Everything is about authenticity. Nobody likes to be deceived. To be made to look foolish, to feel foolish. Whether it’s within luxury goods or baseball cards or even grocery-store staples—a class-action lawsuit accuses Barilla of misleading consumers about where its pasta is made (hint: not Italy)—generally, people want to take what they see, hear and consume at face value.
But do appearances hold more weight than authenticity? Data would suggest the answer is “yes.”
“Nothing is safe from fakes,” DK Lee, co-founder and chief business officer of artificial intelligence (AI) brand protection startup MarqVision, said. “You can’t trust anything.”
And nothing is off-limits.
The global luxury resale market was valued at $31.61 billion in 2021 and is likely to reach $51.77 billion by 2026, “The Global Luxury Resale Market” by ResearchAndMarkets.com reported. As the sale of used luxury goods has rapidly increased, the stigma of “used” is fading fast. According to management consulting firm Bain & Company, secondhand sales of luxury items across all categories grew 65 percent from 2017 to 2021, a rate five times faster than the primary market, Entrupy, the AI-powered, on-demand solution for verifying physical goods, reported.
But with that comes the proliferation of counterfeits, also known as replicas, or reps.
More consumers are shopping for fakes online, driving the value of the counterfeit and pirated goods market up to $3 trillion, according to the Organization for Economic Co-operation and Development (OECD). That’s triple what it was just nine years ago. The total trade in fakes is estimated at around $4.5 trillion, with ersatz luxury merchandise accounting for up to 70 percent ($1.2 trillion) of that amount, Harvard Business Report said in 2019. Counterfeit goods now make up 3.3 percent of global trade. Entrupy’s 2022 “State of the Fake” report found that in 2020 alone, illegitimate imports into the U.S. cost the economy $54.1 billion in retail sales, $33.6 billion in lost wages and benefits, and $13.5 billion in personal revenue and business tax revenue. The total amount lost in state and local sales tax revenue is more difficult to pin down.
The price of counterfeiting isn’t limited to monetary damages, either. Roughly 36 percent of counterfeits tested by the American Apparel & Footwear Association (AAFA), which represents Adidas, Gap and other household names, contained dangerous levels of toxins; one item had more than 600 times the exposure limit of cadmium, a toxic heavy metal known to cause kidney damage and other adverse health effects. Most forced labor, Entrupy reported, occurs in illicit trade and other activities of the “informal economy.”
“People don’t realize how empirically bad it is for them,” Vidyuth Srinivasan, co-founder and CEO of Entrupy, said. “These all sounded like talking points, and I needed to really internalize it in order to believe it, because I’m in this business.” So he took it upon himself to verify these facts. After having some fakes analyzed by a rep authenticator, “100 percent of the samples that I used—fakes from all different parts of the world, different brands, different qualities, all of it, the entire spectrum—all of them had lead paint. These people don’t realize they’re actually rubbing lead paint on themselves everyday they use [the fakes].”
Plus, reps fund organized crime and terrorism, with illicit trade directly linked to criminal networks in Cambodia, insurgencies in Iraq and cash flows from Dubai to groups including al-Qaeda, the Taliban, Mexican drug dealers and Hezbollah.
“It’s not a victimless crime,” Srinivasan said. “Someone is going to pay for it, either with their health or with their freedom or with their money.”
And obtaining reps is all too easy these days.
No longer is New York’s famous Canal Street the go-to place for fakes—reseller marketplaces are. Facebook groups, Reddit threads, Instagram pages, Depop. Name any social platform, and counterfeits are for sale on it. Though regulation has been lacking, Congress is considering bills to combat the counterfeit crunch.
The INFORM Consumers Act, first introduced in the Senate of March last year and passed this month, requires online marketplaces to collect, verify and disclose certain information from high-volume, third-party sellers. In October, over 75 brands and organizations, including heavy hitters like Amazon, Levi’s, Nordstrom and Walmart, urged Congress to add the INFORM Consumers Act to the defense spending bill.
