Retailing

NOT WHAT THEY SEEM

Knock-offs of brand-name goods aren’t just cheap and popular. They’re illegal, writes KATHERINE MACKLEM.

June 20 2005
Retailing

NOT WHAT THEY SEEM

Knock-offs of brand-name goods aren’t just cheap and popular. They’re illegal, writes KATHERINE MACKLEM.

June 20 2005

NOT WHAT THEY SEEM

Retailing

Knock-offs of brand-name goods aren’t just cheap and popular. They’re illegal, writes KATHERINE MACKLEM.

AS YOU ENTER the hall at the Oasis Convention Centre in the Toronto suburb of Mississauga, a greeter hands you a paper shopping bag to hold the goods you’d like to buy. The vast room, usually decked out for wedding receptions, is today laid out in sections: in its centre are clothes racks sporting fashionable, funky threads. There’s a wall of shoe boxes, and benches to try on the sandals and mules. At the far end of the hall are handbags and stacks of reading glasses. Along the wall closest to the exit is a bank of tables where customers pay for their merchandise. Rather than registers, there are metal boxes to col-

lect cash. There are also electronic debit and credit card machines. The room is abuzz with shoppers, and much of the action is around jewellery tables dripping with baubles and fake bling-bling. “Here,” says a saleswoman with a sweep of her hand, “is our Tiffany table.”

Of course, the “diamond” rings, at $35, aren’t the real thing, but the design, with three shiny jewels, is very close to Tiffany & Co.’s classic three-stone “round-brilliant” engagement ring. And the long chains of silveror gold-coloured loops interspersed with oversized pearls aren’t actual Chanel necklaces. And the pretty pink-and-white bag sporting a “Prada” label? Well, at $75, it’s obviously a cheap replica. These shoppers know the authentic bag—made with real, not imitation, leather—sports a Pradasized price tag of more than $1,000.

Not everything here is a knock-off. But among the goods for sale are items that look like they’re from New York City’s Canal Street, which serious North American shoppers know as knock-off central. This event

at the Oasis centre, a three-day show held in May for an exclusive set of shoppers, is hosted by an Oakville, Ont.-based company called NYC Accessories, which has six such “shows” a year. Owned by the well-connected Cathy Peterson and her partner Lori Rayner, the company imports fashion items from New York and sells them to an invitation-only, fJiends-of-fJiends crowd. “We do very little knock-offs,” Peterson says. “Really, that’s a small part of our business.”

It’s probably the riskiest part, too. Trading in counterfeit goods is against the law in Canada. Offenders can be sued civilly by owners of the trademarks. And criminal offences, which are rare, can come with penalties of up to two years in jail. Peterson, as it happens, is married to the Ontario MPP for Mississauga South, Tim Peterson, who is the brother of both the former Ontario premier, David Peterson, and the current federal minister of international trade, Jim Peterson. She’s likely aware of the law covering knock-offs—she has a background in importing and retailing—and that enforcement in Canada is weak.

While it’s not possible to know the actual volume of counterfeit trade in Canada, the RCMP say there’s been an “explosive increase in the sheer number of counterfeit goods” brought into the country. The International Chamber of Commerce estimates the global market in counterfeit goods—everything from airplane parts to jewellery to prescription drugs—may be worth US$350 billion. Others believe it’s worth as much as US$600 billion. Last February, the Washington-based International AntiCounterfeiting Coalition, a lobby group representing industry players, singled out Canada as one of the world’s two worst offending countries in the counterfeit business. The other country that shares this dubious distinction is China, with a long history of counterfeit manufacturing. While Canada is not a manufacturing hotbed like China, the IACC said Canada’s leaky border and weak enforcement make it easy for importers to bring in counterfeit products.

Even if the “Prada” bag’s buyers know they’re purchasing a fake, is the item still illegal to sell? Yes, say the RCMP. “Selling a product with someone else’s trademark is illegal,” says RCMP Const. Judy Laurence. There is no difference between a knock-off and a counterfeit, she adds: the word “knockoff” is slang for a counterfeit item.

Peterson and Rayner started their company

AN anti-counterfeiting lobby group named Canada and China as the world’s two worst offending countries

after a shopping spree of their own in New York City in 2001. Upon their return home, strangers would ask them on the street or in the check-out line at the grocery store where they’d picked up an item they were wearing. Rayner’s husband was the one who suggested, as Peterson says, that the “girls go into business.” Their first show was in 2002 at an exclusive private ski club in Collingwood,

north of Toronto. They sold everything they put on display—and the girls were in business. Within three years, the company has grown to host six private shows annually, held at convention centres such as the Oasis. As well, the company attends trade shows and sells its products as a wholesaler to about 300 retail outlets, mainly beauty salons and spas. NYC Accessories is growing exponentially, Peterson says; sales have doubled each year that it’s been in business.

Initially, the company started with more knock-offs than it sells now, Peterson says. But she and Rayner have “downsized” that part of the business. “We’re trying to get away from that,” she says. “We don’t want to get into trouble.” She certainly seems to know of the dangers of dealing in knock-offs. “Certain brands you can get in trouble with,” she said in a phone interview. “Like Louis Vuitton. We don’t carry Louis Vuitton at all. We did carry that at the beginning, but we do none of that anymore.”

Still, NYC Accessories doesn’t take chances with Canadian customs officials. Asked if

she has ever had trouble bringing products into Canada, Peterson replies: “Nothing comes in with a label at the border.” Labels such as the “Prada” one on the pretty pinkand-white bag are affixed to handbags once they’ve arrived in Canada.

What exactly is a counterfeit? Is a scarf that looks like a Hermès and has, say, “Henmès”, scrawled on it against the law? “Counterfeiting is where you actually sell something that in every way, shape or form is designed to trick people into thinking it is something else,” says intellectual property lawyer James Holloway, a partner with Baker & McKenzie LLP in Toronto who specializes in anticounterfeiting issues. “A counterfeit is something that is usually sold in association with a well-known trademark, like Prada, to falsely suggest to the buyer that, in fact, he or she is getting an original Prada bag.”

In Canada, counterfeit goods are covered by the federal Trade-marks Act. For Industry Canada, which administers the act, the concept of confusion is central to the law. “A person selling goods with a trademark, without authorization, or with a confusing trademark, would be considered to be infringing that trademark,” says Susan Bincolleto, a senior official with Industry Canada. If someone is using a registered brand name without owning the rights, the owner of that trademark can sue in civil court for infringement. In Canada, it’s generally up to the trademark owner to enforce their rights to use that brand exclusively.

That’s the problem, says Holloway, whose firm is part of the Canadian Anti-Counterfeiting Network. Most countries allow trademark owners to register brands at the border so customs officials can help crack down on counterfeit imports. Not here. To enlist the help of customs officials, a trademark owner must first get a court order, and in a chicken-and-egg style problem, it’s tough to get the court order without some evidence of an infringement. “That’s the real knock against Canada,” says Holloway. “There just isn’t an effective or efficient way to address counterfeiting. That’s why we are included on the list of countries where counterfeiting is a big problem.” And why a businesswoman from a prominent political family has been blithely selling knock-offs. I?il