Authentic.Trusted.com

The official blog of Trusted.com

Author: Lesleigh Baden(page 1 of 3)

Could Blockchain Technology Help Prevent Art Market Fraud?

Recent years have seen some of the biggest art forgeries of the 20th century, including a $79.6 million Austrian case of forged certificates and replicas by Pablo Picasso and Claude Monet.

According to the FBI’s art crime unit, art frauds, forgeries and fakes total $6 billion annually.

In an industry plagued by authenticity and traceability issues, could Blockchain technology be the solution to bringing transparency to the art market?

Essentially a cloud-based digital ledger, Blockchain offers a secure means of digitizing authentication, provenance and ownership history.

Artists would register their work into the Blockchain to create a digital certificate of authenticity. Through a unique cryptographic ID, each artwork can be authenticated and ownership rights securely transferred to galleries or collectors. Once a transaction is verified, the Blockchain ledger is updated and cannot be removed or altered.

This “distributed registry of authenticity” offers a significant upgrade from the current system and incredible potential to easily prove authenticity, ownership and transactions.

https://www.slideshare.net/EXANTE/blockchain-and-fine-art-how-the-technology-could-change-the-art-market

Accessibility

Blockchain can help to make fine art accessible for everyone. Traditionally, artists have relied on galleries for distribution. Blockchain could eliminate such intermediaries and connect artists directly to a broader audience through an online market.

Proving Provenance and Authenticity

Standard paper-based transaction records are unsecured and prone to inaccuracies, omissions and forgery.

When combined with technology like in-depth scanning and fingerprinting, Blockchain offers a secure, digital solution to verifying provenance (where a work comes from), authenticity and ownership.

Once the provenance and authenticity is recorded in the Blockchain, it won’t require authentication again, which takes a lot of cost out of the system.

Establishing Identity and Ownership

Anonymity has long been central to the art world. The identity of art owners is oftentimes concealed, especially during auctions. But this creates opacity around tracking ownership- a key element in establishing a work’s authenticity.

Blockchain could provide visibility into the secondary market by recording transactions and changes in ownership as well as transparency around the identity of the owner.

While proponents of the Blockchain believe it has the potential to revolutionize the art market, the technology has been slow to gain traction. As with anything, change is often slow.  It will likely take a progressive gallery or a prominent artist to adopt it before it becomes the industry standard.

Tiffany’s Triumph in Costco Trademark Case

When you think about shopping for engagement rings, Costco Wholesale Corporation probably isn’t the first retailer that comes to mind. However, the warehouse club chain was desperately trying to claim a growing share of the fine jewelry market – by offering “Tiffany” diamond engagement rings. In doing so, Costco has been charged with trademark infringement and trademark counterfeiting against world-famous luxury retailer, Tiffany & Co.

A federal judge has ruled that Costco owes Tiffany & Co. a settlement of $19.4 million for selling generic diamond rings falsely marketed on in-store signage as “Tiffany.”

The ruling comes four years after Tiffany & Co. originally filed a cease and desist against Costco. Even though Costco immediately removed all “Tiffany” signage from the rings and even offered to refund customers’ money, Tiffany still pursued a suit against the retailer. Why? To defend its biggest asset: the value and cachet of its brand.

Costco argued that it used “Tiffany” as a generic term to describe the style of setting. Costco claimed “Tiffany” had become an industry-standard, generic term for the six-pronged gem mount created by Charles Tiffany in the 19th century. Further exacerbating the situation, Costco even asked for a declaratory judgment that would cancel Tiffany’s trademark rights to the name when used to describe ring settings.

“This was not a case about counterfeiting in the common understanding of that word—Costco was not selling imitation Tiffany & Co rings,” Costco said.

But the luxury jeweler did not take lightly to its trademarked and registered name being challenged. Nor should they.

Brands risk losing millions of dollars if they don’t protect their trademarks. The more famous the brand, the more valuable trademark protection becomes.

As one of the world’s best-known luxury retailers, Tiffany has built an iconic brand associated with exceptional quality, value, reputation and name recognition. The public has come to associate Tiffany engagement rings with high quality and prestige. A Tiffany engagement ring from Costco guts this perception.

