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Warning: It's a Fake!

 Recently, YouTuber “Freezia” (Song-Jiah), who is one of the most recognized influencers among the MZ generation, has been embroiled in a controversy over wearing imitation luxury brand products. At first, she attracted and received people’s attention as an image of a ‘silver spoon’, born rich. However, it turned out that she had purchased most of the clothes and bags from a fake market by paying extremely low prices and but eventually couldn't avoid public criticism. Let’s investigate the rising issue of the ‘fake market’ which mimics luxury brands and examine the effect of these imitation products on luxury brands. 

 

YouTuber Freezia, Controversy of Counterfeit

 A few years ago in Korea, many YouTubers who marketed themselves with a “young and rich” image uploaded “luxury haul” videos, and recorded millions of views. For this reason, “haul” became a YouTubers’ favorite topic. The word ‘haul’ means ‘drag’, which refers to a content of purchasing mass amounts of luxury products from worldwide luxury brands. Then, unboxing those goods, and introducing them through the videos. Not only in Korea but also tens of thousands of luxury brand haul videos have already been searched by overseas YouTube viewers. Most of the haul videos hit surprisingly high views, so were recognized as one of the most popular subjects on YouTube. This causes a positive vicarious satisfaction because viewers can easily see luxury products that are inaccessible in daily life but are indirectly accessible through YouTube. However, there are contrasting voices to the luxury haul. Some criticize the vanity of YouTubers who tend to show off their wealth and it causes feelings of deprivation to ordinary viewers. 

 

 “Monthly Freezia” is Freezia’s one of the main YouTube contents, introducing fashion and beauty items purchased by herself. In the videos, she said, “My parents bought me everything I wanted when I was young,” directly revealing her prosperous background. Since Korean society greatly values humility, her confident attitude of being a silver spoon character has drawn the envy of many people. Freezia marketed herself as ‘contents’ with her attractive mask, rich family background, and introduced numerous luxuries at a house located near the Han River in Seoul. According to her popularity, numerous broadcasts wanted to scout her on TV shows.

 

 In 2021, Freezia showed up on Netflix’s new show ‘Single’s Inferno,’ where she wore fake luxury clothes and imitation bags, but acted like she was wearing real luxuries. Because of this, many people who watched the show raised questions about her consumption of imitation goods. Her fake products appeared not only on the show but also on her ‘Monthly Freezia’ videos one after another, all exposed by viewers. Surprisingly, she has been showing the imitation products directly and indirectly in almost all her videos, so that eventually, people begin to suspect her image of being a ‘silver spoon’ character. She couldn't avoid blaming viewers, who were potential luxury consumers, watching her videos for curiosity and desire to purchase luxuries. As the controversy arose, Kim Hyo-jin the CEO of Hyowon CNC, Freezia’s agency, said, “It is my responsibility and fault that I didn’t notice the truth in advance.” However, she said, “It is a misunderstanding that all the luxury products on her channel are fake,” implying that only a few were counterfeit. However, many netizens responded that they had been deceived not only by the introduction of fake goods as genuine but also by exposing them with photos and videos as if they were genuine. Also, on January 25, Freezia uploaded an apology video for the purchase of imitation products on her YouTube channel and posted a handwritten apology on her social media to acknowledge the use of fake luxury items. In the apology videos, she apologized to the luxury brands for damaging the brand values, and to the fans who supported her. Regarding the purchase of fake goods, she said. “I bought imitations because they were so beautiful at first, however it drew a lot of attention and support from people, which made it impossible for me to stop.” Eventually, Freezia, who hit one million subscribers by appearing on Netflix’s ‘Single’s Inferno’ stopped all activities on YouTube and other social media. 

 

Fake Market

 As mentioned earlier, Freezia caused chaos by introducing the fake luxury items as if it were genuine. Let’s take a closer look at the market selling counterfeit goods that she used to use. Usually, people look for fake goods for many reasons, but the main reason is low prices with accessibility to product purchases.

