A recent article by Rick Falkvinge posed the question: If ACTA doesn’t change anything, why are they pushing for its passage as if their life depended on it? Well, the answer is rather hilarious: it does, actually.
While this question is obviously a rhetorical device, its answer is none the less relevant to the discussion. And here, I would like to propose an answer to said question. You see, to understand the Anti-Counterfeiting Trade Agreement, we need to go a little further back in time than the 00’s. We need to go back somewhere to the late 80’s, early 90’s.
This is a guest article from Thijs Markus, who opens on Falkvinge &Co. on Infopolicy with this article.
During this time, a new fashion came over the industries of the day: as pioneered by Nike, large corporations decided to put all their factories overseas, the company would be only its brand. Anything that could be done cheaper at the gunpoint of this or that dictatorship would henceforth be done there. This means pretty much all the dumb labor is done overseas. Thus the trademark, as intended, as a means of identifying who produced what, pretty much ended there.
Why? Well, to take Nike for example, they figured that if they could produce and bring a shoe to a store for $5, and sell it for $150, they get a whooping $145 profit margin. This profit margin could then be spent on marketing, which is why you know the Nike logo with your eyes closed. The whole idea of the operation was exactly that: by making the shoe as cheaply as possible, the largest possible margin could be spent on marketing, thus ensuring the largest possible market share.
So here you have a company that takes in $5 shoes from third world countries, brands them, and sells them for $150. That’s pretty damn clever and profitable. However, there is one very minor loophole they overlooked in this manoeuvre. I could train a chimpanzee to take a logo and apply it on a product, and slightly more industrious primates all over the planet are doing as much. And now, some 20 years later, they begin to realize that in fact they have nothing to sell, their sole asset is the legal right to the logo they spent billions, even trillions to idolize.
Realizing that their scam is running thin, hanging only by the thread that people in fact respect their right to brand something, they swung into action the lobby apparatus to tell the rest of the world how very naughty they are when they don’t respect said right. And the result, amongst a long list of treaties-and-such, is ACTA.
Written by Thijs, always good!
Looking forward to the next one. ^_^
Sorry but I have to disagree. The text kinda sucked because of all the inaccuracies, in fact this blog seem to be filled with pirates who missed doing their homework before writing here.
All right – feel free where we pirates fail to do our homework by bringing accurate criticism to the table.
So far all we hear is “We have to do this (“this” generally being a gross violations of every man’s civil rights as a free citizen) because a lot of people’s jobs depend on it!!”
And as we pirates generally point out, if your job is dependant on revoking human rights for everyone since many people do not respect “Intellectual Property” then that job should not rightly exist to start with.
However, if you are willing to bring proportionate, reasonable suggestions to the table which adhere to the bare basics of common jurisprudence you will generally be met with more respect.
Standing up, pointing a finger, and hollering “You’re all so wrong!” simply because you have no logical basis to stand on in your claims does not provide any useful information for anyone here.
I really don’t know where to start but your text is so filled with holes that it almost lifts off.
For example Nike doesn’t make anything even close to 145 dollars in profit on a 150 dollar shoe. You’ve got your figures all wrong you missed out on distributioncosts and dealermargins/kickbacks/bonuses/etc. Another example is that you claím that Nike pioneered moving factories abroad to cheaper factories, thats totally false as that practise had been going on long before Nike entered the scene. And as for Nike not having anything to sell but its logo thats just silly. Nike sells stylish innovative quality shoes that are quite hard to copy.
While I admit the numbers are inaccurate, as the perfectly rounded off digits should have tipped you off about, the actual prize ratio’s are not that inaccurate. The companies to which Nike licences the production of Nikes only get around that number from Nike. Even so, the numbers are not really relevant to the line of the story. We could go in the exact details of the numbers, but even then it would not really be relevant how they are distributed across the spectrum you mentioned; look at Nike’s marketing budget as % of their total budget since they laid off the factories.
And while I did not claim Nike pioneered moving production abroad, this practise being as old as history, what Nike did in fact pioneer was to lay off ALL production to third parties, maintaining only the brand name, and, admitably, the design studio’s which design the Nikes.
If the numbers aren’t relevant why did you bring them up firstplace? And why did you exxagerate?
But OK you admit lying overstating and hiding facts to make your points, not a very good tactic especially on your first post here. Though maybe you just wanted to follow the numerous likewise examples made by Mr. Falkvinge here & there?