Even being indirectly associated with anything cheap has the potential to make the price of jewelry plummet dramatically. If Costco had continued to use the Tiffany name, their reputation as a low-price retailer could have had a detrimental effect on the overall value of Tiffany & Co.’s jewelry.

“We brought this case because we felt a responsibility to protect the value of our customers’ purchases,” a company spokesman said. “It is critically important that the Tiffany name not be used to sell any engagement ring that is not our own.”

According to a Bain & Co. report, Tiffany “claims the largest share of the female mind in the U.S.” when it comes to name recognition in jewelry brands. Given the fact that Tiffany has struggled in recent years to command consumer attention in an oversaturated luxury market, defending their trademark and their reputation was a no brainer.

In addition to paying Tiffany, Costco can never again use the word “Tiffany” to sell products as a standalone. Bye, Felicia!

Attention Walmart.com Shoppers: Now Offering Counterfeits

In an effort to compete with Amazon, Walmart.com has significantly increased its product selection by offering items from third-party sellers. While third-party offerings provide consumers with more options, online shoppers may want to proceed with caution.

Launched in 2009, Walmart’s Marketplace allowed select retailers to list their products on Walmart.com. Recent partnerships have ballooned Walmart.com’s product selection from 10 million to more than 50 million items in the past year alone. All of which is due to an increased number of third-party marketplace sellers.

By offering a wider selection, Walmart.com has become more attractive to online shoppers. The site is now the 3rd-most-visited e-commerce site in the U.S., with 89 million unique visitors per month, according to comScore.

But with this success has come a problem that troubles open marketplace retailers like Amazon.com and eBay: the sale of counterfeit products.

The Counterfeit Report has repeatedly found and submitted complaints to Walmart, authorized by the trademark holders, for counterfeit items found on its website. Yet months later, some items remain while others are removed, but then are relisted.

As the top retailer in the U.S., most consumers would perceive Walmart as a trustworthy merchant of authentic goods. But online shoppers, who are unaware of third-party items, misplace their confidence when shopping online at Walmart.com.

Walmart Marketplace items include items from international companies, like China – the counterfeit capital of the world. These items show up right alongside Walmart’s own inventory leaving little differentiation between the store’s verified merchandise and potentially counterfeit third-party goods.

Walmart has recently been criticized for not monitoring its marketplace counterfeit problem. The Counterfeit Report, a self-described consumer advocate and watchdog, “has repeatedly found and submitted complaints to Walmart, authorized by the trademark holders, for counterfeit items found on its website. Yet months later, some items remain while others are removed, but then are relisted.”

While it’s impossible to prevent counterfeits completely in an open market, Walmart is failing to remove even reported counterfeits from their site. You’d think a nationally recognized brand like Walmart would be proactive to protect their customers from fakes. For the time being, Walmart.com shoppers may want to steer clear of the online aisles.

What’s your take? Does the risk of purchasing counterfeit products affect your willingness to shop through Walmart.com?

RELATED: Prime Issues: Keeping Counterfeits Off Amazon

Outsmarting Counterfeiters

Digital commerce poses both immense opportunities and serious threats to brands, consumers and whole economies. With 4.7 billion online consumers predicted by 2020 , it will become easier than ever for counterfeiters to exploit brands through e-commerce. Rogue websites, online auctions and the darknet provide a global, anonymous and lucrative channel for counterfeiters – one that has become difficult to control.

The risk of lost revenue, market share and consumer trust makes it essential for brands to invest in anti-counterfeiting methods. Thankfully there are arsenal of anti-counterfeiting technology to combat counterfeiters.

Domain Strategy

Oftentimes, cybercriminals will exploit popular brand domain names by using slight misspellings in the web address. This diverts customers unknowingly to rogue sites selling counterfeit goods. Fortunately, brands who use gTLDs (generic Top Level Domains), essentially a ‘.BRAND’ domain name, can safeguard customers from being diverted to fraudulent sites. By adopting a .BRAND domain name, companies create a trusted environment for their customers and make it easier for customers to find them.

