What’s that smell?

Commercial fragrances and perfumes are big business, and the multibillion-dollar industry attracts its fair share of dodgy practices and outright fraudulent activity. Here we look at the difference between knockoffs and counterfeit products, and why the big perfume houses have such difficulty protecting their brands.

In the 1990s, a Belgian fragrance manufacturer called Bellure began producing replica fragrances of several perfumes made by French cosmetic giant L’Oreal. The idea was to sell fragrances that smelled like some of L’Oreal’s top brands to consumers who lacked the funds to buy the more luxurious French names. Bellure marketed the perfumes in supermarkets and discount stores. The company even said they were imitations of L’Oreal perfumes and used similar packaging.

Unsurprisingly this didn’t sit well with L’Oreal. After all, while Bellure was upfront about what it was doing, its actions virtually replicated what the FBI describes as indicators of counterfeits, such as using similar packaging to the authentic product and selling it at markedly lower prices at discount stores. In 2003, L’Oreal sued Bellure over trademark infringement and won the case in the European Court of Justice on the basis that Bellure had been “free riding” on L’Oreal’s prestigious trademark. That decision was upheld by a U.K. court, though the judge expressed the view that “countries with a healthy attitude to competition law such as the U.S., would not keep a perfectly lawful product off the market by the use of trademark law to suppress truthful advertising.” (See “Perfume makers are fighting back against an illegal fake scent boom,” Wired, Nov. 23, 2020; “Counterfeit Cosmetics, Fragrances Hazardous to Your Health,” FBI, Jan. 2, 2014; and “L’Oreal’s Success in Extending Protection for European Community Trademarks is Reluctantly Acknowledged by English Court,” by Hamish Porter, Venable LLP, July 2010.)

L’Oreal’s success in protecting its brand from fakes continued. Its Lancôme subsidiary successfully proved in 2008 that Dutch-based Kecofa had infringed on one of its fragrances by using gas chromatography, a chemical method that separates substances into individual components. The results showed that the Kecofa smell-alike product used 24 of 26 ingredients found in the Lancôme fragrance, and therefore was classified as a “fixed substance.” The Dutch courts regarded the Lancôme fragrance as a copyrighted work under the law. (See “Perfume makers are fighting back against an illegal fake scent boom,” by Carly Page, Wired.co.uk, Nov. 23, 2020.)

And in 2020, Gucci and other luxury perfumers won a copyright infringement case against Spanish company Equivalenza using results from gas chromatography analysis. Equivalenza was found guilty of illegal copying of original perfume, unfair competition and business reputation abuse for peddling Gucci knock-off fragrances. (See “Perfume makers are fighting back against an illegal fake scent boom.”)

Despite those legal victories, copyright protection for fragrances remains a bit of a gray area and has been dealt with on a case-by-case and country-by-country basis. Indeed, fragrance manufacturers’ battles to protect their products underscore the complications of distinguishing between legitimate knockoffs and outright fakes. (See “Inside the Complex World of Fragrance Dupes,” by Emily Jensen, allure, March 1, 2023; “Lost and Found: Intellectual Property of the Fragrance Industry; From Trade Secret to Trade Dress,” by Charles Cronin, NYU Journal of Intellectual Property & Entertainment Law, Feb. 2, 2016; and “Perfume as an Artistic Expression: Scope of Intellectual Property Rights in Perfume,” by Yashika Nagpal, Fashion & Law Journal, Oct. 3, 2021.)

Against that backdrop, fraudsters see opportunities galore in what is now a multibillion-dollar industry, sometimes with potentially lethal results. Counterfeit perfumes are regularly being seized at airports across the globe, with authorities warning that they may even contain poisons or carcinogens. (See “Fears fake designer perfume could contain cyanide and human urine,” by Tom Sanders, Metro, Dec. 16, 2022 and “Arrest made as fake cosmetics, perfumes seized in Hong Kong,” by Phil Taylor, Securing Industry.)

Perfume’s long history

The fascinating history of perfume use dates back at least 4,000 years, from the alluring scents discovered in ancient Egypt to the luxurious fragrances in the Roman Empire, Mesopotamia, ancient China and the Persian Empire. Besides being used for personal hygiene and cleanliness, perfumes also held immense ceremonial value — especially burials — and symbolized nobility and wealth. It wasn’t until the early 16th century that perfume and other fragrances became a fashion accessory that spread rapidly through Europe.

Fast forward to 2023: The global perfume and fragrance market has global annual revenues at around $53.44 billion and is expected to grow to $67.4 billion by 2028, according to Statista. (See “Fragrance market in the U.S. - statistics & facts.”) Price points for perfumes and fragrances are as numerous as the variety of scents. You can even purchase the one-and-only bottle of Shumukh (I think it’s pronounced “sch-muck”) perfume for a mere $1.29 million. The bottle, a symbol of the United Arab Emirates’ rich heritage, is carefully encased in genuine leather. It boasts silver clamshells cradling real pearls, roses crafted from pink gold and diamond dust, and marble pillars adorned with a falcon sparkling with diamonds. These unique fragrances are also potential magnets for fraudsters. Although the charges were dropped, one fashion designer recently was accused of fraud when he said he owned a 44 million pound perfume made by the singer Michael Jackson. (See “The 15 Most Expensive Perfumes of All Time,” by Leanna Serras, FragranceX.com, Nov. 12, 2021 and “Fashion designer, 50, ‘claimed to own £44million perfume made by Michael Jackson and said he had agreed £48m deal over 200 Ghost bags with the Brunei royal family’, court hears,” by Shari Miller, The Daily Mail, March 15, 2023.)

