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Mario Boselli, scion of a textile empire that dates back to 1586, thinks he has found a way to outsmart the counterfeiters that plague the Italian fashion industry. Sitting in his showroom in Milan, surrounded by racks of avant-garde clothes, he explains how his company makes a sophisticated synthetic fabric called Jungle for Gianni Versace. Suddenly, he gets up and returns with a swath of the intricately patterned jersey. “It’s difficult to copy,” says Boselli. “The printing process is too expensive.” According to Boselli, who also heads the Milan-based Camera Nazionale della Moda Italiana, the leading fashion trade group in Italy, designers have been racking their brains to find ways to thwart copying. Some are even starting to embed microchips in handbags and blouses, he notes. Despite their best efforts, however, most haven’t been able to outwit the counterfeiters. Of course, fakes are hardly new in the world of designer fashion, but the problem lately has reached epidemic proportions. The First Global Congress on Combating Counterfeiting reported in 2004 that worldwide trade in counterfeit goods had reached $450 billion. In Italy alone, the counterfeit market is valued at $6.4 billion, of which 60 percent comes from fashion products, according to the Milan-based anti-counterfeit group Istituto di Centromarca per la Lotta Alla Contraffazione (INDICAM). The group estimates that Italy has lost more than 40,000 jobs in the past decade because of lost sales due to counterfeiting. According to the Associazione Imprese Italiane Alta Gamma (commonly called Altagamma), a Milan-based association of high-end Italian makers of designer goods, worldwide production of fakes has jumped 1,700 percent since 1993. What’s more, the quality of the fakes has improved. They used to be poorly made and easy to spot. But the newer counterfeits are made in modern Asian factories with astonishing precision and speed. “Instead of producing 500 bags a week, [Chinese manufacturers] are making 25,000 a week,” says Armando Branchini, Altagamma’s secretary-general.
There are plenty of reasons the Italian high-fashion industry finds itself overwhelmed. For starters, both the design houses and the Italian authorities have been slow to react to counterfeiting. Until recently there had been a grudging acceptance of fakes. Designers regarded the poor-quality imitations as minor nuisances, and law enforcement had other priorities besides waging war on behalf of makers of luxury goods. But now, faced with better fakes, the industry and the Italian authorities are taking the fight more seriously, pursuing criminal charges against counterfeit producers, using the customs system to monitor illegal shipments, and raiding producers and sellers of fake goods. So far, none of these methods has significantly stemmed the tide of illicit luxury goods. The problem, say some industry experts and lawyers, lies less with the available remedies and more with the structure of Italian fashion houses. They tend to be secretive, eccentric, and driven by a single personality. To win the war against counterfeiters, the fashion houses must be better organized, more unified, and much more businesslike. In other words, a major revamping of the anachronistic world of Italian high style is needed. The independent, family-based business has become a liability in an age of meticulously managed global brands. Today the design houses almost never band together to pursue a counterfeiter, even when a container full of fakes is discovered in customs. Companies will instruct their lawyers to proceed only when the quantity of fakes is significant (about 100 pieces), says Flavia Cassara of the Milan law firm Rapisardi, which specializes in intellectual property. Part of the reluctance is logistical: It’s rare to find a big cache of fakes of just one designer; each shipment usually contains an assortment of faux Pradas, Fendis, Guccis, and the like. But the psychological barrier to cooperation is even higher. The fashion houses guard their secrets closely and are loath to expose their weaknesses to rivals. “The only way to fight is for the companies to work together, but they won’t,” says Cassara. “It’s hard to convince them.”
The danger posed by easily available counterfeit goods is twofold: They cut into sales, and they sabotage the company’s image and brand. Giorgio Brandazza, co-director of the master’s program in fashion at Milan’s Bocconi School of Management and a former chief operating officer of Calvin Klein Asia, explains that companies spend millions to create an aura of exclusivity around their luxury products. “Part of the mystique for consumers is the difficulty in buying,” he says. Until just a few years ago many designers felt that counterfeits did not really eat into their market because the inferior copies only attracted buyers who couldn’t afford the real thing. But with the advent of more sophisticated digital technologies, some copies have become much better. “There are different levels of counterfeits,” says Stefania Saviolo, the other co-director of Bocconi’s fashion program. She cites an example: At Forte dei Marmi, a tony Tuscan resort, well-done counterfeit handbags are being sold through private, word-of-mouth sales. These knockoffs typically sell for $300; the real versions retail for $1,300. The luxury-watch market is particularly hard-hit. The industry estimates that two-thirds of the luxury timepieces sold around the world are fakes, says Frederic Lejosne, managing director for Italy of Gucci Watches. “We could have twice the sales [but for the counterfeit market].” The big problem for oft-copied watch brands such as Gucci, as well as the prestigious Swiss makes, is that the imitations are exceptionally good. “I can’t even tell the difference at times. They get every detail — right down to the gift box,” says Lejosne. Some consumers are unwittingly buying fakes, and that hits the company’s sales directly, he adds.