RFID

Radio-frequency identification (RFID), often referred to as ‘track and trace’ technology, uses adhesive tags or chips that contain electronically stored information. The technology uses radio waves to wirelessly identify and track tags attached to objects. RFID tracking chips are often used in supply and distribution chains to help identify diversion or product tampering. However, only when they include a unique identifier, are consumers able to verify the authenticity of a product.

Worldwide security printing (barcodes, holograms, special inks, etc.) could become a $35.3 billion market by 2018.

Digital authentication

All too often, brands use outdated methods like authentication cards or holograms that are easily duplicated. The average customer can’t discern a fake card or hologram, so what use is that to the consumer? A better solution is an app or scanning technology that can identify counterfeit goods at the point of purchase – either through online verification via serial number, like Trusted.com, or by ciphered QR codes on the products themselves.

Nanotechnology

Advances in nanotechnology are the newest offerings to prevent illicit copying. Nanotechnology deals with things on a molecular scale – less than one nanometer (nm), or one billionth of a meter, in size (scale of hemoglobin and DNA).

Nanotechnology anti-counterfeiting methods create a totally unique, virtually unreproducible signature or “fingerprint” for each item. The irregularities of nano-devices make it nearly impossible to replicate and present what may be the most effective anti-counterfeit methods yet.

Prime Issues: Keeping Counterfeits Off Amazon

Much has changed since Amazon.com opened its virtual doors on the World Wide Web in July 1995. Today, the world’s largest online retailer offers 500 million products sold by 2 million sellers; many of which are third-party vendors. In fact, 50 percent of units purchased last year were sold by third-party sellers.

While many third-party sellers are legitimate enterprises like major retailers and brands and small business, Amazon basically lets anyone sell nearly anything on its platform – including Chinese manufacturers. Notorious for counterfeit products, sales from Chinese-based sellers have more than doubled on Amazon’s marketplaces in recent years.

Oftentimes, consumers are unaware that their items are from unknown and unvetted sellers overseas. Unsuspecting customers may perceive a fake item as legitimate because of the Fulfillment by Amazon (FBA) endorsement. But this designation only means that the item is being packaged and shipped by Amazons fulfillment centers. Furthermore, Amazon commingles inventory – bundling together multiple third-party sellers – so that a counterfeit item could be sent to an Amazon facility by one merchant but sold by another.

Customers aren’t the only ones complaining. The company has begun to face legal pressure from brands including Apple and Birkenstock for allegedly enabling the widespread sale of counterfeits on the platform.

As a marketplace, Amazon isn’t legally responsible for keeping counterfeit items off the site; they are only required to respond to complaints and take action when fakes are brought to the company’s attention.

While Amazon has an anti-counterfeiting policy and recently announced a meager attempt to protect trademarked merchandise, critics say Amazon has not made it a priority to manage the influx of counterfeits. In fact, there’s not a single mention of the word counterfeit in their 2016 Annual Report.

The sale of counterfeit products, including any products that have been illegally replicated, reproduced, or manufactured, is strictly prohibited.”  

With a such a vast, global selling platform, it seems impossible for Amazon to police the millions of items sold by third-party sellers. But if Amazon wants to maintain any consumer trust, they need to do much more to close their counterfeit loopholes.

RELATED: ATTENTION WALMART.COM SHOPPERS: NOW OFFERING COUNTERFEITS

Why Counterfeiters Love the Internet

On a daily basis, billions of people use the internet to buy and sell goods and services. The booming online economy has created an ideal environment for counterfeiters, whose trade has burgeoned.

The internet has revolutionized the way counterfeiters operate and remains a highly lucrative and sophisticated criminal environment. Counterfeiters are no longer sequestered to selling fake goods through rouge websites. Ecommerce marketplaces and auction sites like Amazon and eBay allow counterfeiters to sell direct to consumers through a global and largely unregulated marketplace.

1. Anonymity

For websites selling counterfeit merchandise, it’s common practice for the registrant’s name and address on a URL to be fake. Moreover, the warehouse or retail locations are often not revealed, which further conceals the identity of the seller.

2. Globalism

The internet allows counterfeiters to reach a global audience faster and with far less economic effort than the off-line world. Between email promotions, social media marketing and digital marketplaces, reaching potential buyers is easier than ever.

