AAFA Panel Discusses Digital Risk

In today’s retail climate, where 58 percent of purchase decisions begin with an Internet search, it’s imperative for brands both big and small to establish an e-commerce presence. But being online also comes with increased risks.

The American Apparel & Footwear Association’s Monday morning seminar at FN Platform addressed the many challenges of the digital realm, which include counterfeiting and other violations such as “cybersquatting” (an unauthorized entity using a brand name in a URL to essentially steal Internet traffic). Offering advice on the subject were panelists Eric Mueller, director of global anti-counterfeiting at Levi Strauss & Co.; Leah Evert-Burks, director of brand protection at Deckers Outdoor Corp.; and Brian Winterfeldt, a partner at Steptoe & Johnson LLP. Frederick Felman, chief marketing officer of brand protection company Mark Monitor, moderated.

“[Counterfeiters and other violators] are not only ripping the customers and us off but they are also ripping off the hard work and innovation that [Levi Strauss] has done since [the brand’s inception],” Mueller said.

To combat that, his company last year began an intense effort to take down offending websites in 55 countries, using Mark Monitor as well as internal efforts such as undercover buyers, raids and seizures. This first round culminated in litigation that shut down more than 400 offending sites and froze 146 PayPal accounts connected to those sites, diverting the funds to Levi Strauss to pay for its legal expenses.

“The problem is so big, but it is all about speed and process, process, process,” Mueller said.

Evert-Burks recounted Deckers’ process for catching Ugg counterfeiters, which includes an automated system that focuses on prevention, identifying offending URLs before they gain traction with search engines, and instantly generating cease-and-desist letters that are later reviewed by Deckers’ attorneys. “We have moved away from reactionary [methods],” Evert-Burks said. “It’s tedious work, but you have to be flexible and move with the threats. Our mantra is to use all the tools that are available, and when the tools are not available, develop your own.” She added that Ugg has a database that customers can access to check if a website is authentic. The database has 31,000 listings, and it had 500,000 visitors in the fourth quarter of 2011. “Education is a must-do,” Evert-Burks said.

Evert-Burks and Mueller also discussed transforming counterfeit threats into boons for their own e-commerce channels. For example, when a counterfeit site is identified, Deckers can divert traffic from that page to its own Ugg site. “[In those instances], the counterfeiters do some of the work for us because they are still valuable in searches,” she said. “When a hit to a [counterfeit] landing page generates a sale for [the legitimate Ugg site], it supports the premise that the consumer was in fact looking for genuine goods.”

Winterfeldt noted there is a new counterfeit-fighting option that could change the way brands use e-commerce in an even bigger way: a process allowing companies to apply for new “gtlds,” or generic top-level domains (i.e. the .com or .org in a web address). For example, Levi Strauss could apply for .Levi. Applications, which require a hefty $185,000 fee, are being accepted by the nonprofit ICANN (the Internet Corporation for Assigned Names & Numbers) through April 12, with a second round tentatively planned for a few years from now.

“It’s a way for [a brand to] run its own piece of the Internet,” Winterfeldt said. “It’s an opportunity to own your own domain space and run it as a closed system. [Brands] are seeing it as a chance to be cutting edge and change their profiles.”