Another week, another story of Kering’s battle against fake fashion. The French luxury label is at war and Bank of China is the latest casualty. On Tuesday, the bank, one of the 5 biggest state-owned commercial banks in China, was found to be in contempt of court for failing to turn over financial records from various Chinese companies accused of selling counterfeit Gucci goods.
Last year the Bank had argued that Chinese Banks operating in the US did not have to comply because it would violate China’s secrecy laws. It also claimed that US courts did not have jurisdiction despite the bank operating branches in new York. Judge Sullivan ruled back in September that US courts did have jurisdiction and that “forcing Gucci to initiate this process in China would be significantly less efficient, extremely time-consuming, and potentially fruitless.”
The Bank failed to comply and hand over the financial records to Kering,using what the judge referred to as “ridiculous” delay tactics and essentially telling brand owners to “suck it up.” Judge Sullivan held Bank of China in contempt of court and will determine monetary sanctions next Monday.
Gucci is asking Judge Sullivan to order a $12 million payment, as compensation for how much the brands say they would have collected in damages from the counterfeiters, in addition to $3 million a day in coercive sanctions. Gucci is also requesting that the bank pay the company’s legal fees.
“Bank of China has not been accused of wrongdoing and is not a defendant in the this case,” said in a statement released by Bank of China’s lawfirm Allen & Overy LLP. “The district court does not have jurisdiction to order the Bank to produce documents.” According to the Wall Street Journal, the bank has said Gucci should make its records requests through provisions of an international treaty, also known as the Hague Convention, which has been used in similar counterfeit cases in the U.S.
The past decade has seen an explosion in the counterfeit goods industry and it is now estimated that 20% of clothing and shoes are now counterfeit. The anonymity that the internet affords sellers of counterfeit goods has created unprecedented challenges for designers trying to protect their brands. With over 70% of counterfeit goods originating in China, the internet has become a safe haven for the sellers. Websites can disappear at the touch of a button and counterfeit sellers can use numerous names and aliases on Alibaba or eBay to avoid detection. Chinese regulators are clamping down and launched a five-month campaign targeting counterfeits and other inferior products sold online in June of this year. SAIC said that the initiative to strengthen the regulation of online trading sites, known as Red Shield Network Sword, would run until the end of November. The regulator is monitoring and supervising the rules governing e-commerce sites over this period in a bid to crack down on fakes.
Meanwhile the Kering Group has been battling fakes on numerous fronts. Just last week we reported its decision to go to mediation with Alibaba, the world’s largest e-commerce company, which it claims “provides the marketplace advertising and other essential services necessary for counterfeiters to sell their counterfeit products to customers in the United States.”
More to come on this one folks!