3. Targeting

In the early days of selling counterfeits online, items were exclusively sold through rouge websites in which the counterfeiter relied on key words and meta tags of brand names to show up in search engine results. Today, the Internet offers innumerable opportunities to attract buyers.

Social media channels enable fraudsters to easily and affordably launch global marketing campaigns. It’s easy to create an account and buy followers to look legitimate. For pennies on the dollar, targeted advertising through platforms like Facebook and Instagram ensure the items appears on interested users’ timelines.

4. Enforcement

Unfortunately, the Internet is a difficult place to enforce IP rights. Fighting IP infringements is both expensive and complicated. On top of playing whack a mole to shut down rogue websites, brands are now facing the dilemma of fighting fraudulent listings on social media, auction sites and marketplace listings.

Current regulations for auction sites and ecommerce marketplaces do not require these retailers to pre-emptively remove counterfeit listings; they are only required do so when notified by the customer or rights holder.

The Perils of Art Authentication

On June 07, 2017, the New York Senate passed Bill S1974 and delivered it to the New York Assembly– a proposal that has been stalled in the state legislature for three years. The purpose of the Bill is “to enhance protections under the law for individuals who are employed as art authenticator in the visual arts community.” If enacted into law, it will be the first of its kind in United States to explicitly protect art authenticators.

But what has prompted legislative intervention to protect art authenticators? The Bill comes after an increasing number of frivolous lawsuits against New York authenticators. Such claims have resulted in authenticators ceasing to offer their services and abandon their profession due to the exorbitant costs of litigation. Even prominent artist foundations such as the Andy Warhol Foundation for the Visual Arts and the Pollock-Krasner Foundation have dissolved their authentication boards.

“Untitled” by Jackson Pollock was one of the counterfeit works involved in the Knoedler Gallery forgery scandal.

Senator Betty Little, the Bill’s sponsor, corroborates these claims by stating, “In recent years, the work of authenticators has come under pressure from meritless lawsuits against those who render opinions in good faith. Such defense of expensive and frivolous lawsuits has left many in the industry reluctant to lend their expertise in authenticating art works.”

As such, collectors have found it increasingly difficult to find experts willing to authenticate art. An absence of authentication poses a significant threat to the functioning of the art market: diminishing consumer confidence, disrupting commerce and increasing the number of forgeries entering and devaluing the market.

There is no doubt that authenticators need protection from frivolous claims. Their opinions play an integral role in the fine art market by preserving art values, preventing art forgery and fraud, and providing assurance to collectors, which promotes the purchase and sale of art.

While the passing of the bill may encourage authenticators to resume their profession, some may argue that it will be more difficult for collectors to seek recourse should they be sold a forgery, which also has the potential to seriously affect the sale of artwork.

Are you an art collector? What’s your opinion on the Bill? Let us know your thoughts in the comments below. 

RELATED: AVOIDING FAKES IN THE ART MARKET: A BUYER’S GUIDE

Why You Should Not Buy a Fake Watch

According to Forbes, 15-30% of Internet searches on watches involve people looking for replicas. But what’s the big deal with buying a knockoff watch anyway? Why you should not buy a fake watch

Quality & Reliability

Because fake watches are made as cheaply as possible, they generally have very short lifespans. Made with low quality materials and internal mechanisms, fake watches quickly fall apart and are notorious for keeping inaccurate time. What use does a watch have if it can’t tell the correct time?

Poor Investment

At first, you may feel like you saved a lot of money by paying a fraction of the price. But after a few weeks or months of wear, the watch will break or not keep time and you’ll regret your purchase. Most jewelers will refuse to repair counterfeit watches. In the end, you’ll lose the money you spent on the watch.

A fake watch has no value. Why waste your money on something without value?

Reputation-Damaging

The hard truth is that we regularly judge others on their appearance. Just by wearing a fake watch, you can cause irreversible damage your reputation. While some may excuse your purchase as an attempt to impress others, others will deduce that you are poser or downright disingenuous. Don’t run the risk of others assuming you are as fake as your replica.

Legal Aspects

Fake watches are illegal in that they illegally copy a brand’s name, logo and/or design elements. Because they are made illegally, counterfeit watches are made in unlicensed and unregulated factories. The workers, often underage and against their will, are subjected to dangerous conditions.

