two out of three university students have bought imitation goods, and demand isn't diminishing. Supply is strong as well, says the article, as the profit margins on fake brand goods can be as high as that on illicit drugs. Top-level government officials worry that complaints by foreign countries over counterfeit brand-name items will damage South Korea's crucial trade relationships, but on the ground not everyone agrees: "Why should Korean officials work for foreign companies that make a pile of money?" asks one customs officer. "With imitations, consumers have access to designer brands they might not otherwise be able to afford." Moreover, experts estimate that about 70 percent of the fakes actually come in from abroad, often sneaked in on shipping containers with extra space. Although the government has launched a campaign to uncover counterfeits and counterfeiters, the article concludes, the battle against fakes will be an uphill climb. – YaleGlobal

No Lack of Fake Luxuries

Jin Hyun-joo
Thursday, June 3, 2004

"Looking for watches, Rolex, Cartier...?" "Clothes, DKNY, Prada...?" "Handbags, Gucci, Louis Vuitton... ?"

"Ppikki` (touts) lure prospective buyers to stalls displaying clandestine counterfeit luxury goods, openly and fraudulently available in counterfeiting hotspots such as Dongdaemun, Namdaemun and Itaewon.

In fact, two out of three university students purchase imitations, according to a study in 2002 by sociology professors of six universities, including Seoul National University.

Endemic counterfeiting in Korea, generating billions of won a year, threatens the relationships with top manufacturers in industrialized countries and the government is working hard to curb fake luxury boom.

"Korea cannot ignore the complaints of other countries because 70 percent of South Korea`s economy is dependent in some way on foreign trade," said a government official.

In an all-out offensive lasting until June 25, authorities have conducted several raids on warehouses to seize stockpiles of fake luxury goods.

Last year there were 5,869 cases of violations and the clampdown has now become more intense. But there is no shortage of counterfeit luxury items for shoppers, and no sign that the trade will be eradicated any time soon.

And, the Internet has been a boon to counterfeiters, allowing them to link suppliers and consumers with ease and anonymity.

Buyers beware. On May 19, top Korean Internet auction sites such as Auction and Gmarket were found to have been involved in a transaction of fake Calvin Klein and AX jeans which netted the seller 550 million won over a two-year period, police said.

A concerned officer at Auction said, "Basically, it is almost impossible for us to supervise all products put up for auction because the transactions are among individuals."

Other websites suspected of being used to supply phony goods to wholesalers are also being investigated, prosecutors added.

High quality counterfeits are almost indistinguishable from the genuine article. When a shopper asks the retailer for an item, he disappears and reappears a few moments later with the fake.

Experts estimate 70 percent of the counterfeit items readily available in Korea come from abroad, with the other 30 percent made in Korea by Koreans. As one of the biggest and best producers of fakes, Koreans churn out replicas that are considered to be of the highest quality.

The counterfeit luxury goods business is comparable in a way to dealing in drugs - it is highly addictive because of the high profit margin. "The money is so good. This market guarantees high revenues, whereas selling generic clothes cannot predicate any big profits," said a street vendor who sells fake Polo goods in Dongdaemun.

An investigator from Polo said, "People might feel sympathy for the poorly-dressed street vendors in Dongdaemun. In fact, they are a lot richer than the prosecutors or policemen who shut them down. In a nutshell, the poor run after the rich." The damage to the reputation of brand names and the cost of anti-counterfeiting measures mean nothing to consumers.

The maximum penalty counterfeiters face is 100 million won in fines and up to seven years imprisonment. But the punishment does not deter many because it`s hard to find a more profitable business than selling fake goods. After paying their fines, counterfeiters are soon back with more fake goods as if nothing happened.

A loophole in Customs regulations opens the door for copycats. To speed up the flow of imports, only up to eight percent of imported goods are disclosed and then examined by Customs officials. A company that regularly imports goods can get an exemption from the inspection process the next time around.

"Counterfeiters bribe someone in a company whose container has extra room into delivering fake goods," said policeman Kim Dae-shik, who has been investigating illegal counterfeit imports.

Consumers do not feel guilty when buying counterfeit goods because they don`t usually think of the damage it causes to the makers of the original; if they do, they feel it is a drop in the bucket of money the company gets from its highly priced goods.

An official at Seoul Main Customs who asked for anonymity went so far as to say, "Why should Korean officials work for foreign companies that make a pile of money? With imitations, consumers have access to designer brands they might not otherwise be able to afford."

Home grown designer brands that cannot satisfy consumer needs also make people want to buy goods carrying luxurious designer names. "I buy counterfeit luxury goods because no other brands have designs like high-end brands. A department store is filled with merchandise that is quite expensive," said a 25-year-old woman who goes to Itaewon once a week to shop for counterfeit designer goods.

While officials stress intellectual property and trademark rights, the gap between the ideal and reality may be too wide to bridge in Korea at this time.

Experts say prosperity is the most effective way to get rid of counterfeits. They note counterfeit luxury items were once the rage in Japan but the demand dropped off as the country became more affluent.

But, as The Economist magazine noted in its May 17 issue last year, "no amount of effort will ever completely eradicate the copycats. For as long as there is consumer demand, companies will find that imitation is the severest form of flattery."

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