By  on April 4, 2007

Online sales of counterfeit goods are soaring, and apparel and accessories companies are fighting back.

An estimated $87 billion worth of counterfeit and gray market goods of all kinds were sold online in 2005, said Andrew Horton, director of product management for MarkMonitor, an online brand protection company based in San Francisco.

About 6 percent of world trade is counterfeit, and roughly 14 percent of the fake goods is sold on the Web, according to a study by the Gieschen Consultancy. Online counterfeit sales had been believed to represent a smaller portion of illegal trade. In 2003, the International Chamber of Commerce estimated that 10 percent of all sales of counterfeit goods were made via the Internet, Horton said.

The most successful and well-known companies, from high-end designers Louis Vuitton and Hermès to hot brands Ugg boots and The North Face, are the most affected. But there is software that helps automate the process of finding and stopping fraudulent sales.

It's easier to fool customers online because they can't examine the goods in person. Often, sellers will use a photo of the real thing (without permission from the company), then send a fake. It's also easier for criminals to hide online, and easier for them to reach a big market.

However, software can help ferret out lawbreakers by automatically tracking Internet domain names and registered owners to help identify counterfeit sites that are related to one another. And eBay recently added more protections to guard against sales of fake goods, including prohibiting sales from China on its U.S. site.

But sellers can get around that by setting up an agent in the U.S.

"If the creativity people use to manufacture counterfeit goods were funneled into more lawful and respectful enterprises, it would be a whole different world out there," said Angelo Mazza, a partner at the New York law firm Gibney, Anthony and Flaherty, who oversees the company's Internet researchers.

Counterfeit apparel and accessories are sold on eBay, other auction sites, classified ad sites such as Craigslist, business-to-business and wholesale sites, in online retail stores and on fly-by-night sites that lure buyers with spam. The problem has worsened because of a wider acceptance of online shopping and a growing appetite for designer branded goods, said Susan Scafidi, an author and law professor at Southern Methodist University who specializes in copyright and intellectual property rights. She also writes the popular blog Counterfeit Chic."As customers go online, the counterfeit sellers will follow," she said. "You reach a larger population, and a population that is getting a lot more fashion savvy. People who would not have heard of these luxury brands before are now very much aware through the Internet and television of these brands. So if the brands are becoming more valuable, then counterfeiting brands is becoming more valuable."

Sales of inferior counterfeit goods can cut into legitimate sales and tarnish a brand's status and exclusivity.

Brands are finding that the deluge of online sales is so great, they need to automate the process to keep up.

Software and services from companies such as MarkMonitor, OpSec, Envisional and others scan the Internet or specific sites such as eBay for brand names. OpSec, for example, has Web-crawling software to find sites that quickly come and go, often called "replica" sites because they claim to be selling "replicas" of designer merchandise. OpSec's software also interfaces with eBay and downloads suspicious listings for its clients to examine.

"We are looking for patterns among sellers who are offering very large quantities of product over time," said Alina Halloran, OpSec director of client services.

Legitimate sellers of used or end-of-season goods are unlikely to have more than a few of the same thing.

Companies such as MarkMonitor and OpSec group the suspicious listings together in one place, such as a portal or dashboard, where select listings can be quickly reviewed by a brand expert, who can then request that the site shut down the sales.

Gibney, Anthony and Flaherty uses OpSec and trade board monitoring software to keep track of sales for four of its clients, which include a well-known fashion company and a luxury watchmaker.

"The time savings is tremendous," Mazza said. The software has halved the time the firm spends scrolling through eBay auctions and cutting and pasting information. The firm is using the saved time to monitor other sites, he said.

On any given day, the firm looks at hundreds or thousands of auctions for each client, but the number varies greatly depending on the company and whether it has a hot item or a long-standing product, he said.Of all the thousands of listings OpSec culls for its 50 or 60 clients, perhaps 10 to 20 percent of them are shut down, Halloran said. Mazza estimated that 25 to 50 percent of listings on auction sites for its type of client are fraudulent. But, he said, "it varies on the product, it varies on the site. It's hard to say across the five to six most popular platforms that you have a stable amount of goods that are counterfeit. That varies widely."

Last year, LVMH filed a suit against eBay alleging that 90 percent of certain of its goods sold on the site were counterfeit.

Jeans company Seven For All Mankind has taken a novel approach to combating counterfeit sales: asking customers.

"We have a form on our Web site under customer service," Barbara Kolsun, Seven For All Mankind senior vice president and senior counsel, said at a WWD panel this year. "It describes in a couple of graphs our counterfeiting problem, where you buy the real thing, where you're not going to get the real thing. Then we have a form they can fill out identifying where they've seen counterfeits."

The company receives a tip about once a week, she said.

"The Internet and auction sites have been an absolute nightmare for luxury brands," she said.

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