“We were pleased to see the House pass the INFORM Consumers Act, an important first step in the effort to keep counterfeits off of popular marketplaces and out of consumers homes,” AAFA president and CEO Steve Lamar said. “The United States must lead in efforts to eradicate illicit and counterfeit items that are flourishing. This means the Senate now needs to take up and pass this measure and both chambers need to pass the complementary SHOP SAFE Act. Both measures are needed to keep dangerous products from multiplying online during this holiday shopping season.”
But some think more needs to be done.
Fed up with the state of the industry, authentication experts Deanna Thompson and Graham Wetzbarger have partnered to create the first educational platform providing extensive remote training and certification in luxury goods authentication and counterfeit detection.
The Authentication Institute of America (AIA) they launched two months ago is the world’s first program to offer a thorough scholarship in the practice of authenticating personal luxury goods. Through video recordings, training modules, essays and live assessments, AIA’s teachers determine if learners are truly grasping the art and science of authentication.
“Currently there’s no regulatory organization standardizing the training, accuracy and compliance of authentication practitioners,” Thompson said. “To create a more dependable and trustworthy industry, we have come together to create this program.”
Thompson has a deep history in the authentication business. Over the past 15 years, she’s built two luxury resale businesses: First Class Consignment, an online luxury reseller that she sold in 2011 and Haute52, another luxury online resale website, sold in 2016. She also launched, sold and then reacquired her blog ClosetFullOfCash.com, which is dedicated to navigating the resale industry, and written a dozen books on the topic and established herself as a spokesperson at several national conferences.
“My whole thing is education,” she said. “I just got fed up with seeing the same misinformation everywhere. Any way that I can promote knowledge, that’s been huge for me.”
Where did this decade-spanning desire for education on luxury authentication come from? Experience.
“What was the tipping point for myself was that I had met someone that was taken advantage of from a seller. I wrote a blog post about that, and then all of a sudden, all these other women come out of the woodwork,” she said. “They would call me in tears. They are ashamed. They are embarrassed. They’ve lost tens of thousands of dollars because they trusted someone. [That] person was threatening them, the harassment [was] horrific. That is a driving force for me because if you pick up the phone and you’ve got someone you’ve never met before and they’re literally contemplating suicide, something has to be done.”
Those shoppers aren’t alone. Consumers are consistently deceived, even by reputable retailers, into believing what they’re purchasing is the real deal; 24 percent of consumers said they unwittingly purchased a counterfeit product online over the last 12 months, according to the Stefanini Group, a Brazilian marketing and consultancy. Even authenticators get it wrong sometimes. In 2018, Chanel sued What Goes Around Comes Around, a notable reseller, for selling reps.
“It’s not difficult to be honest. What [Wetzbarger] and I are creating is a beacon of trust for secondhand goods,” Thompson continued. “There’s got to be someone you can go to that, you know, I’m not trying to sell you anything. I want to help you. And that’s what we’re trying to create.”
The duo met years ago, while Wetzbarger was giving a tour of notable luxury reseller The RealReal to Thompson, a then-employee of Entrupy. Wetzbarger was The RealReal’s 50th employee and spent nearly seven years there as the chief authenticator, overseeing the growth and development of the company’s authentication group. But both left their careers at established agents of authentication with the common desire to do more than what was possible within the parameters of a corporation.
“We wanted to create something that was dynamic, that could evolve, that could follow the counterfeiting and anti-counterfeiting trends,” Wetzbarger said. “And in a way that people who are interested in learning more could find a non-biased, non-sales-based platform to do so.”
These kinds of non-commerce platforms for authentication are few and far between.
“It’s either, they’re selling counterfeits, or they’re copy and pasting from one website to the other for sales because that’s their motivation: they want to see bags,” Thompson said. “There’s no hierarchy in authentication in the secondary space. Anybody can throw up a website and create certificates and say they’re an authenticator. I mean, this is kind of the Wild West.”
