In the summer of 2011, a brilliantly bright red Birkin bag was being crafted in a workshop in France. Despite lingering economic woes in the United States, following the depths of the Great Recession two years prior, and volatility in the eurozone, the United Kingdom, and China, all of which had “spooked investors and economists, alike,” the demand for Hermès’ most expensive – and recognizable – bags remained unwavering. This particular blood-hued bag was among the tens of millions of dollars’ worth of handbags that were being manufactured in little-known workshops on the outskirts of Paris in order to meet the incessant demand of deep-pocketed devotees.
Finished with a small gold stamp on the front that read “Hermès Paris Made in France” and packaged in one of Hermès’ signature orange boxes, the ones that the 181-year old brand had been using for more than a half-a-century, the Shiny Porosus Crocodile Birkin was destined for a blissful consumer, an individual almost certainly unaffected by the financial turmoil that was permeating markets across the globe. The problem: the bag that was being assembled that day was anything but the real thing. It was the product of a sophisticated $22 million-plus counterfeit operation that was being carried out in France, right under the nose of Hermès, the closely-guarded stalwart luxury brand.
While Hermès was working to carefully balance its own supply against the intense and unwavering yearning for its most coveted bags among well to-do consumers from women in sunny Southern California to their counterparts some 6,500 miles away in Shanghai and trying to keep takeover bids by aggressive fashion conglomerates at bay, more than a dozen people were laboring diligently to build and maintain a small-but-mighty counterfeiting ring. In clandestine workshops not far from Hermès’ own workshops, they were producing bags that to even some of the more discerning Hermès collectors looked – and felt – real.
Unlike the cheaply-made, obviously-fake bags – with their plastic-y “leather” bodies, imprecise stitching, and off-kilter Hermès stamps – that are regularly churned out in factories in China and other far-flung locates, and sold for cheap on Amazon and in stalls that populate seedy flea markets, these bags were not that. In fact, these bags were made in France and as the story goes, at least a portion of the materials being used to craft them were coming directly from bona fide Hermès workshops.
Maybe most critically, as Hermès would later learn, at least two of its own employees were intimately involved in the budding criminal enterprise, providing those authentic materials and overseeing the manufacturing. The result came in the form of counterfeit bags of almost unprecedented quality.
This specific ring fits neatly into a much larger pattern of counterfeiting, a sizable and long-standing business in France, with roots that date back to the days of the earliest-operating couture houses in Paris. As the heart of the global fashion market, France’s well-established luxury industry has routinely been plagued by intellectual property crime, and Hermès – which is the name found on some of the most famous and in-demand handbags in the entire world – has routinely been among those hit the hardest.
“It’s an absolute disgrace,” Hermès’ longtime former CEO Patrick Thomas said in 2012, revealing that some “80 percent of objects sold on the Internet under the Hermès names are fakes.”
As of that same year, the shadowy trade was costing the French economy as a whole a whopping $7.5 billion in lost revenue per annum (that the government knew of), a number that had been growing steadily over the years, and which was only expected to increase as time went on. However, not only has the dollar-figure associated with the fake trade been escalating, the sophistication of the players and their global counterfeiting operations has been advancing significantly, as well. With that in mind, industry insiders, trade organizations, and law enforcement officials have been paying attention for decades – watching the risks to their own interests rise, as well.
“When counterfeiting was artisanal, it didn’t bother us much,” Adrian de Flers, the head of Comitè Colbert, the French luxury goods association, said in back in the 1980s. With the broadening scope of counterfeiting, facilitated in large part by widespread technological advances, and the unending demand for less bank-breaking alternatives, “it’s become an industrial practice, and we’re frankly very worried.”
