Counterfeit NBA Merchandise: How do we curb the black market?
Zachary Landow is a J.D. candidate, 2021, at NYU School of Law.
On September 11, 2019, a routine cargo inspection at Los Angeles International Airport (LAX) led to the discovery of 28 counterfeit NBA championship rings. The rings were intended to be shipped from China to Arizona, and the agents who made the discovery believe that the rings were to be sold as a collection. If determined to be real, the rings could have sold for as much as $560,000. Ultimately, the fake rings violated the trademarks of not only 11 NBA teams, but also the Jordan brand and the NBA itself.
The bust at LAX is not the first sign of trouble for the NBA. Rather, it is the latest incident in a series of black-market activities that has demonstrated the tremendous value of NBA merchandise. During last year’s NBA Finals between the Golden State Warriors and Cleveland Cavaliers, undercover Homeland Security agents discovered fake merchandise being sold at pop-ups around Oracle Arena in Oakland, California. One agent even found a fake hat so poorly made that one was unable to read the NBA logo on it. Counterfeiters have also been known to target significant events. At this year’s NBA All-Star Weekend in Charlotte, North Carolina, agents seized over $100,000 worth of fake merchandise intended to be sold as genuine NBA products.
The black market for counterfeit merchandise negatively impacts players on all sides of the market. Of course, the effect on the NBA is quite obvious; the black market eats into their revenue stream and defeats the purpose of the protections provided by the ownership of trademarks. While the exact economic impact on the NBA is not entirely clear, “according to a 2013 INTA/BASCAP study done by Frontier Economics, the estimated value of international and domestic trade in counterfeits and pirated goods was between $710 billion and $970 billion globally per year and is directly responsible for the loss of more than 2 million jobs per year.” Along with the tremendous economic burden on the League, individual consumers are affected as well. Although the existence of counterfeit goods may allow consumers to spend less on NBA gear, they are often tricked into believing they are purchasing genuine NBA-licensed products and thus may have to pay a similar amount. Furthermore, counterfeit goods have no quality guarantee, and because the producers want to make as much of a profit as possible, they often use subpar materials in the production of the goods. Thus, a fan may unknowingly purchase a counterfeit jersey at a similar price to a genuine product, only to find that the poor quality renders the jersey unwearable in the near future. At the 2019 All-Star Game in Charlotte, NBA Vice President Michael Potenza noted: “when people buy shoddy merchandise…it’s not genuine, it doesn’t use the right logos and trademarks and spells players names wrong…that’s the kind of stuff that detracts overall from the fan experience.” Finally, there is also the risk that by purchasing counterfeit goods, consumers are supporting criminal enterprises that may contribute to more significant legal violations than the production of counterfeit products.
While the NBA has used several different strategies to combat the sale of counterfeit merchandise, it is first important to note the difficulty in stopping the production of fake NBA goods. Consumers are now able to surf the web searching for the cheapest merchandise, with many of the sources being traced back to China. While domestic counterfeiters can be caught and prosecuted, the same cannot be said of international sellers. Thus, the focus has instead been on catching goods before they get to the consumer, or alternatively properly warning consumers as to how to identify fakes. In 2013, the NBA partnered with the Coalition to Advance the Protection of Sports Logos (CAPS). CAPS works with both law enforcement agencies and the major professional and college leagues to protect their intellectual property and trademarks. While conducting investigations and seizures is an important part of their work, the main strategy used by CAPS and the NBA to slow down counterfeiters is education. The CAPS website includes instructions for how to spot fakes as well as pictures of counterfeit merchandise. Furthermore, the League is always sure to remind fans of how to ensure they purchase genuine goods, as Potenza has informed fans that, “the most important thing to remember if you’re a consumer is to look for the NBA hang tag…What you want to do is look for that holographic hang tag or sticker…If it doesn’t have that kind of sticker or hang tag, it’s a good sign it’s fake.” While these instructions may save an otherwise oblivious fan, the League’s strategy will certainly not be effective for the group of fans that are willing to intentionally purchase counterfeit goods because they are cheaper. Convincing these consumers that it is worthwhile to buy legitimate merchandise is the next challenge for the NBA in their battle against counterfeiters.