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PARIS — Hermès International said the French national police dismantled an international crime ring that produced counterfeit versions of several of its bags with the help of the luxury house’s employees.
This story first appeared in the June 18, 2012 issue of WWD. Subscribe Today.
“This operation concludes a one-year investigation following an Hermès complaint based on clues and abnormal behavior identified through the house’s internal monitoring systems,” the company said.
Two Hermès employees have been dismissed as a result of the probe, but the company believes that several current members of staff could also be involved. The bags were sold through a parallel distribution network in Europe, the U.S. and Asia, it added.
A dozen people are believed to have been arrested in the bust on Thursday, during which police discovered clandestine workshops filled with precious leather skins. The Paris public prosecutor was said to have estimated the value of sales by one branch of the ring alone at 18 million euros, or $22 million at current exchange.
“Hermès is very satisfied with the efficient and diligent collaboration established with the national gendarmerie in this case and reiterates its relentless commitment to fighting counterfeiting,” the company added. “This action puts an end to the fraudulent project in progress.”
Counterfeiting costs France 6 billion euros, or $7.5 billion at current exchange, in lost revenue every year, according to the French National Anti-Counterfeiting Committee, or CNAC. French luxury goods association Comité Colbert recently unveiled a new campaign against counterfeiting that uses tongue-in-cheek slogans to raise awareness of the issue among travelers in airports.
Famed for its Birkin bags and silk scarves, Hermès has stepped up its public statements against counterfeiting in recent weeks.
In an interview with WWD last month, Hermès chief executive officer Patrick Thomas called for Internet service providers, search engines and social media sites to be held accountable for providing their services to companies selling fakes. “Eighty percent of objects sold on the Internet under the Hermès name are fakes. It’s an absolute disgrace,” he said.
A U.S. court recently ordered 34 Web sites peddling counterfeit Hermès products to pay the company damages of $100 million. Asked by a shareholder at the company’s annual general meeting on May 29 how long it would take to receive the payment, Thomas replied: “Eternity.”
Even with the difficulty of recouping damages, brands have pressed on in the battle against Internet counterfeiting since it has become the primary focus of illegal activity. In May, Deckers Outdoor Corp., the maker of Ugg boots, was granted a $686 million judgment in a Northern Illinois court against 3,007 China-based counterfeit Web sites selling fake Uggs.
In the same month, Burberry scored a $100 million judgment in Manhattan federal court against a network of Chinese cybersquatters, who used a variety of domain names to sell fake Burberry goods. Judges in the Hermès, Burberry and Deckers cases in the U.S. all ordered third-party sites and payment processors such as PayPal Inc. to pay the brands any cash held over from pending transactions. Part of the reasoning behind this decision is that it is extremely difficult to track down Web operators located overseas, and thus hard to obtain monies from them.
Even with that remedy, brands aren’t likely to collect anything close to the full judgments they are being promised by the courts.
“I think what the courts are finding in all of these cases is that the defendants are acting in complete disregard of the law,” said Joseph Gioconda, the lawyer who won the $100 million judgments for both Hermès and Burberry.
Gioconda, who is representing Michael Kors Holdings Ltd. in a similar kind of cybersquatting case in Manhattan federal court, noted that the more brands fight against Internet counterfeiters, the more courts will adapt new strategies to help combat these criminals.
“These cases have made the courts more aware of the plight of counterfeiters,” he said. “At the very least, it’s made courts quicker to act.”