Tags
black market, chanel, counterfeit, cyber piracy, gray market, highend, law suit, LVMH
High-end fashion labels have been battling with counterfeiters for years to reduce the amount of knock-off merchandise sold through grey and black markets. Chanel made a bold statement when it filed a cyber piracy and trademark infringement lawsuit accusing 399 websites that Chanel believes are selling counterfeit items under the Chanel name. Chanel believes that these websites operate in China, the Bahamas, and other overseas areas where trademark infringement is not strictly enforced.
Historically, high-end brands have focused their battle tactics to minimizing the sales of street corner knock-offs. Chanel’s lawsuit takes the fight to a larger war by seeking to seize or permanently disable websites from selling any counterfeit merchandise, from t-shirts to expensive jewelry, bearing the Chanel name. Tiffany filed a similar suit in April targeting 223 unnamed websites. Louis Vuitton filed a suit against 182 websites. Each of the lawsuits includes several website operators that are also names in the Chanel case.
In this case, if an individual or firm purchased large amounts of legal Chanel merchandise and resold the merchandise online or through another retailer, this would be a gray-market. Black-market goods, on the other hand, are illegal. An example of a black-market in this instance would be if an individual or firm stole Chanel merchandise and resold it. Counterfeit merchandise is merchandise that is made using a label that has not been approved by the manufacturer. Counterfeit items are commonly referred to as “knock-offs.” If a company or individual manufactured an item and applied the Chanel brand without Chanel’s consent the item would be considered counterfeit.
In August 2010, a federal judge ruled that defendants in a federal trademark or infringement lawsuit could be served legal notice via email. The aforementioned cases have found that many of the defendants were falsifying their physical addresses.
Discussion Question:
- Why did Chanel file a lawsuit against 399 websites?
- What is the difference between counterfeit, gray-market, and black-market merchandise?
Ken Ritter, “Chanel files Internet trademark lawsuit in Vegas,” Las Vegas Sun, September 21, 2011.
Grewal Levy Marketing News 
Chanel’s aggressive legal tactics should come as no surprise. After all, Chanel has a legal obligation to protect it’s brand name. Nevertheless, I find the ruling by the federal judge to not to much to offer protection. Serving an international firm legal notice seems to be a formality rather than anything that would promote action. Politicians should take more aggressive action to enforce international trade relation agreements that would protect companies like Chanel from black and grey markets.
As a global leader in the luxury fashion industry, Chanel does have a prestigious reputation to withhold. For this reason, it is important that Chanel does pursue legal action against any clear counterfeiters. However, it is hard for me to believe that they will win all 399 cases of cyber piracy and trademark infringement cases when the websites operate in countries which do not strictly enforce these laws. I feel as though this may initially scare some counterfeiters from entering the online market, but I think that eventually the counterfeiters will find another region in the world to run their websites and black market schemes from because of the huge demand of cheaper counterfeit goods.
Chanel’s legal tactics are long overdue. The amount of knock off merchandise for Chanel and other major companies is staggering. I do think that they will not be very succesful either, or at least not in the long term.
The counterfeiter will always be tempted to copy a brand whos cost of product relies significantly on design and labeling. The products are easy to duplicate and pass off as legitimate goods.
Safe harbours for such goods will always exist, and the legal dollars Chanel puts into the battle will takes years to have effect on a retailer of said merchandise. And then, the retailer will easily be able to relocate and repoen, starting the process all over again.
Chanel should focus on creating some sort of icon where their products are not easily counterfeited. But more feasibly, they should concentrate on making consumers of Chanel products concious of having real products. The lack of interest in cubic zirconia vs. real diamonds could be someway replicated towards the luxury goods market, where stigma for having counterfeit goods creates enough of an incentive to purchase the legitimate item among consumres.
The black market can only be defeated by consumer desires, as is the nature of international business and capitalism at large.
Yet the gray market such as Tj Maxx or another such scenario could be more easily controlled through controlling the distribuiton and sale of Chanel products more carefully.
I would be surprise if Chanel, Tiffany’s, and Louis Vuitton had not taken legal action on these online comanies. Knock-offs have a huge impact on the companies and their profits. The cheaper merchandise takes away from the reputation and luxury created by these high end designers. The 399 lawsuits are expected in order to protect their name. Since it is so difficult to locate the source of where counterfeits are manufactured, law enforcement should focus on the grey and black markets. They may not be able to prevent counterfeits to be made, but they can prevent them from being sold!
I understand why Chanel took these actions due to the fact that they want to appear as a high end jewelry and apparel store. With counterfeit sites, not only is this diminishing their brand name, but it causes their loyal customers to view their products as not prestigious, which could entail their lack of interest in their product within the future. Chanel has a very selective target market, due to the cost of their products, which is the reason why they feel that legal obligation is necessary when dealing with black and grey markets.
Channel, Louis Vuitton, and Tiffany took actions to protect their trademark. When I think of these brands…I think of brands that are special, a fashion statement, expensive, and luxury, So when knock offs of their brand are sold at such a cheap price, it ruins the trademark of these brands. If you could get the a knock off of a brand for a cheaper price, would you? This question is important especially when the economy is bad because people are not as inclined to spend a couple thousand on a purse or ring. The actions that Channel, Louis Vuitton, and Tiffany took will benefit their trademark in the future and establish themselves a firm to be taken seriously when it comes to product knock-offs.