Sir, you may be the only person in the word who mistook those numbers for facts. No actual product was linked to the numbers, so the example was obviously fictional but an example of the kind of profit margins these companies enjoy.
Are you saying that the reality is much different?
Erique so you mean it’s OK that a political partyleader just spreads myths and inaccuracies?
That example is not a good example of NIKEs profitmargins as they in reality are much slimmer than what you think and Thijs spreads. So yes reality is much different.
“Nike sells stylish innovative quality shoes that are quite hard to copy.”
Which is why Nike and almost every other sport shoe manufacturer out there has in the past been censured over employing child labor in malaysian and pakistani sweat shops in order to make the bulk of their product.
Fact of the matter? Nothing is hard to copy today given that you have materials, machines and labor. What is usually the problem with cheap ripoffs is that the workers in question have no experience at all since the “product line” ripped off can shift every week.
Nike basically has design and a brand. But they have no production and no at-home expertise to fall back on. That leaves Nike with the only “real” product being the brand.
In my opinion, the brand is also the only finite resource here, and the one worth protecting. Designs can be reverse engineered and honestly the day is not far off when we can expect multitool machines cheap enough for the home market able to reverse and copy most of the functional parts of a nike shoe.
A brand name however, means there is some form of well-known quality. The consumer is not buying an unknown. S/He is buying a prestige item. A brand has value.
If I consider Thijs wrong about any aspect here it would be that it’s wrong to call a company brand a “scam”. Most companies in the world live and breathe by their brand and have done so since the first man to paint an icon on his wall and call it his own came along.
Brand name protection thus makes sense, where going after unbranded copies and knockoffs does not.
“Fact of the matter? Nothing is hard to copy today given that you have materials, machines and labor. What is usually the problem with cheap ripoffs is that the workers in question have no experience at all since the “product line” ripped off can shift every week.
Nike basically has design and a brand. But they have no production and no at-home expertise to fall back on. That leaves Nike with the only “real” product being the brand.”
Scary you obviously don’t have a clue about Nike or large companies designs and productions.
Knockoffs very seldom have the same construction materials or quality as the originals and this is because it is not easy or cheap to copy good not even for stuff made in the same factories as some materials are either prohibitive expensive or ptoprietary to the original designer.
Actually, i have rather extensive knowledge of how big corporations work since Brand is actually a pretty big deal where i work.
You, however, seem to know absolutely nothing about how manufacturing is done and why outsourced labor has become such a thorn in the side of western brandholders.
This is how it works.
1) Company A creates a design – in this case let’s say for a shoe. They then contact an intermediate broker who starts auctioning the offer to manufacturers in India, Malaysia, Indonesia and China.
Once the offer has been hammered down, and the lowest bidder capable of meeting the design criteria has been established, the manufacturer starts re-tooling their design line to meet the new product. They then purchase enough material to meet both the quota and some surplus in case of mishaps and emergencies. Usually, the cheap parts are labor and material – re-tooling the production and delays are what rapidly adds costs.
After hammering out the design and producing valid prototypes of a good standard, the manufacturer announces how many units they can deliver. Company A orders batches of two thousand units per month.
The manufacturer builds and ships two thousand units in two weeks. They then have two weeks left over and enough material to create another thousand. Not being complete idiots, they don’t let the machines stay idle and incur loss of potential profits – instead they produce another thousand units and strip the brand label from them.
These they then sell on the cheap, meeting cost and some margin, to a local wholesaler.
That wholesaler then either sews on the brand again, or another brand, then sells it to western outlets at a fifth of the price company A originally demands.
And this is why you find “knockoffs” at half the price of the “real” product which are every bit as good. They usually come from the same factory and use the same design. And it’s precisely this which leads to frantic legislative attempts such as ACTA. What you are referring to is the gaggle of fraudsters trying to cash in on brand names which aren’t a threat to the brand holders and never have been. The cheap fall-apart replica is no threat to the margins. The exact duplicate IS
This has been written about over and over again – extensively – so if you absolutely feel the need to swing your weight of knowledge around in a forum, do yourself the favor of first checking your facts. And don’t accuse others of lacking a clue when it’s painfully obvious you picked your own “knowledge” up from mere assumption.
I’ll have to concur with Thijs. You’re either the village troll or just a belligerent idiot.
Putting words into my mouth now? What are you? The village troll? The numbers are relevant, their complete accuracy is not. No fact was hidden. Your interpretation of them however is at best flawed.