With likely just a few hundred people making their living as luxury authenticators, the landscape truly seems to be untapped and untamed. Misinformation spreads fast and quickly. Accurate information is rare, and sharing that information is even rarer.
“Because it’s such a small world, the information has really siloed; people keep it to themselves,” Wetzbarger said. And that makes sense: Why share the secret handbook with potential counterfeiters?
“Information is power. If I’m giving you that information, if I have AI tech and I had the best—I have, like in The Lord of the Rings, a Palantir, right?” Srinivasan said. “If I had that for all of these goods, and then I went and told the world that I have this, then the counterfeiters are basically going to be working with me to look for that information and keep improving.”
Big names like The RealReal and high-end consignment boutique Fashionphile have their own “universities,” where employees undergo extensive training with an authentication team. Consignment shop owners and pawn shop buyers treat authentication like a trade, honing their craft over decades. But for the average consumer, the only way to learn is by navigating through the often-polluted web.
So, this is where AIA comes in.
“If big brands sell apples, then we plant the seeds,” Wetzbarger said.
AIA offers seven courses thus far (with 26 more in the works), covering brands like Goyard and Loewe, for $20 a pop, with the Louis Vuitton mini-course offered for free. Though AIA is still in its infancy, somewhere between 50 to 100 people have completed the courses, Thompson said.
“We’re doing this strategically,” she continued, saying that they’re easing into the offerings versus throwing it all on the site at once. AIA doesn’t have the capacity to do that just yet, anyway. But in another six months, Thompson believes the institute will be the deciding factor in education. “My goal is to have at least 50,000 people going through [the courses] by the end of next year and I think it’s absolutely doable,” she said.
The free Louis Vuitton course feels a bit like an art history lesson. It covers the small, significant signals that differentiate so many details and explains how to tell if an item was manufactured before 2007 or which factory it comes from—and cross-referencing if that production location matches the claimed country on the brand stamp—but, ultimately, serves the purpose of pinpointing the difference(s) between a real and a rep. For example, the “L” of the brand’s embossed trademark stamp has a short leg, while the “O” is more of a circle than an oval. It takes a precise, keen eye to spot these diminutive differences, and as fakes get increasingly better, more than that is necessary.
In 2021, LVMH, Prada Group and Richemont joined forces to form the non-profit Aura Blockchain Consortium to make blockchain solutions and related technology easy and available to all luxury brands to authenticate their goods. This unprecedented collaboration within the luxury sector urges the entire industry to join the consortium to offer a single industry-standardized solution to counterfeits, among other services. Collaborative approaches across the industry are necessary to combat the counterfeit crisis, according to Entrupy.
“Authentication is, per se, table stakes, for any of these high-value goods platforms. And that also means that authentication cannot be a differentiator, it needs to be the default,” Srinivasan said. “So, it’s hard for people to say, ‘Hey, we’re great authenticators, we’re the best,’ unless there’s data to support it. And because everybody can make the same claim, and if everybody is making the same claim, then this claim is worth nothing. So what we’re really trying to do is democratize these ideas [and] that authentication should just be the default thing. We want to bring authentication as a default thing across the industry.”
Currently, artificial intelligence-based solutions are proving effective at staying ahead of the fakes. However, wider industry adoption will slow the manufacturing and selling of costly counterfeits.
“Technology can serve as a reliable median between authorities and trademark owners and/or their representatives by establishing an infringement claim platform which allows right holders to file an infringement case against the counterfeiters,” Ahmad Almheiri, senior manager of trademark and commercial agencies disputes at the Dubai Department of Economic Development, said. “Moreover, the continuous development within AI technology physically help in identifying counterfeit and digitally aids websites to identify counterfeit goods based on different attributes.”
MarqVision was founded out of Harvard Law School and MIT to tackle counterfeiting. Using AI, it automatically detects and removes counterfeits from over 1,500 global online marketplaces, including social media sites like Instagram and TikTok, as well as Korean counterparts. Its technology enables the efficient removal of fakes by automating the traditional anti-counterfeiting process end-to-end.
