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Italian Hosiery Companies Fight Fraudulent Labeling

Industry fraud has financial as well as health implications.

Struggling under the weight of foreign competition and the high cost of raw materials, the Italian hosiery industry is standing pat. Companies located near Lombard cities Brescia and Mantova are banding together to fight what they see as the biggest problem among many: fraudulent labels.

“We are talking about a problem that has two parts,” said Davide Bonassi, secretary general of Associazione Distretto Calze e Intimo, or A.Di.Ci, an association of hosiery and intimates companies that includes Calze Ileana, Calzificio Nuova Virgiliana, Charme Legwear and Gizeta Calze, among many others. “On one hand, false declarations of fiber content create unfair competition and are fraudulent to clients. On another hand, there’s the presence of carcinogenic or irritating dyes.”

A third factor is the denier: some companies are declaring a high denier level and using a lower one, thereby saving on raw materials and cutting costs, Bonassi explained. The trickery gives competitors a price advantage when selling to retailers. “Bad money drives out good. Small producers aren’t able to bring home orders,” he said. “There’s nothing to be done: you don’t bring orders home, and then you can’t pay salaries.”

He added that in the last few months alone, about 50 small, specialized laboratories in Lombardy had shut down. “Our goal is to make retailers assume some responsibility. Buyers cannot [ignore what’s happening] and only look at the price.”

To illustrate the problem, A.Di.Ci members purchased a random sampling of hosiery from local supermarkets and submitted the selection for fiber testing at the Associazione Tessile e Salute di Biella, or Health and Textile Association, an independent group dedicated to consumer safety and transparency in the textile industry. The association found that “in some cases, the fibers on the labels did not correspond [to actual fiber content] or were even missing entirely,” said Bonassi.

The Health and Textile Association had already been studying the matter in its laboratories, having determined that 7 to 8 percent of dermatological diseases in Italy stem from use of imported textiles and footwear. “Based on our tests, the mislabeled products were all imported from outside the European Union,” said the association’s director Mauro Rossetti. While he did not have a precise breakdown of such countries, he said the Far East was a main source.

He noted that the current list of banned substances in the EU textile industry is limited, and a more comprehensive list would better protect consumers.

Some examples of chemicals the EU does not allow on textiles include Azo dyes that can release aromatic amine groups that may be carcinogenic, and dyes that are proven carcinogens or allergens. The EU has also banned plasticizers, heavy metal compounds and some detergents and preservatives.

Most frequently, problem chemicals cause rashes and allergic reactions, he said, although in rare cases the substances are known to cause cancer.

Cesare Galli, an intellectual property lawyer whose clients have included fashion companies, said Italy and the EU have a variety of laws in place to fight counterfeit products and labels.

“In the most serious cases, it’s a crime subject to heavy sanctions, in the case of so-called ‘fraud in commerce,’ which is to say that through a false label you convince consumers to buy something they otherwise wouldn’t buy,” he explained, noting in Italy the penalty was a hefty fine and up to two years in prison.

Further, Galli said the EU set up guidelines in 1996 that required fiber percentages to be listed in detail on labels, and violating these rules leads to administrative sanctions and penalties for unfair business practices, punishable in Italy by fines from 5,000 to 500,000 euros, or about $6,660 to $666,000 at current exchange.

“All of this works if on the other side I have a company or an entrepreneur,” said Galli. “But if on the other side I have a character who imports merchandise from unlikely countries, whose whole business [is in a closet] with a fax, phone and computer, and who disappears when attacked, only to pop up somewhere else — it’s clear that this is a problem.”

The enforcement of existing EU-wide rules poses another dilemma, as the strictness of customs agents at EU borders varies by country, which can lead to problems of “traffic deviation,” when products enter one country with the goal of reaching another: once on EU territory, goods are no longer subject to border controls.

To fight fraud, the Italian Customs Agency created FALSTAFF, or Fully Automated Logical System Against Forgery Fraud, a multimedia database that allows firms to provide detailed information about their products so customs agents can better detect counterfeit items and zero in on where they are most likely to appear. The Italian Customs Agency’s technological and antifraud departments jointly run FALSTAFF.

A single company can have numerous product forms, and these help customs agents “analyze the risk” posed by a specific import, said Maria Laura Comito, an innovation and central technology officer at ICA. The agency assigns four risk levels to merchandise: green, which means no further inspection is needed; yellow, which requires that documentation be reexamined; orange, which requires scanning the merchandise, and red, which leads to a thorough physical examination of the products.

Comito said the EU is working to guarantee a consistent level of control throughout its territory. The Italian Customs Agency, meanwhile, is striving to raise awareness among consumers of the risks posed by mislabeled and counterfeit products, through a Web portal called Falsobook (“Fakebook”), which contains posts about how to recognize fake merchandise.

“People often think counterfeiting is a minor crime,” she said. “But we’ve seen that there are health and safety risks, even in the textile sector, with carcinogenic substances or items that cause allergic reactions.”
Attorney Galli added, “It can seem like a paradox, but right now a country like Italy is much more sensitive to these issues, probably also because it’s a manufacturing country, and as [such] it suffers more heavily from these phenomena compared to other countries.”

He suggested that the EU “extend control measures also to merchandise in transit,” to prevent goods from being falsely declared missing or stolen en route to countries outside Europe, and thereby entering the market without a trace.

A.Di.Ci supports the Health and Textile Association’s proposal for an Italian national observatory: a sanitary surveillance and general reference point for the textile, clothing, leather and footwear industries. The association has invited the Ministries of Health and Economic Development, as well as the Chamber of Commerce system, to take part. Stated goals include the promotion of European REACH regulations — Registration, Evaluation, Authorization and Restriction of Chemical substances — within and outside EU borders, and promoting “reciprocity between the states of the provisions on the safety and ecology of the articles.”

Bonassi also spoke of A.Di.Ci’s desire to create a district research center where Italian artisans can pool their years of accumulated know-how and support each other.

“The area needs to be a team, to unite with a common purpose,” he noted. When businesses shut down or move, he said, the district loses its creative sparkle, and promoting hosiery that is Made in Italy becomes that much harder.