Counterfeit Luxury Goods Sales - Financial Times

Counterfeit goods are regularly being bought by well-off consumers in Britain, according to new research that contradicts the widely-held industry belief that fakes are targeted at low-income shoppers.

Many luxury brand owners have been reluctant to take action against counterfeit traders in the UK in the belief that the stereotypical buyers of fakes would never purchase their products anyway.

But research from Davenport Lyons, a law firm that acts for many household name brands, has found that people who buy counterfeit clothes, watches, shoes or jewellery are often higher spenders who are also more likely to purchase genuine brand-name luxury items.

Simon Tracey, head of intellectual property at Davenport Lyons, said the research proved fakes were doing even more damage to luxury brands than most in the industry had realised. "The extent of the problem is far worse than anyone thought it was here."

The research came as Franco Frattini, European Union justice commissioner, yesterday proposed new sanctions that could see counterfeiters in Europe facing jail sentences of up to four years. Mr Frattini wants to toughen up national laws to reflect the seriousness of the problem and to avoid the creation of "safe havens" for manufacturers of fake goods in countries with lax penalties.

Some member states such as Britain have serious reservations about the European Commission involving itself in setting criminal penalties, which they believe are matters for national jurisdictions. But Mr Frattini said: "It is blatantly clear that such measures are extremely necessary in the EU's fight to combat counterfeiting and piracy."

Luxury groups are also taking a more aggressive legal stance. Louis Vuitton, for example, is suing Carrefour in a Chinese court over allegations that a Shanghai branch of the French supermarket chain sold fake copies of the group's handbags. It is one of the first cases involving a foreign company taking action over IP against another in China, widely regarded as the global counterfeiting hotspot.

The research also claims to dispel the notion that consumers almost always know they are buying fakes. The report said as many as one in eight consumers bought a fake product in the past year but almost half of them - the equivalent of more than 3m people - believed they were buying the genuine item. In addition, for some brands such as Louis Vuitton and Cartier, about as many people bought fake items as genuine ones.

The study of more than 1,000 consumers, conducted by Ledbury Research, found that Burberry - whose famous check was adopted for the baseball caps of so-called chavs - was the brand most often bought in counterfeit form. The next most popular fakes were rip-offs of Gucci, Louis Vuitton, and Yves Saint Laurent products. Walpole, the trade body for the British luxury industry, whose members were presented with the research findings, welcomed the report and said it offered valuable insight for the industry.

The report was also the first to examine the phenomenon of high street "look-alike" products - items such as clothes and shoes that mimic luxury brands but do not claim to be the genuine article. The researchers warned that look-alikes could prove even more damaging to luxury companies as they damaged brands' exclusivity and represented "hidden" lost sales. Mr Tracey said: "Look-alikes haven't been considered properly by the industry but one in two consumers bought them last year. This should be of real concern to the luxury sector."

The survey found most consumers thought companies should do more to protect their brands. But Mr Tracey said luxury brand companies were often too "embarrassed" by the problem to take action and thought clamping down on small traders was an "unnecessary cost".