Citing the loss of $300 million in sales for New Era Cap Co. because of cheap Chinese counterfeits, U.S. Sen. Charles E. Schumer called for stronger action and coordination by U.S. agencies to shut down counterfeit websites, track fake products back to their source and pressure the Chinese government to crack down on factories that make them.
Speaking next to four black bins full of counterfeit hats, New York's senior senator said the Buffalo-based hatmaker is "threatened by the scourge of fake caps and other clothing" that not only denies it sales, but also damages its reputation.
He and company officials said the fake hats are made to look exactly like real New Era products, complete with logos and labels, but they're low-quality and deteriorate easily.
And while the company has unique features that it can use to identify fakes, consumers don't know the difference, and blame problems on New Era.
So Schumer called the counterfeiting a "very serious threat that puts the company at risk."
"It's time to get all hands on deck and crack down on these thieves," he said during a press conference at the company's Delaware Avenue headquarters, with a backdrop of New Era hats, backpacks and apparel.
Founded in 1920, New Era produced its first baseball cap in 1934, and now produces more than 45 million caps per year, with a production plant in Derby that employs 450. The company has been the exclusive provider of caps for Major League Baseball and its minor-league affiliates since 1993 and is also the official on-field cap supplier for the National Football League.
In all, the company employs 700 in Western New York and 1,700 worldwide.
But as the caps have grown in popularity, and New Era has diversified into many other caps, backpacks and other apparel, it's also become an easy target for forgeries from countries such as China, Indonesia, Vietnam, Malaysia and Brazil.
"New Era's popularity and global presence has made it a key target for counterfeiting operations," said New Era CEO Christopher H. Koch in a statement.
"We will not tolerate others making money through the sale of poor quality, imitated products being peddled as authentic," said Koch, who did not ?attend the press conference because of a funeral.
In response, New Era has already been very active in taking down counterfeiters, spending more than $2 million to $3 million a year to crack down on forgeries. Working with local police, private investigators, law firms and other authorities in China and elsewhere, the company seizes roughly 1 million fake goods each year by raiding factories at a rate of nearly one per day in other countries, taking down street vendors, and getting retailers to pull fake products off shelves.
Last year alone, the company seized 850,000 fake caps valued at $35 million in 298 factories; found 120,000 fake pieces of apparel worth more than $10 million in 48 factories; and took down 90,000 counterfeit websites, with a "removal value" of over $94 million. Its brand protection director, Tony Swaffield, is based in Hong Kong and goes on raids with police to ensure that the goods are confiscated and destroyed, and that local authorities aren't bribed to leave the factories alone.
Still, the company estimates that it catches only 30 percent to 40 percent of counterfeit goods each year. And China in particular is "the worst in terms of economic warfare on the U.S.," Schumer said, asserting the Chinese government is well aware of what goes on.
"The Chinese government tends at best to look the other way," he said.
"But there are instances where government-owned companies are involved in the counterfeiting."
Schumer's three-point plan - a policy "hat trick" for New Era, he said - calls for action by multiple federal agencies to go after the sources and means of distribution for the fake hats.
"I do not want this company to bleed because of these criminals," he said. "The knockoff hat producers are going to learn something, that New Era is red, white and blue to the core, and those colors don't run."
First, the senator wants the U.S. Trade Representative to provide resources and support to New Era, to help train the company in the best ways to track and shut down the producers of fake caps.
He also wants the trade representative, through high-level meetings with the company, to help New Era pressure the Chinese government into cracking down.
"The Chinese do nothing unless pressure is put on them," he said. "We are never going to stop it, but we are certainly increasing the enforcement to decrease the number of counterfeits."
Second, he noted that the Department of Homeland Security already confiscates counterfeit goods when they are brought across the border, and often sends the goods to the company. But it doesn't track where they came from.
So Schumer urged the agency, along with the U.S. Justice Department, to start tracing such products back to where they are made and provide New Era with information about "the location and tactics of counterfeiters," so that the company and other authorities can shut down the sources.
Third, he wants more participation by the National Intellectual Property Rights Coordination Center, a multi-agency task force known as the IPR Center that is devoted to investigating and stopping global theft of intellectual property.
Specifically, the center teamed up with the Justice Department, U.S. Immigration and Customs Enforcement and the FBI in 2010 to launch "Operation In Our Sites" to shut down commercial websites that illegally sell counterfeit goods and copyrighted works.
As of July, 769 Internet domain names have been seized and 229 forfeited to the federal government.
Schumer called for the IPR Center to target websites that sell counterfeit hats and apparel, along with its other efforts. "Caps haven't had the focus of Operation In Our Sites, and I'm going to use my clout to get that to happen," he said.