 

 ‘Replica’ means a duplicate, referring to imitation products made of luxury goods. Replicas can be found easily on online shopping websites. They sell replicas of famous luxury brands such as Gucci or Louis Vuitton and stimulate consumers with ridiculously low prices. When searching for luxury brand products, low-priced replica sites are exposed on top as recommendations. This induces customers to purchase replicas without being aware that they are fake. Similarly, how does the online e-commerce market respond to the sale of various illegal replica products? Replica products are sold in categories of clothing and miscellaneous items by representative e-commerce malls in Korea such as G-market, Auction, Coupang, and Timon.

 The damage of the replica is not only to the customers who buy without knowing the products are fake but also to the sellers who honestly sell genuine products at a net price. Kang (45), an importer who imports luxury goods from overseas to Korean e-commerce, complained, “Selling clothes and shoes are suffering from tons of counterfeits. Many sellers with genuine products had to forcibly lower their prices, and it continues to a vicious cycle of gnawing at each other.” In response, e-commerce companies stressed the absence of management and institutional limitation while watching such illegal virtual commercial activities. Also, they pointed out that measures by the authorities are urgent. Illegal replica goods are subject to the trademark laws to protect industrial property infringement rights or the Unfair Competition Prevention and Trade Secret Protection Act. Regarding the laws, the Fair-Trade Commission deals with illegal activities in e-commerce, maintains that the abuse of a specific brand violates industrial property rights. Thus, it should entrust all authority to the Korean Intellectual Property Office. However, the Korean Intellectual Property Office expressed that even if a suspected violation of the Trademark Law is confirmed, sanctions can be imposed after directly confirmed by the trademark possessor. This indicates that there is a limit to active prevention in advance of violation. In this regard, an official from the Korean Intellectual Property Office said, “We can't help but strongly acknowledge the institutional weakness of falling behind the pace of industrial change. There are many mistakes of the authorities about not focusing on problems that may arise in the process of transferring markets from offline to online. Also, the noncommittal attitude of e-commerce enterprises should be improved since they know such problems better than anyone else. Lastly, it is time for active consultation dealing with the sale of illegal replica products.”

 

 In China, known as a kingdom of fake products, the scale of the fake market is immense where they mimic luxury brands to the highest quality. Before the 1980s, the poor quality of imitations lowered the demand for counterfeits. However, after the 1980s China emerged as the world’s factory, which induced rapid improvement in manufacturing. From then, China buckled down to producing counterfeits with outstanding manufacturing technique. In particular, multinational corporations, which are headquartered in Western countries and have factories in developing countries with low labor costs, have been established in China. Therefore, numerous luxury brands have built manufacturing plants and have intensively concentrated manufacturing technology in China. As a result, Chinese manufacturing technicians became interested in the fashion industry which is easy to imitate and has the quality of producing first-class products. These technicians are not aware of the legal problems about copying designs and ignoring intellectual property rights. Rather, the fact that people can buy high price luxury goods at less than tenth of the price of their official price makes the Chinese fake market more active. As the fake market grows, it also attracted great interest overseas. Some Korean travel agencies have signed an agreement with fake markets to include it in their tour package schedules. The joy of purchasing cheap luxuries strongly stimulated Korean travelers’ consumption.

 

 As the offline fake market has switched to online, it has become much easier to access imitation luxury goods at Taobao, the largest online marketplace under Alibaba, China. In 2015, the Chinese government took issue with the counterfeits trade on e-commerce and online platforms. At that time, the Chinese General Bureau of Commerce, and Industry Administration (General of Commerce and Industry) accused Alibaba head-on, stating that more than 60% of the merchandise in Taobao was fake. In 2021, the Chinese authorities announced a draft amendment to the e-commerce law, focusing on strengthening the punishment of both sales and sellers of fake products. In addition, they stressed the purpose of the policy, being to purify the online market and maintain a clean environment for e-commerce. Yet, fake sales are still actively conducted on social media such as WeChat, TikTok, and Instagram. Concern about the legal sanctions of individual transactions seem unclear.

 

 

Luxury Brands Suffering from Counterfeits Issues

 As the size of the fake market grows day by day, how are the luxury brands affected and what problems do they face? 