P.S. Looking up your earlier comments on this site, I have to confirm that you are in fact the village troll. Have a nice day.
My interpretation seems to have been more accurate than your original post as you actually have admitted to lying, exaggerating etc. so Thijs I feel sorry for you having such lack of knowledge of what you are discussing and for copping out with so weak arguments, and unfortunately for you, you are the troll.
Peach. Fuck off will ya. Thank you.
Strange that Rich doesn’t give you a reprimand for being totally way off. But then again you pirates frequently stick together and seem to enjoy employing doublestandards.
Sorry won’t do that. Funny that you don’t seem to be interested in facts only fiction and exaggerations when you listen to your piratefriends.
OK Peach Troll, you want some numbers?
In the year 2001, I could buy a Manchester United team shirt in Thailand for 80 baht. That was about one pound twenty five pence at the time. The same shirt, made in the same Thai factory, was being sold at the same time in the Manchester United shop for forty pounds – thirty two times the price in Thailand.
OK , Man U had to pay some shipping charges and import duty. Let’s be generous and assume another one pound 25p. They were still selling the shirt for 16 times what it cost them. In fact more, because I haven’t factored in the retail margin on the cheap shirt sold in Thailand.
Don’t bother calling me a liar too, because I won’t be back to read any more of your comments.
Colin unfortunately for you the shirt you bought in Thailand either was of inferior quality to the original or stolen from the factory as even in Thailand the production of quality shirts cant be made for so little money.
Sorry Peck, it doesn’t work like that.
Say that wellknown brand X orders Y units of their bestselling product from a cheap asian factory. The people at the cheap asian factory is not stupid, so they of course see the obvious opportunity to manufacture 2*Y units, delivering the ordered units to X and selling the rest, identical units, themselves and making a healthy profit in the process.
That’s why you can find a tshirt in thailand sold for a fraction of the price that it is available for in europe. The tshirts are identical, manufactured from the same materials, in the same factory and by the same workers.
So Stefan you still don’t get it that the dirtcheap shirts are either stolen or of an inferior quality. Good materials and labour aren’t so cheap that you can sell good shirts for peanuts even in Thailand.
Great first article Thijs. Keep it going! It explains quite well what ACTA was made for. It is also refreshing to see, from an off-line perspective, how todays technology renders middleman obsolete.
Anonymous, in what way does todays technology render middlemen obsolete? If you check facts you’ll find that there are more middlemen in almost all industries today than ever. To sell stuff one needs middlemen more today than ever.
To sell high tech “stuff” as in large scale factory produced goods maybe yeah. Immateria such as culture and knowledge, not so much anymore…
Funny you seem to be interested in fiction and not facts. Immateria can’t be “protected” anymore. “Selling” immateria has become a fairy tale at best.
Investing in the work to produce new immateria however… is what still may have any value. No matter if there is a company or “fans” doing the investment…
You can’t hope to “protect” and profit from old immaterial work any more. Sorry…
@peach: You make me laugh. Ever heard of 3d printers? No? Well, if you happen to be a middle man, you should be very afraid of the future.
Robske 3D printers orobably won’t be usable or cost effective for conusmers untill 2020 but I imagine middlemen will love 3D printers, imagine how múch supplies they are gonna sell to the users of these machines.
it’s constant evolution. That’s the answer to life, the universe and everything. And people ignoring that fact of life are going to be left in the cold. And yep, new middlemen will arise to supply the materials required for 3d printing. And that’s evolution! But yeah, some idiots, like the plate labels and nike, completely ignore the answer to the life, universe and all. I’m happy that you managed to find the answer yourself, even as you don’t agree with thijs’s article.
Congratulations, you just won one free internets!
Well, Peach Cobbler is correct in ONE aspect. Once 3D printers hit the home depot there will be no end of opportunities for middlemen to sell cartridges of resin and materials.
Then some indelicate bastard in the open source sector, unaware of just how badly he’s tipping the applecart will invent an add-on which enables the average home to refine materials suitable for the printer out of common kitchen waste and the middlem en selling resin cartridges will all go pouting to a legislative body and demand a ban on that fiendish new technology.
Yes, middlemen will always exist in some form of other. But what Peach Cobbler is missing in that equation is that middlemen are go-betweens and nothing else. Their role on any market lasts only until technology closes a gap between one link in a chain and the next.
