Commerce comission warns about fakes

The Commerce Commission has recently cautioned consumers to be alert to the sale of possible counterfeit clothing and footwear on the Trade Me website after issuing more than 70 warnings. The traders have been warned that they risk committing an offence under the Fair Trading Act if they are selling or offering for sale goods that are not genuinely manufactured 'labelled' items.

"Selling counterfeit goods harms both the consumer and legitimate businesses," said Adrian Sparrow, Commerce Commission Director of Fair Trading. "Consumers have a role to play and should exercise caution if offered a well known brand at a low price. If you are paying $50 for a brand name item that usually retails new for $200, instead of getting a prestigious label at a bargain price, it is more likely that you are paying over the odds for a cheap knock-off. The best way to ensure that you are getting the genuine article is to buy from an authorised dealer."

The Commerce Commission sent the warnings in response to a complaint laid by Trade Me after Trade Me's security tools had identified a number of potentially counterfeit items on offer via the website. The identified traders have been banned by Trade Me.

There are competing views as to the social and economic impact caused by the sale of counterfeit product. From a social perspective, much organised crime is funded from counterfeiting activities, and there are public safety issues involved with counterfeit drugs, car parts and toys. From an economic perspective, right holders object to third parties free riding on the effort that they have made in developing and promoting a product or brand, which costs can often only be recovered via the premium prices genuine goods can sometimes command. They also claim that cheaper (often inferior) copies denigrate the value of the original - a problem particularly pronounce when a product relies upon cost and limited supply to enhance its desirability (think Hermes' Birkin Bag). On the other hand copying has been shown in some cases to increase the market for the original product. When US3 illegally sampled Herbie Hancock's Cantaloupe sales of Hancock's back catalogue increased exponentially.

What do you think about counterfeiting? Is it wrong for me to be able to buy a fake Rolex when I can't afford the original? If my fortunes change and I can afford the genuine product am I more or less likely to by a genuine Rolex having become accustomed to the look and design ie can counterfeiting actually grow the market for genuine product? Is an action under the Fair Trading Act appropriate when most consumers are aware by the price that they are paying that the product is not genuine ie does counterfeiting meet a market need the original can't? What other responses from the Government or right holders might be appropriate?