Chinese Police Bust Major Luxury Counterfeit Scheme

Police in China have arrested more than 25 people suspected of allegedly selling counterfeit handbags online, including imitations of luxury brand Louis Vuitton. China-based news website Ecns reported that police in Shanghai and the Fujian Province have confiscated more than 60 computers and around 1.75 million yuan ($282,000) in cash, following a raid on Tengchuang Information Technology Company. Of the counterfeit bags that were seized in last month's raid, police claim that if sold at retail, they would be worth over a million dollars. A police spokesman said the raid stemmed from information provided by the Paris-based design house.

The Tengchuang Information Technology Company, the counterfeit group's business name, was set up in 2009 and is responsible for operating more than 200 websites offering counterfeit goods for sale. The group allegedly collected counterfeit luxury handbags, watches and accessories from factories in Guangdong and Fujian, and transported them to Beijing and Shanghai by express courier. They then offered the fake luxury goods online, advertising and oftentimes, "guaranteeing" them to be authentic.

Far from a small time operation, the 25+ member group consists of university-educated individuals and reaches customers in more than ten countries, including the U.S., Canada and Britain. Monthly sales of the ring of counterfeit sites is said to be upwards of 2 million yuan ($322,000). Further investigations are currently underway.

According to sources, it is encouraging to see that there is a general willingness of cooperation from local authorities in China to help brand owners in the fight against counterfeits. The current Chinese trademark law, which was recently revised and been put into effect almost exactly one year, provides stronger power to the authorities in the enforcement of registered marks, stricter standards against the unauthorized use of “well known” marks, and a six-times increment in statutory damages to brand owners.

Given the high rate of counterfeiting of Louis Vuitton-branded bag and accessories in China and the presence of authentic Louis Vuitton goods on the market, the brand has reportedly become too ubiquitous for its own good.  A recent survey from the Financial Times reveals that individuals living in China's first-tier cities — Beijing, Shanghai, Guangzhou and Shenzhen — are increasingly shunning the brand, even though it remains the most popular brand in the country at the moment.

According to the FT survey, "the zeitgeist among China’s wealthier and more cosmopolitan consumers is for individuality and exclusivity. Such people recoil from the idea that they will be seen sporting the same brand as, say, the mistress of a 'bao fa hu' — overnight millionaires or billionaires — coal mine owner from a lower-tier city in the gritty inland province of Shanxi." The dwindling popularity of LV also shows up among Chinese travelers making purchases overseas.