Fakes, Damned Fakes, and Fendi

Fendi and Wal-Mart have have come to a settlement over the counterfeit Fendi bags and small leather goods that were being sold in Sam's Club stores. Wal-Mart initially denied that the bags were fakes, claiming they bought them from a legitimate third party. Eventually, Fendi convinced them that the bags were indeed fakes and that the third party supplier was operating illegally. These days, telling a real bag from a fake involves a lot more than counting stitches or looking to see if the LV logo runs into the seams. When real product enters channels that it is not supposed to be in, it is called grey goods.

How do these goods get out? It depends. Sometimes factory owners who are contracted to make bags for someone like Fendi will simply make a few more than they were supposed to and sell them off to a wholesaler. That's illegal. But when an authorized retailer that bought too many items wants to hock them at a warehouse store, it's not illegal. (Though the brands don't like it.)

Fendi still has suits pending against several other retailers. A lawyer for one of them, Austin Reed, told WWD:

"Ashley Reed buys goods predominantly from the factories that make authorized Fendi products or in some cases buys overstock from retailers who purchased directly from Fendi. Ashley Reed [representatives] inspected the goods at the factory in Italy and met with a Fendi quality controller."

Alternatively, product is stolen from the factory (or warehouse or delivery vehicle) by employees who then sell it on. (A friend of mine who was bidding on a very expensive Vuitton bag on eBay -- a real one -- was contacted by such a worker, who offered to get him one of the bags from the factory. He turned the guy in.)

And then there are real fakes.

An executive from a major jeans brand told me that shortly after they opened their first factory in China, another factory opened nearby. It had the same machines that his factory had, and bought materials from the same supplier. The jeans they produced had the same brand name on their label as the one on his. The only real difference in the two products was where the profits were going. In one case, to an already rich family who spent years building the brand and in the other ... to, well, who knows? Intellectual property lawyers and luxury goods executives are quick to point to links between counterfeit goods and child labor, money laundering, and even terrorism.

Harpers Bazaar has jumped on the anti-counterfeit bandwagon. (After all, if the profits aren't going to the brands, then the ads aren't going to the magazines.) This spring they launched the website FakesAreNeverInFashion.com, and they sponsor yearly seminars on the subject.

Several of the luxury executives working in intellectual property got together to start the Teacher of Ten Thousand Generations Foundation. Otherwise known as the Confucius Foundation, it puts children who were put out of work by factory raids in school.