These illegal shops are known to be part of a wider criminal network. Proceeds support serious criminal activities including money laundering, drug trafficking, extortion, prostitution, child labor and human trafficking.

Your seemingly innocent replica has some widespread repercussions.

Revenue Loss

Counterfeit watches undermine the entire industry by diluting and redirecting the equity of watch brands into counterfeit goods. In fact, estimates by the Swiss watch industry reveal that the replica watch market costs them billions of dollars each year.

Knowing that you risk wasting money, a tarnished reputation, and supporting illegal activities, is buying a replica worth it?

Authorized vs. Unauthorized Dealers: What’s the Difference?

When it comes to buying authentic products, it’s important to know the difference between “authorized” and “unauthorized” dealers.

What is an “Authorized” Dealer?

An authorized retailer has a contractual relationship with a manufacturer. Simply put, authorized dealers are granted official rights to sell the brand’s merchandise.

This relationship benefits both the retailer and the manufacturer. For manufacturers, authorized dealers ensure supply chain transparency and related sales research, pricing consistency and greater profits.

An authorized retailer benefits from recognition by the brand as authorized seller, which gives their store reputability and verifies their merchandise as authentic. Additionally, their products are covered by the manufacturer’s warranty.

What is an “Unauthorized” Dealer?

On the contrary, an unauthorized dealer does not have official rights to sell a brand’s merchandise. Also known as gray market dealers, unauthorized retailers generally obtain genuine merchandise overseas and bring it back to the U.S. for sale. However, their merchandise can be acquired from questionable sources including damaged, defective, used, or stolen goods.

Due to the questionable nature of goods sold by unauthorized sellers, manufacturers discourage the purchase of such items. In fact, brands will not honor the manufacturer’s warranty of items purchased from unauthorized retailers. This is why so many gray market sellers offer their own in-house extended warranties.

Why Sell Unauthorized Merchandise?

From Costco to Amazon, even big box stores have engaged in unauthorized retailing. Why? Quite simply, to offer lower prices. An unauthorized retailer can often purchase and then re-sell products at a lower price than an authorized retailer.

Are Unauthorized Goods Legal?

In the UK, the sale of gray market goods was recently made illegal. In the U.S., because gray market goods are not counterfeit or pirated, it’s generally legal.

What’s the Big Deal?

Those who sell gray market goods seek to profit from differences across markets, such as currency fluctuations, tax differences and manufacturer’s regional pricing differences.

Because most gray market goods are obtained overseas,  they pilfer purchases from stateside retailers. When a brand’s products are purchased overseas and then resold in the U.S. marketplace, it negatively impacts the brand’s U.S. sales.

Gray market goods can also negatively affect sales price. Authorized retailers are forced to sell their merchandise for less in order to compete with lower-priced authentic foreign products.

While some consumers may appreciate the discounted price of gray market goods, it comes at a cost to brands and legitimate regional sellers.

How Culture Influences Counterfeit Luxury Purchases

Curtailing consumers’ desire for fake goods is crucial to winning the war on counterfeiting. Since the counterfeit market is driven by consumers’ desire for authentic luxury goods, researchers have begun to examine what motivates consumers to make luxury purchases, which can offer an understanding of why consumers buy counterfeit goods. From this, marketers can formulate targeted campaigns to weaken perceptions around the counterfeit industry.

Current research has found that consumers’ desire for counterfeit luxury goods are based on social motivations. However, these motivations tend to differ among consumers’ culture and country.

One study focusing on the purchase of genuine goods, found that Americans specifically buy such goods for hedonistic reasons of self-fulfillment while French consumers, for example, buy because they are expensive and exclusive. American consumers reported buying goods for self-fulfillment, rather than to please others.

Another study by the same author focused on different countries perceptions toward counterfeit goods.  The findings showed consistent attitudes in accordance with cultural patterns.  For instance, Americans and Europeans want high-quality goods and worry that counterfeits won’t have the quality they desire. Koreans, on the other hand, are more concerned with social perceptions and the shame associated with counterfeit goods.

With this information, advertising messages can target the cultural and social goals associated with preferences for counterfeits.

Older posts