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Photograph by Skye Dunlap
Local flea markets suffer from the growing crime of counterfeiting.
Fraud Market
Local law enforcement agencies combat a $200 billion a year problem
By Michelle Ku
It's early morning, and the sun is rising. When most people are still in bed or just beginning their days, Mary Ellen Rivas is setting up her booth at the De Anza Flea Market.
Rivas is a Bay Area flea market vendor with a booth at the De Anza market each month.
"I like this (market) because it's once a month," Rivas says. "These are serious customers here. I try to carry quality merchandise, and here customers appreciate it."
But Rivas didn't always carry quality merchandise. Four years ago, she was caught selling counterfeit goods at a market. Among the items she carried were fake Nike, Adidas, Warner Bros. T-shirts, jackets, hats and shoes. Following her citation, Rivas dumped the fake items she sold and switched her inventory to stickers, earrings and gift items.
"I used to carry knock-offs, but I changed my merchandise," Rivas says. "I got caught once, and once was enough."
Rivas isn't the only vendor who has sold counterfeit merchandise. Each week, thousands of fakes are being sold at swap meets and flea markets throughout the country--at a huge cost to the American economy.
One group, the International Anti Counterfeiting Coalition, estimates the fraud costs more than $200 billion a year in lost jobs, taxes and sales. New York City alone loses an estimated $400 million in excise taxes. "That's a lot of potholes," says David Quam, executive director of the anti-counterfeiting group--the largest multinational organization to represent companies that suffer from product piracy and counterfeiting. "In any major American city, especially a port city--New York, Miami, Los Angeles--counterfeiting is a real problem. The trend is to ship goods into the United States at the major entry points."
Local markets like the one at De Anza and San Jose's Berryessa market aren't immune to the problem either.
In June, Sheriff's officers visited the De Anza market and arrested six vendors. In each case, officers confiscated a truckload of goods, arrested and cited the suspects and released them at the scene.
"The vendors make a good deal of money selling these things," says Sgt. Luther Pugh, a community services officer with the Sheriff's Office. "One of the vendors had over 600 items of clothing that were counterfeit. Just while we were observing them, they were doing pretty brisk business. And they travel from flea market to flea market."
At any given market, one out of every 10 items is probably a knock-off, said William Wolfe, a detective with the San Jose Police Department.
Photograph by Skye Dunlap
And counterfeiting goods is on the rise. In 1982, the International Trade Commission estimated that knock-offs affected the American economy by $5.5 billion. The number grew to $66 billion in 1998 and has more than doubled to today's estimated $200 billion loss.
Since law enforcement agencies cannot arrest or cite suspected counterfeiters without signed affidavits from the manufacturers to act in their stead, they work with private investigative firms which are hired by companies to investigate individuals counterfeiting registered trademarks.
One firm which has worked with the Santa Clara County Sheriff's Office and the SJPD is Investigative Consultants, a private southern California firm. Investigative Consultants represents many leading manufacturers including Chanel, NFL Properties, Rolex, Seiko and Warner Bros.
"In effect, they hire us to make these arrests," says Pugh.
Prior to contacting the Sheriff's Office or the SJPD, Investigative Consultants identifies vendors who are selling fake items. Then the group works with the law enforcement agencies to make arrests and issue citations.
Such a process was used during a May visit to the Berryessa flea market, where SJPD made several arrests.
Still, Wolfe stressed, not all Berryessa flea market vendors are illegitimate. "Most of the vendors are totally legal," he says. "Only a few sell knock-off items, but the ones that do are huge."
On each trip to Berryessa, SJPD usually limits the number of arrests to three because of the time it takes to catalog and inventory the confiscated items. Also, word of SJPD's presence spreads fast, and vendors often close their booths for the day.
"There are bags and bags full of merchandise," Wolfe says. "More merchandise than Gap."
Jennifer Wang, 17, right, and Amy Wang, 13, scrutinize the selection of purses for sale at the De Anza Flea Market.
Photograph by Skye Dunlap
While some knock-offs are easy to spot--Rolex watches that sell for $20, Nike T-shirts with a picture of Disney's Tasmanian devil or an Adidas shirt with a Hanes tag--others are more difficult. It often takes trained investigators hired by manufacturers to detect counterfeited items because of specific company and trademark knowledge.
"It's very tough to be on top of all the latest," says Patrick DeTar, Berryessa's reservations manager. "I can't tell you if something is authentic Tommy Hilfiger because I'm not trained to know that brand."
