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Birkenstock Identifies Counterfeiting on Facebook as a Major Risk in IPO Filing

Lanon Wee

On Tuesday, Birkenstock, the 249-year-old shoe company, announced its intention to list its shares on the New York Stock Exchange. In its prospectus, Birkenstock mentioned that it faces the threat of lower-cost imitations or ‘knock-offs’. The company has had difficulty in protecting its intellectual property, as competitors have used the brand’s fame and high prices to produce cheaper substitutes. Birkenstock, the German-born, London-based sandal maker established in 1774, submitted paperwork on Tuesday for its initial public offering, alongside a warning to investors on the hazards posed by fake brands advertising their merchandise on social media. The public listing is due to take place on the New York Stock Exchange, with the ticker symbol "BIRK".The luxurious price of Birkenstock's products has been a target for copycats and private labels, who are seeking to undercut Birkenstock's prices. In its prospectus, the company mentions that fake products are wrongly claiming to be genuine Birkenstock items, using Facebook and other sites in an effort to deceive customers. It reads, "Previously, third-parties created websites to reach users on Facebook or other social platforms with 'look-alike' websites in an attempt to make buyers think they were buying Birkenstock goods at a discounted rate."Further, it cautions, "Should counterfeit products be successfully sold on e-commerce platforms managed by third parties, our brands and reputation could be harmed."Without naming Amazon, the 206-page filing (plus footnotes) does mention that Birkenstock has "avoided, and may in the future avoid, using specific third-party websites to offer our products as a result of the sale of counterfeit goods on such platforms."This comes several years after Birkenstock decided to no longer be featured on Amazon in the United States. This move was a response to a sudden outgrowth of counterfeit and unauthorized sales on the website, along with Birkenstock's authorized vendors being banned from selling on Amazon. In July 2016, then-Birkenstock USA CEO David Kahan wrote a memo addressed to "our valued Birkenstock partners" expressing his concern over the "unacceptable business practices" found in the Amazon marketplace, which operates as an 'open market.' Kahan, who is now President Americas, noted that attempting to police the activity was "impossible." It was reported at the time that many Chinese sellers were offering Birkenstock's Arizona sandal for $20 below the retail price. Following the dispute, the company sold a majority stake to LVMH-backed private equity firm L Catterton and has since "significantly expanded" its direct-to-consumer efforts in the U.S. Revenue for the fiscal year ending Sept. 30, 2022 was 38% from e-commerce.Facebook parent Meta is well aware of the counterfeiters on its platform. In 2021, a joint lawsuit was filed by Facebook and Gucci against the perpetrator who was using the platform to sell fake Gucci products. The companies removed over a million pieces of counterfeit content in the first half of 2020 based off of thousands of reports from brand owners. Birkenstock's revenue from the six months ending March 31, 2021 increased 19% to 644.2 million euros, or $693.2 million, but their net income dropped 45% due to a foreign exchange loss. Birkenstock has recently filed for a U.S. IPO on the NYSE and described themselves as "the oldest start-up on earth." The house had already been sold when the new owners arrived. When the new owners arrived, the house had already been sold.

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