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Duke Beats Apparel Counterfeiters In Court But Markets Are Hard To Regulate

Saving money and greed are eternal partners

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NBA: Golden State Warriors at Minnesota Timberwolves
Mar 19, 2019; Minneapolis, MN, USA; A detail view of the shoes worn by Golden State Warriors guard Quinn Cook (4) with the Duke Blue Devils logo are seen during the fourth quarter against the Minnesota Timberwolves at Target Center. 
Brace Hemmelgarn-USA TODAY Sports

Duke won three lawsuits in May about counterfeit apparel (all three by default). There were other schools and franchises involved but we’re focusing on Duke here.

Essentially this means that these companies violated Duke’s trademark and tried to undercut the value Duke assigned to that trademark when displayed on apparel.

The first point here is that obviously Duke is behaving correctly. The trademarks belong to Duke and if you want to use them, if you’ll pardon the pun, you have to play ball.

That’s entirely correct and while you may not agree with a particular law, that doesn’t mean you get to just ignore it (Wesley Snipes). The law is the law and if the law has a flaw then you work to change it. We can’t all run around picking and choosing what laws we’re going to obey. That’s how you end up with I-40.

However, economics and law do not always coincide. We can give you some pretty clear examples of when the law creates artificial prices or scarcities and less ethical people see opportunity.

Start with cigarettes. Cigarettes, for better or worse, are desired by many people. Taxes have made cigarettes so expensive that tobacco addicts seek alternatives which smugglers are willing to provide. Same basic thing happens with other drugs and that of course describes the busy alcohol market that took place during prohibition.

Interestingly, while a lot of Californians are very happy about marijuana being legalized under state law, guess who’s not?

The traditional growers of Humboldt County, that’s who. Their profits are way down and they find that state regulations are burdens and tend to favor bigger businesses. You’re welcome, hippies!

The same impulse applies to clothing. If you charge far too much for clothes, someone will take a chance on selling some cheap counterfeit alternatives. This is exactly what has happened with sports apparel as Chinese companies are happy to provide cut-rate alternatives.

What’s really interesting is that this is nothing new.

Charles C. Mann wrote two fascinating books called 1491 and 1493. The first one is before the Columbian exchange began and the second one after (and by the way, some of the more radical archeological ideas in 1491 are rapidly being verified via lidar. If you’re not familiar with that, head over to YouTube. It’s sparking an enormous revolution in archeology and other areas as well. Lidar changes everything and will rewrite the histories of the Americas within 5-10 years. It’s off to an incredible start.

In 1493, Mann gets into what happened after Spain conquered Latin America (one of our favorite details was the samurai who helped guard the plunder as the Spaniards moved it across land to ship it out).

As it turns out, most of Spain’s silver actually went to China, where the Chinese were having problems keeping currency functioning.

The Spaniards had conquered the Philippines at the point in the book where we’re going and assumed, after conquering the powerful empires of what is now Latin America that, well, how hard could it be to do the same thing to China?

It didn’t take long to figure out that wasn't happening so the next thing on the agenda was trade. The Chinese had a lot of things the Spanish wanted, including silk and they really needed silver to fix their currency. We can’t remember all the details here so read the book if it’s of interest but the upshot was that while the Spanish did everything they could to enforce their ideas on trade, the Chinese had very different ideas and they wanted as much silver as they could get. The Spanish were willing to buy a certain amount of silk; the Chinese were sending out vastly larger quantities. They were sneaking it out in ways that will remind modern readers very much of drug cartels and their shipping innovations.

The Spanish allowed the Chinese to build a trading post next to their city in the Philippines (again, check the book for details). As soon as it became strong enough to worry about, the Spanish just killed everyone and burned it to the ground.

But they needed it for trade, so eventually they asked the Chinese back and the Chinese came again...and the Spanish eventually burned it to the ground again.

There are a lot of historical parallels between Spanish-Chinese trade and what we see today, including Duke’s recent victories in court. That section of 1493 is just fascinating and will sound very familiar to modern ears.

We’re glad Duke won and we’re glad the law is being enforced but the suits underscore the difficulty of maintaining the price you wish as opposed to the price the market will bear before people seek out alternatives.

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