“I think counterfeit[ing] has been with humanity for the entire course of our history,” MarqVision CBO Lee said. “But because of the advent of different channels, the internet has triggered the movement of counterfeiting being in a physical world and moved [it] to an online world. This is a very well-organized criminal scene. What many luxury brands are asking us today is to develop a tool to connect data points after an internet search so [they] can hire investigators to tackle the distribution centers and warehouses.”
So, MarqVision, which won the LVMH Innovation Award in the data and AI category and raised $20 million in Series A funding this summer, developed a tool to connect the dots between each seller’s listings across various platforms. If the AI detects any similarities in the images used by sellers—between the text, title, pricing or product description—it then connects those dots and clusters them. Then clients like LVMH can see who’s controlling the listings from behind the scenes. Essentially, MarqVision serves to help digital content owners and global brands protect their intellectual property (IP).
“It’s going to be a never-ending journey,” Lee said of MarqVision’s endeavors. “A company has to evolve constantly, so from that perspective, it’s a never-ending battle that we’ll have to face if we are to build a great company.”
Luxury houses outside of LVMH enlist the services of MarqVision as well. But do these houses have any responsibility themselves to stop the proliferation of counterfeits of their own products? The answer doesn’t seem to be clear-cut right now.
“It’s not just an issue of bad counterfeits anymore because of the growth of the resale world. Maybe that’s unnerving to the brands,” Srinivasan said, referring to the growth that the resale world sees compared to that of the retail world. “So that in a sense, it could be unnerving, but on the other hand, that might absolve them of being responsible because the resale world is responsible [for] themselves. It’s not just about the counterfeit problem, it’s also about—if I’m a brand and I get into resale myself, am I double-dipping? It’s all about perception here.”
Brands can invest in technology like MarqVision and send out cease-and-desists—LVMH alone employs at least 60 lawyers and spends roughly $17 million per year on anti-counterfeiting legal action, Harvard Business Review reported—but Lee doesn’t think that’s enough.
“Investing in technology is one thing, but I think those brands should start working with some government bodies,” he said. “The public agencies are trying to stop these activities from ever happening, so having us is one thing, but they have to partner with other agencies, other government bodies, to tackle this issue at the source.”
And what about consumers themselves? With the wealth of knowledge available regarding just how dangerous reps are, why is the industry growing? Who is wittingly supporting it?
“It’s impossible to know it’s human behavior,” Srinivasan said, recounting a trip he took to a country known as a hotbed for fakes. While meeting with a reps wholesaler, Srinivasan was told that he would be put on a four-month waitlist to obtain some premium counterfeits (which he needed for research purposes). “Just like the original products have a waitlist, you have a waitlist? Who’s buying this stuff? And it turns out, it’s the richest of the rich who buy this.”
Thompson agreed, referencing an article by The Cut that focused on the upper echelon of well-heeled Manhattan women who proudly touted owning reps despite their ability to afford the real thing.
“There’s two kind of people here that buy counterfeits: screw the brand, they make too much money, I’m buying fake,” she said. “They’re not educated enough to know of the harms and dangers of counterfeits, or they just don’t care.”
But buying a counterfeit Louis Vuitton doesn’t hurt LVMH CEO Bernard Arnault, Europe’s wealthiest man, Wetzbarger argued.
“You are allowing the theft of intellectual property rights to flourish, and that [hurts] small artists, small artisans, people of color, women, people who have been stolen from by society regularly in the past,” he continued. “When we talk about protecting intellectual property rights, we have to protect the billionaires as well as the artists. You can’t have your cake and eat it too; you can’t have your fake bag and the real one.”
There’s enough research out there to understand the real-world effects that counterfeits have. Are appearances really worth their underlying cost?
“You have no idea the damage you’re doing. If you want to carry counterfeits, you’re trying to project an image,” Thompson said. “Spend the money you would spend on the counterfeit and go to therapy, because there’s something inside of you that’s not working if you can’t just rock any old bag, okay?”