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How the Sports Industry Gets Faked Out, and Why Planners Should Care

2 Dec, 2015

By: Mary Helen Sprecher
Counterfeiting of Logo Merchandise, Equipment Brings Not Only Financial Losses to Planners but Danger to Athletes

It happens at NCAA March Madness. At the World Series. Even at the Olympics. It’s rampant and it’s ugly and it’s costing a lot of money to fight.

And unfortunately, it’s a fight the public either doesn’t know, or doesn’t care about, but sports planners need to.

Counterfeiting in the sports world, whether it’s of logo merchandise such as T-shirts, hats or souvenir jerseys, or of sporting equipment itself, is a problem that is growing exponentially. Counterfeiting is defined as the production of replica materials, which are then passed off as the genuine article, and sold at bargain-basement prices.

A report from The Oregonian noted that in 2012, the major professional sports leagues in the United States lost over $13 billion in revenue due to sales of counterfeit jerseys and apparel. Merchandise of the National Football League (NFL) had the most losses to counterfeits, with nearly $3 billion of the total, according to The Licensing Letter.

But… pro sports leagues have big money. Why should sports planners, particularly those planning youth or amateur events, care about counterfeiting? A number of reasons, actually. They’re all important and they all matter:

It takes money away from legitimate vendors, including you: Picture this. You have paid to have a logo designed for your youth sports event. You’ve made sure that logo appears on your website, any printed materials and on all your social media. And you plan to give all participants a logo T-shirt – and make more available for sale to parents, family members and friends who traveled in. So not only is there a cool souvenir, but the potential for income as well.

Except when you arrive at the venue, there are already people wearing your T-shirts. Turns out, someone downloaded the image off the Internet and went to an online retailer who made shirts with your design on them. Oh, and they’ve sold them to a lot of the people coming in the gate. And suddenly, you have boxes of shirts that nobody seems to want because they already bought one, thanks, and for less than what you’re charging.

That’s counterfeiting. That’s what it does to sports events.

It creates and perpetuates a marketplace of inferior and unsafe products: Looking beyond souvenir jerseys, hats and T-shirts for a moment, it’s easy to see why counterfeiting is such a threat to the sports market. Players depend on good equipment for optimal performance. But good equipment can be an investment (particularly for youth players who grow out of it quickly) so it’s not uncommon for parents, coaches and others to shop around on the Internet, trying to find a better deal on a piece of equipment, whether that’s a tennis racquet, a football helmet or anything else. And some of the top places to hunt for bargains are online auction sites such as eBay.

But, say manufacturers, that’s where the trouble starts. That tennis racquet that costs a fraction of the price in the sporting goods store, the one that ships out of China, has advertising copy stating it’s the brand you’re looking for. It might even be identical to the real thing, but it’s not the real thing. And the biggest red flag of all is not what it looks like or what it promises; it’s that big discount.

In general, buyers who have already paid for an item and had it shipped don’t have much recourse when the equipment breaks or performs poorly. The Better Business Bureau can’t help you if the vendor you used is located out of the country.

And while a counterfeit racquet can break, or give a wicked case of tennis elbow, there is more serious potential for harm in a knockoff youth sports helmet or other protective gear.

See why it’s so important? And here are a few other reasons sports planners should care:

It hurts American manufacturing: United States-based cap maker New Era reported losing $300 million a year in sales to foreign companies selling counterfeit baseball caps according to Buffalo Business First. Uggs has also recently begun targeting counterfeiters. All those people who want to buy “Made in America” products need to make sure they’re sourcing the genuine article, rather than something that comes more cheaply. In fact, a recent article on SportsOne Source noted that buying counterfeit products has a significant impact on the global economy, eliminating tens of thousands of jobs with legitimate businesses and costing the economy an estimated $600 billion of revenue a year.

It hurts workers: Counterfeiters who operate out of places like China are not accountable to human rights and environmental regulations nor do they adhere to child labor laws, anti-sweatshop laws, or restricted substances laws. This puts workers, the environment and consumers at risk. (So all those people who promote 'Small Business Saturday' and Shop Local' can put their money where their mouths are and help buy only from reputable retailers.)

A number of companies have stepped up their anti-counterfeiting efforts. The latest to make the news is Vibram (they of the shoes with toes), which recently announced an aggressive stance against knockoff products.

It’s a crime. Really. Within the United States, a number of governmental agencies work to stop counterfeiting, and to secure intellectual property rights. The website, StopFakes.gov, lists more than a dozen agencies, including Immigration and Customs Enforcement (ICE) and U.S. Homeland Security Investigations, all of whom have jurisdiction over different aspects of the problem. In fact, Customs and Border Patrol (CBP), another agency involved, has an e-allegation portal through which people can provide information on suspected counterfeiting.

Agents have conducted stings, making arrests of vendors prior to high-profile sporting events. For example, the 2013 Super Bowl coverage on ESPN included an announcement from the NFL, in cooperation with government authorities, of the seizure of a record $13.6 million worth of counterfeit NFL merchandise in one season in a nationwide enforcement effort called "Operation Red Zone."

That total included a bust in Warwick, Rhode Island, when the U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations, with an assist from U.S. Customs and Border Protection and U.S. Postal Inspection Service, seized 226 boxes containing 4,016 counterfeit jerseys. It also includes 160,000 Super Bowl-related pieces of memorabilia discovered as the season progressed.

More recently, in early November, CBP seized 5,383 pieces of counterfeit soccer apparel near Washington Dulles International Airport. The haul included jersey tops and shorts that violated the intellectual property rights (IPR) of many well-known European football clubs, such as Arsenal, Barcelona, Manchester United, and Real Madrid. During fiscal year 2014, CBP made more than 23,000 seizures of counterfeit goods, which, if genuine, would have an estimated total MSRP value of more than $1.2 billion.

Officials have continued to widen the net, arresting dealers who routinely set up shop at regional flea markets, selling counterfeit logo merchandise to consumers. Law enforcement officials have also shut down dozens of websites selling knockoff NFL jerseys and more.

But people don’t think it’s a crime. Unfortunately, the general public fails to understand the connection between governmental agencies and anti-counterfeiting measures, and often feels victimized by the fact that “the dealers with the good prices” have been put out of business. As a result, agencies fight the battle on two fronts: trying to squelch the counterfeiters themselves and trying to educate the buyers who unknowingly shelter illegal activity.

Sports planners can help: There are measures planners can take, including sourcing merchandise from reputable domestic vendors. They can also look for problems-in-the-making by keeping an eye on sales that might be going on prior to, during or after the event, by unauthorized individuals, and by reporting those. They can also help raise awareness of the dangers of counterfeit equipment among athletes.

Nobody is alone in the fight: A number of trade associations serving the sports industry have made it their business to provide reporting mechanisms for players and others who know about counterfeit merchandise. The Tennis Industry Association (TIA), for example, provides a portal through which suspicious activity can be reported.

“All of us in this industry are pulling together to bring awareness and to help shut down this kind of illegal activity that hurts everyone — manufacturers, retailers, consumers and players,” noted Jolyn de Boer, executive director of the TIA in an interview in Tennis Industry Magazine. “We all have a stake in cleaning up this kind of abuse.”

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