So, beginning in the mid-2000s, Comitè Colbert joined brands in working overtime to stomp out the latest wave of counterfeiting, which was negatively impacting 8 out of 10 European businesses, according to its research. This included educating consumers about the dangers associated with fakes. The summer of 2012, for example, brought the introduction of a new effort by the Comitè. In furtherance of a collaboration with Cartier, Chanel, Christian Dior, and Louis Vuitton, among other brands, the Comitè plastered France’s 18 airports with 10,000 posters aimed at raising awareness about counterfeiting.
“Buy a fake Cartier, get a genuine criminal record,” read one poster, a reference to the ability of prosecutors to levy fines of up to $300,000 and even jail sentences in connection with the manufacture, sale, and even the purchase of fakes, as under French law it is not only illegal to make and sell counterfeit goods, it is also a criminal offense to buy them. (No such equivalent exists in the United States).
Another poster, adorned with a patent Cannage Lady Dior bag, declared, “Real ladies don’t like fake.”
These efforts – which were backed by the Directorate-General of Customs and Indirect Taxes, the French law enforcement agency responsible for investigating counterfeiting – did little to deter those working stealthily to churn out relatively sophisticated, precious-skinned Hermès counterfeits, of course.
Evidence of Abnormal Behavior
Faced with evidence of “abnormal behavior identified through [its] internal monitoring systems,” Hermès had begun to suspect that things were awry under its own roof. Armed with such “clues,” Hermès took its findings to French law enforcement and filed a complaint. It was 2011. A year later, inside a police station in Paris, law enforcement officials were trying to get to the heart of what would ultimately reveal to be a very close-to-home scheme that was bringing millions of dollars of counterfeit Hermès bags to market.
In the time that had passed since Hermès had first filed its complaint, a new collaboration had been born: a joint effort between the brand and French law enforcement, one that would ultimately spawn a year-long investigative partnership between the two entities.
After months of following leads, engaging in surveillance, and tracing the orange Hermès-branded boxes – and even some Hermès leather and hardware – back to the brand (by way of two rogue employees), a big break would come in the late spring of 2012. News outlets worldwide were reporting in June that a dozen people had been arrested by French police as part of the dismantling of an international crime ring that was peddling counterfeit handbags. The expansiveness of the ring’s reach would stretch from Europe to the United States and all the way to East Asia. As far as French authorities knew, the national arm of the operation, alone, had brought in approximately $22 million.
One that same spring day, in another part of town, the two unnamed Hermès employees were simultaneously being let go from their jobs and arrested. The unnamed employees had been integral to the workings of the ring. Despite the two arrests, Hermès harbored suspicions that “several current members of staff could also be involved,” and vowed to continue its own internal probe.
A representative for the traditionally tight-lipped house, said that they were “very satisfied with the efficient and diligent collaboration established with the national gendarmerie in this case and reiterates its relentless commitment to fighting counterfeiting. This action puts an end to the fraudulent project in progress.”
Meanwhile, in New York, a federal judge was deciding an unrelated case that Hermès’ legal team had filed against dozens of online sellers, which they accused of hawking fakes. In siding with the Paris-based brand, Judge Denise Cote of the U.S. District Court for the Southern District of New York ordered the operators of 34 different websites to pay $100 million, and asserting that “collectively, they had sold and offered for sale at least nine distinct types of goods” – from Birkin bags to silk scarves – “each bearing numerous counterfeits of the Hermès trademarks and designs.”
In reality, Hermès would see very little – if any – of that $100 million money, as none of the defendants could be identified beyond the domain names they were using to hawk the fakes (such as HermesBagsOutlet.org, HermesBirkin-Bags.org, and HermesOutletStore.com, among others) and none of them responded to the Hermès suit, and certainly did not appear in court to defend themselves against the claims. The only monetary remedy that Hermès would get would be any money in the PayPal accounts that were linked to the defendants’ domains.
Nonetheless, the case joins the French bust in a truly global – and resource-intensive – effort by Hermès, often in conjunction with various national law enforcement and government agencies, including customs, to get a handle on the growing counterfeit market, in which its instantly-identifiable bags are some of the hottest commodities.