 

 In general, we can assume a huge loss for luxury brands due to the cheap price, which is a tenth of the price of genuine luxury merchandise. Interestingly, more than 26 billion euros are lost to counterfeiters every year only in the fashion industry. It is true that normal customers do not have access to extremely expensive products, so it does not impact brand sales. However, ever since the counterfeiters arose, they have become competitors of most brands. What luxury brands most worry about is reputation and value. If you purchased a fake bag without noticing the deception and one day the bag is torn, you might contribute a bad reputation for the brand by complaining about an unsatisfactory product. Therefore, the most powerful marketing strategy, customer feedback, is a factor determining the reputation and quality of the product, from mouth to mouth. In 2021, according to the National Statistical Office, the number of e-commerce transactions exceeded about 18 trillion won in Korea. Also, total transactions of clothing, shoes, fashion goods, and accessories was recorded at 2.6 trillion won. Those figures indicate that an enormous amount of online trade is performed in Korea. Since the online reviews by customers are a public indicator of brand quality, customers who bought fake goods can complain in a genuine retailers' site. Also, only a few consumers can differentiate fake or genuine, other dissatisfied consumers will ask for compensation after buying counterfeits, request refunds, or new products from genuine sellers. So far, you might have doubts about brands imposing legal sanctions against fake goods companies. Ironically, confronting counterfeit companies is a waste of time and money. To protect the brand’s intellectual property, they need to hire lawyers and set up litigation funds and spend hundreds of millions of dollars to block imitations from being sold in e-commerce sites such as Amazon and Alibaba. Because of massive expenses, it is reasonable to invest in growing the brand rather than pursuing conflict with infringements individually. 

 

 “Paolo Gucci” was founded by Paolo Gucci, a grandson of the founder of Gucci in Italy. He used to work as a senior designer at Gucci. However, he had some discord with the management of Gucci, and eventually resigned in 1982. After that, he created his own trademark brand “Paolo Gucci” to mimic the original Gucci. Paolo created logos and products similar to the original Gucci, at a low price, causing much confusion about the origin of the products. Eventually, the headquarters of Gucci filed a lawsuit against Paolo Gucci’s trademark infringement in many countries inside the world. In 1994, the original Gucci won these cases in over 50 countries. In 1995, Paolo Gucci passed away, and his trademark disappeared due to bankruptcy as his license contract expired in 2003 in Korea, the last country. Gucci has made efforts to protect its intrinsic brand value and scarcity through enduring prolonged disputes over similar trademarks. 

 

 

Opinions of the Design Industry and Experts on Counterfeits 

 Nowadays, due to imitation products, the interest in intellectual property rights in the design industry has arisen. The “design right” is a right on a design, given to the first person who created the shape of the figure. And the “Industrial Design Protection Act” provides exclusive rights to those who have design rights by promoting the protection and use of a design. It is greater to protect against the act of selling counterfeit goods than to promote the use of design. Products in the fashion industry are vulnerable to imitation, moreover, the characteristic of the design is reproducible by looking at the appearance, which requires intensive protection.

 In 2014, the domestic design industry estimated that their loss is near 88 billion won because of damage from imitations. Most importantly, design has a short life cycle of 3 to 4 months, while design registration under the Design Protection Act takes an average of 6 to 8 months. Before the design registration is complete, it can already be easily reproduced as a fake, and be out of fashion. Therefore, the Design Protection Act is not effective in preventing damage due to its limitation. In response, the design industry, and the legal community voiced concern. They emphasized the need to revise current policy, expand the range of compensation for damages and pay more compensation than the actual amount of loss. To protect the creator’s design rights, it is necessary to minimize cases of illegally copying and commercial theft of designs.

 

 Consuming fake goods, to ease the desire of possessing luxury goods, is nothing but a desire to show off. It is time for both sellers and consumers to be wary of counterfeit goods but have the critical mind of design theft. Just as you feel anger when someone else takes your hard work as his own achievement, you need to mature as a wise consumer who respects the right of the creator and pays its corresponding price. 

 

고주선  kojs3716@inha.edu

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