After which it’s time to scrap that entire business model and move on.
Tell that to indie bands putting their music on the web, and getting money for it.
Or you could try talking to authors who publish their books online, again making money.
What’s missing? Record labels and publishers, also known as middlemen!
Colin thats old hat as indiebands and authors have been selling their own music for decades without labels and publishers but then again most of these bands never get anywhere
You’re right in that new middlemen arise. Though other middlemen are forced to quit their business. This is obviously not something new. The landscape of middlemen is constantly changing and it probably has always been like that.
Thing is, I’m referring here to the middlemen that are in the process of becoming obsolete. Specifically the middlemen behind DMCA, SOPA, PIPA, ACTA and similar repressive legislation.
We don’t need Nike anymore to import shoes. We can go straight to the manufacturers website to buy shoes. That cuts out a rather expensive middleman. Obviously we are now stuck with another middleman. The one that is used to deliver these shoes at our house. The difference is that the manufacturer can actually choose this middleman and thereby significantly reduce the retail price.
Prohibiting this scenario is *exactly* one of ACTA’s goals.
Interesting post which is pointing to “the fight for the brands”. My guess is that the biggest fear of Nike and all the other brands which does not produce anything themselves (apart from the design) is that we the consumers will understand that outsourcing have made the “the brands” worthless. Or maybe even worse, the retail industry and the consumers understands that there is no longer any real value in “the brands”.
Personally I’m really into fly fishing and a resent trend in this small market is that more and more retailers are selling their own brands. And they sell them cheaper (and probably with higher profit margins) than the “big and known brands”, since the products are made in the same sweatshops as the “big and known brands” the quality and functionality is the same. So it’s a win for the retailers and a win for their customers.
By outsourcing production “the brands” have actually transformed themselves into useless middlemen 😀
Sorry,
That is a lousy article/post.
I am against ACTA. But this post is wrong on too many levels.
Manufacturers all over the world have to deal with “copy cats” and knock-offs. And that has been the case for centuries, not “since the 80s or 90s”.
For example, the label “Made in Germany” was introduced and enforced by the English in 1887 (!) already as a defense mechanism against imported German goods. Those goods were very often copied from English inventions, like many steal products at that time. (Check wikipedia and further links)
Outsourcing production has increased the problem, but even companies still manufacturing in-house or with local partners are competing with knock-offs, often enough at lower quality.
That is trues for quite many car parts and pharmaceuticals. In both industries the estimates for fakes are way above 10% of total sales. Nobody wants to publish the real numbers, because consumer trust would erode immediately.
Maybe a fake watch, fake shoes or t-shirts don’t hurt you.
A fake and useless car part (brakes anyone?) or a fake medication is a different story.
ACTA is wrong on many levels and in many industries. For example, where it is supposed to stop re-imports of the real goods and artificially protects high price markets.
And ACTA wants to grant too many rights to IP holders and is stepping over the line in allowing to enforce IP laws outside the legal system.
But your post is – pardon my French – plain bullshit.
Not quite. What you say is very true, but you are missing one important part of the equation – a lot of what is now being sold is basically, spillovers.
I.e. Nike is not threatened by a shoddy lookalike. They never have been. What they do consider a real threat is when the asian company they hired to create 5000 units then uses rest materials and superfluous production to ship another 2000 units – at cost plus very little – to a local dealer.
That dealer then sells those units to western consumers and retailers at vastly lower prices than Nike does. Same product, same design, same standards, made in the same factory. With only the brand label missing.
Savvy and perceptive consumers have noted that the quality of some “unbranded” goods has gone way up. In many cases becoming quite indistinguishable from the originals. And this is a threat on many levels.
On the level which the OP takes it, it’s a threat since it undercuts a brand with a “competitor” based on the design created directly from the company which owns the brand. Indeed, it’s usually the same damn shoe.
The even greater threat, however, is that once you’ve told asian factories exactly how to build great shoes in popular demand on the rich western markets, those factories would be idiots not to cash in on the know-how and experience they’ve gained. This problem is a direct fallout of the temporary outsourcing business – manufacturing in Asia is highly competitive and no one can afford to let go of an opportunity.
The one and only way out of this would really be if companies requiring manufacturing actually went in and started owning part or whole of the factories producing their goods – giving them control over what the machines produce.
This they will not do. For many reasons, some good, some rather shady. And that ensures the problem remains.
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