The Fight Against Fakes Online

You may think you're getting a bargain when you buy online, but the truth is, the Internet can be a worldwide web of counterfeits.

When Ashley* heard about Louboutinmall.com, a Web site offering deep discounts on the red-soled heels she coveted, she couldn't believe her luck. "A former colleague of mine referred me to the site. This woman had the best taste in shoes, so I trusted her," she says. "I found a pair of classic black slingbacks for $250, and I whipped out my credit card. When they arrived, I noticed the craftsmanship was sloppy." Suspecting her shoes might be too good to be true, Ashley revisited the site, now under a new domain name. She was unable to contact customer service. The return policy was "a joke." "Now," she says, "I am the not-so-proud owner of fake Louboutins."

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Thanks to the Internet, a world of fake goods is at our fingertips. The International Chamber of Commerce has estimated that 7 percent of our annual world trade — more than $600 billion — is in counterfeit or pirated goods. Experts believe that the fake trade costs legitimate businesses up to $250 billion in lost revenue every year in the U.S. alone.

Luxury brands — especially coveted names like Fendi, Louis Vuitton, and Gucci —are the fastest-growing targets for counterfeits on the Web, according to MarkMonitor, a San Francisco —based company that works with brands like True Religion, Levi's, and Ugg Australia to combat the sale of fakes online. In 2009, the luxury-goods industry saw a 23 percent increase in online abuse, including "cybersquatting," the term given to Web sites that unlawfully incorporate a brand's name into their domain name and sell counterfeit versions of their products.

Recently, a young mother from a suburb of San Francisco found herself in court. Her crime? Selling counterfeit handbags from her home via the Internet. She found all of her merchandise on the Internet, from counterfeit bags and boxes to fake receipt templates. "What was striking about this case was how young and average a woman the defendant was," says attorney Susan Kayser, a partner with Howrey in Washington, D.C., and lead counsel for the plaintiff in the case. "She wasn't a bad person. When the authorities came to her home with a search warrant, she was crying, holding her child in her arms. I don't think she realized the significance of her actions." Those actions got her sued for millions of dollars in civil damages.

It's increasingly easy for counterfeiters with little experience to build a site that looks and functions like a major company's Web site," says Rob Holmes, CEO of IPCybercrime, a firm that investigates online theft on behalf of numerous industries. "We often see Web sites that are almost perfect duplicates of the real brand's site. This causes confusion when a consumer is trying to buy the real thing."

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Despite prosecutors' efforts, Web sites offering suspect merchandise crop up every day: 2010shoesfzfz showcases Louboutin and Manolo Blahnik shoes for little more than $100, compared with the real retail price tag of $500 and up. Allthebesthandbags.com touts "replica" Vuitton and Miu Miu bags from $159. (The site even boasts that it's one of the "largest fake handbags merchants" on the Web.)

But if fake sites are so easy to spot, how come they're so hard to stop? "Enforcement on the Web is frustratingly slow," says Heather McDonald, a partner at Baker Hostetler in New York who specializes in intellectual-property enforcement and anticounterfeiting litigation on behalf of luxury brands. Most often, online counterfeiters are operating outside the U.S. in countries where copyright laws are more lenient and manufacturing comes cheap. "If a designer wants to go after a fake site and file a proceeding, they'll win their case, but it will take time," McDonald says. "In the meantime, counterfeit sites often stay up and running."

The Internet has omitted dark alleys and basements from the buying equation, allowing consumers to browse and purchase and sell fake goods from the safety of their living rooms. But that doesn't mean customers aren't putting themselves in danger when they pay for counterfeits online. A few years ago, John Margiotta, a partner at the law firm Fross Zelnick in New York, was in on a raid in which five different households were selling phony watches over the Internet. Authorities discovered dozens of notebooks strewn about the homes with buyers' credit-card numbers and security codes as well as their addresses. "I found it incredible that people were so naive about protecting their personal financial information," Margiotta says. The information could have easily been sent via free, public, unsecured e-mail accounts to the counterfeit suppliers in China.

Many brands are taking a stand against these sites by hiring online protection services. "Our job is to thwart the counterfeiter from being able to make smooth contact with customers," says Frederick Felman, chief marketing officer of MarkMonitor. "We monitor where and when our clients' names are popping up online. If they are part of domains that seem suspect, we work with our clients to report them to search engines and, in many cases, get the sites shut down. We are able to stop up to 90 percent of this kind of abuse across the Internet on behalf of our clients."

Whether or not consumers are knowingly purchasing fakes, the only sure way to get the real thing is to buy that handbag or pair of shoes on a reputable site. "The Internet is a huge buyer-beware forum," McDonald says. "If you're not purchasing a luxury brand from its official Web site or an authorized online retailer, it's highly likely you're buying a fake." And nothing is more fashionable than the real thing.

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