After years of lackadaisical enforcement, the Italian government is getting somewhat more serious. Until a few years ago Italian authorities considered counterfeit crimes “secondary,” says Francesca Negri, a lawyer with Rapisardi. But there’s growing evidence, often cited by industry watchdogs Interpol and the D.C.-based International AntiCounterfeiting Coalition, that organized crime and even some terrorist groups use counterfeits to launder money. As a result, says Negri, prosecutors are now investigating counterfeiters more aggressively. Moreover, there are new laws in Italy aimed at curbing counterfeits. “Made in Italy” legislation is designed to ensure that only goods actually made in the country bear that label. Another law fines consumers who buy illicit designer goods several times the retail price of the originals. But though there were some well-publicized incidents of tourists being slapped with hefty fines in Venice and the Riviera, says Negri, this statute is seldom enforced. Having tough anti-counterfeiting laws on the books but not enforcing them is typical of Italy’s ambivalent attitude, critics argue. “We have good laws in Italy, but they are not always applied,” says Branchini of Altagamma. So far, the most effective tool in stemming counterfeits is the effort of customs officials to monitor incoming shipments — especially those from Asia. (INDICAM estimates that 70 percent of counterfeits sold in Italy come from Asia, with China in the lead, followed by South Korea, Thailand, and Taiwan.) Companies are establishing direct links to customs officials, says Lorenzo De Martinis, a partner in the Milan office of Baker & McKenzie. “You have to react immediately once you get a call from customs about suspected goods,” notes De Martinis, who represents Giorgio Armani and youth brand Guru.
Tracking counterfeits and intercepting them at the border is expensive and time-consuming. So frustrated designers are beginning to tap their own creativity to thwart fakes. They’re changing their products to make copying designs more difficult, as Boselli’s fabric company does. Other designers are using the fickle nature of fashion itself as a weapon. Companies are changing designs quickly, giving them a three-month life span and betting that counterfeiters can’t keep up, says De Martinis. As an example, he cites his client Guru, a hugely successful clothing brand in Europe that’s owned by the Parma-based Jam Session Srl. Though its T-shirts with the distinctive daisy motif put the Guru label on the map, the company doesn’t always go after those who copy that design because the daisy “is already considered old-market,” says De Martinis. But what are the odds that fashion and luxury-goods companies can really outsmart the fakes? If the luxury-watch market is any indication, counterfeiters are still ahead of the game. At the annual watch trade fair in Basel, Switzerland, counterfeiters regularly photograph the watches on display and reproduce them, down to the last detail, in less than a week’s time, says Gucci’s Lejosne. He adds, “I guarantee you what’s shown at the start of the show will be selling outside of the trade grounds or on the Internet by the end of the fair.” For the moment at least, Italy seems to be losing the battle. “You can put serial numbers on your products, put holograms on them, send for the police, but at the end of the day, there’s not much you can do,” sighs Brandazza. “It’s part of the game.” Others in the fashion trenches are not quite as fatalistic. In the next 10 years, predicts Gabriel Cuonzo of the Milan law firm Trevisan & Cuonzo, the fashion houses will finally join together to pool information and wage joint anti-counterfeiting efforts. Maybe. But to get there, the Italian fashion houses will have to adopt a more global outlook. If the counterfeiters in China are running their operations with large factories and 24-hour operations, the days of running a fashion empire on the whims of one individual are probably over. “Fighting counterfeits is a business problem and requires a business approach,” says Cuonzo. “Sooner or later, you need to think like a multinational.”
Vivia Chen is a freelance writer based in Milan, Italy, and a former editor at Corporate Counsel , an ALM publication based in New York where this article first ran.

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