By  on April 17, 2008

Fendi has settled a counterfeiting lawsuit against Big M Inc., the owner-operator of the Annie Sez nameplate, warning that if a retailer doesn't purchase directly from the Italian luxury firm, there is a risk the goods are fakes.

"We are dealing with criminal activity and criminal enterprises at the manufacturing and distribution levels," Fendi chairman and chief executive officer Michael Burke said in a telephone interview from Vietnam. "Every retailer has to be vigilant about where they are buying from."

Fendi sued Big M in 2006 in Manhattan federal court, alleging that Annie Sez was selling counterfeit Fendi-branded handbags.

In a settlement disclosed Wednesday, Big M agreed to pay Fendi an undisclosed amount. In addition, a permanent injunction prohibits Big M from buying or selling any Fendi-branded product in its stores without Fendi's written permission.

Burke, who was in Ho Chi Minh City, formerly Saigon, because the company is considering opening a store there, said it has become tougher to fight counterfeiters because they are more sophisticated with globalized operations.

Complicating matters is the presence of so-called gray goods, or parallel imports. They are legitimate merchandise distributed through channels not authorized by the original manufacturer. While there is little recourse in the U.S. against gray market goods, Fendi is active in fighting counterfeit merchandise.

Burke emphasized that the Italian firm manufactures product only after it has received orders, one way of controlling how much merchandise is produced and where it will be sold. Small leather goods and handbags are manufactured in its own factory in Florence, and even the components used to assemble the product are kept under strict controls, with multiple safeguards in place.

A lot of counterfeit product is manufactured in China and shipped to Italy for transfer to other countries bearing fake invoices, Burke said. "Naples is a problem," he added. "The port in Naples is notorious for not being able to police products coming in and leaving."

Fendi also works with its parent, LVMH Group, as well as some of its luxury competitor brands, in fighting counterfeit merchandise sold by illegal retailers, such as those who work out of locations on Canal Street in Manhattan.

Richard Mattiaccio, an attorney representing Fendi counterfeiting cases, said retailers need to understand that if they're not purchasing directly from the company, there should be an "alarm bell" triggered that the product might be fake.

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