Detar is proactive in policing the sale of knock-offs at Berryessa. The market has its own in-house security that looks for counterfeit merchandise and works with manufacturers, four or five private investigation firms and several organizations including the Western Anti Counterfeit Coalition.
Buckner and his firm have been at Berryessa three or four times in the last five months, DeTar says.
While it is easier for Berryessa to police its permanent vendors--if a vendor is caught selling knock-offs twice, he or she is evicted--it is difficult to monitor the sellers who set up short- term.
"Sellers who have been here a long time understand the importance of their good location and they don't want to lose that to the risk of selling counterfeits," DeTar says. "But we don't have the ability to pull the day seller over to check their inventory when they are trying to buy a space."
The traditional places for the sale of knock-offs are swap meets and flea markets, but they aren't the only places.
"[Swap meets and flea markets] are just the tip of the iceberg," Quam says. "There's a whole industry involved outside of the flea markets and street vendors. There are stories of counterfeit items making it onto legitimate store shelves. We have to combat this on all levels."
There is an entire industry outside of the counterfeit clothing and jewelry sold at flea markets and swap meets. Manufacturers are being opened to product liability with the cosmetics, automobile parts, toys, pharmaceuticals and baby formula being counterfeited and sold under their names.
While legitimate manufacturers research and develop safe toys for children, the counterfeiters don't care if the knock-off has a plastic part that can break off and choke a child, Quam says.
In the 1980s, Searle, a pharmaceutical company, discovered that more than 1 million counterfeit birth control pills had been distributed to women, resulting in unwanted pregnancies and irregular bleeding.
In 1995, Procter & Gamble placed half-page advertisements in newspapers informing consumers that counterfeits of Head & Shoulders shampoo on store shelves could harm users with weakened immune systems.
Some of the larger retail chains have also purchased counterfeit Nike merchandise in the past, says David Simpson, Nike's security director.
Each year, Nike loses several million dollars globally to counterfeit items.
"It's hard to equate," Simpson says. "If you add up everything we seize by us, police or customs, it's several million dollars. And you're just scratching the surface. There's a lot out there you don't seize, so it's an area where you make an educated guess."
Most of the fake Nike apparel sold in the U.S. is typically T-shirts and sweatshirts. Knock-off Nike footwear is generally distributed outside of the U.S.
To help combat counterfeiters, Nike hires private investigators to protect its trademark through criminal and civil investigations.
"We've taken action at the San Jose flea markets," Simpson says. "But it's a tough deal. You have to go in and try to pursue the people, what they are selling and then work backwards and try to see who their suppliers and manufacturers are."
Photograph by Skye Dunlap
Ryan Curtis surveys the wide array of sunglasses at the De Anza Flea Market. Though these goods are likely legit, some experts estimate one in 10 items at local flea markets are counterfeit.
The number of counterfeit items available on the open market has increased owing to the advancement of technology, making it easier and cheaper to produce authentic-looking merchandise inexpensively.
While being caught once was enough to stop Rivas from peddling counterfeit items, vendors aren't usually deterred unless states institute criminal punishments--jail time.
"The problem with civil remedies is they get fined or sued," Quam says. "Counterfeiters take that as a cost of doing business. It's a fine or risk they take. That's why we push for criminal remedies. You can't get out of serving jail time, and in areas with criminal punishments, people are leaving the area."
A difficulty in enforcing California's anti-counterfeiting statutes at markets is due to the mobility of vendors.
And even if vendors get cited and evicted from a market, there's always someone else to take their place, Wolfe says. "They usually get their stuff from Los Angeles, and they don't give out the information on who they get it from."
Los Angeles is where the majority of the counterfeit merchandise in the United States is produced, Simpson says.
Recent changes to California's anti-counterfeiting laws have imposed stiffer penalties on individuals arrested for selling or manufacturing knock-offs.
In 1996, individuals caught selling knock-offs in California received citations unless they had a prior counterfeiting conviction. If they had priors, they were charged with felonies.
Today, individuals arrested for selling knock-offs valued at more than $400 are charged with felonies, which includes jail time.
A new avenue some illegitimate vendors are moving into is selling knock-offs of computer software.
Pugh recently attended a high-tech investigative crimes course, and representatives of the computer industry are interested in establishing a partnership with law enforcement similar to that of companies like Nike, Disney and Adidas.
In the meantime, private industry must continue to work with law enforcement in training how to spot counterfeits to contain counterfeited merchandise trend.
"As soon as all law enforcement agencies are on board with this type of investigation, I would expect to see a bit of a downturn," Pugh says.
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Sunnyvale, California Since 1994