Things have come a long way from the days when everyone’s grandmother wore Jean Naté. (Jean Naté body powder was discontinued due to allegations that it contained talcum contaminated with asbestos, a known cause of mesothelioma). It’s no surprise that the luxury perfume market — valued at $2.397 billion in 2021 — is expected to grow to $5.4 billion by 2027, representing a growth of 14.5% over this period. (See “Luxury Niche Perfume Market Size, Share, Growth, and Industry Analysis by Type, By Application, Regional Forecast By 2031,” BusinessResearchInsights.com, Nov. 6, 2023.)

So why are people spending so much money to smell good?

Psychology of scent and consumer behavior

Fragrances and perfumes aren’t marketed to our noses — it’s our brain that’s the ultimate target of fragrance chemistry via the olfactory receptors in the nose.

A variety of scents, including perfume, stimulates the body’s limbic system, which is responsible for processing feelings, emotions and memory. Recent research indicates that smell can influence as much as 75% of our daily moods. (See “Future sense: Defining brands through scent,” by Stephen Bell and Coley Porter Bell, Market Leader: Journal of the Marketing Society, Autumn 2007.) Consequently, it’s not surprising that perfume is used increasingly to regulate emotions and uplift one’s mood.

The sense of smell is often the first warning of safety or danger, friend or foe. Odors can drive behavior on an instinctive and subconscious level while evoking both positive and negative psychological states of mind and reactions in milliseconds. The intensity of Proustian memories — which are memories evoked by various scents, as French novelist Marcel Proust famously described in his book “À la recherche du temps perdu” — varies with individuals. However, memories evoked by a product’s fragrance are also the prime driving forces in motivating consumer behavior. (See “Proustian Products are Preferred: The Relationship Between Odor-Evoked Memory and Product Evaluation,” by Haruko Sugiyama, Akiko Oshida, et. al., Chemosensory Perception, June 3, 2015.)

Generally, the more vivid the memories that a fragrance triggers, the greater the odds that someone will purchase a product with that fragrance. Nostalgia is a strong psychological element in fragrance marketing by the major perfume houses. They conduct extensive consumer research on how their fragrances can trigger a memory of a past experience. It’s about capturing the positive, wistful, even longing sentiments people pine for in a scent and packaging it in a bottle. There’s even a perfume called Nostalgia.

‘Puttin’ on the Ritz’ at home

Luxury hotel chains are now experimenting with how fragrance influences consumer behavior. “Scent branding” involves hotels pumping their signature scents into rooms and lobbies to create the connection between the experience and a particular fragrance. Some of those hotel chains are offering those branded scents for consumers to purchase so they can recreate the luxurious scent experience in their own homes. (See “Inside the Invisible but Influential World of Scent Branding,” by Laurence Minsky, Colleen Fahey, and Caroline Fabrigas, Harvard Business Review, April 11, 2018.)

What’s really in that perfume bottle?

Besides herbs, spices, florals and citrus elements used in fragrances, non-fragrance companies produce perfume and cosmetic ingredients, especially base chemicals (oils and alcohols) called “feedstocks” and common chemical “intermediaries.” For example, pulp and paper mills may provide chemical byproducts called turpenoids that are used in fragrances, while petrochemical companies might generate small quantities of phenylethanol for use in perfumes as well. (See “The Chemistry of Fragrances: From Perfumer to Consumer,” compiled by David H. Pybus and Charles S. Sell, Royal Society of Chemistry Paperbacks, 1999.)

People purchasing counterfeit fragrances and cosmetics just to save money are gambling with their health and well-being. Counterfeit health and beauty products often include dangerous chemicals that cause acne, eczema and cancer when absorbed through the skin. Bacteria, lead, beryllium, DEHP (a suspected human carcinogen), antifreeze — and urine — are other identified contaminants. (See “Fake Cosmetics and Their Health Risks,” New York Department of State, dos.ny.gov.)

Perhaps perfumers should rethink “eau de toilette” as a name for a class of fragrances.

Scent notes

A legitimate fragrance or perfume consists of three types of “notes” (classes of fragrant elements) that contribute to the overall essence of the scent. Top notes contribute to the initial scent upon opening a perfume or cologne bottle and linger for about 15 seconds. Middle notes are the secondary fragrances that begin to dominate after the top notes dissipate. Bottom notes are scents that dominate after the middle notes have settled down and last from four to six hours. (See “Fragrance Buying Guide,” Costco.com.)

Why are fragrance notes important? A telltale signal of a counterfeit fragrance is how quickly the initial scent dissipates without any follow-on trace because the bogus perfume lacks the essential middle and bottom notes characteristic of legitimate fragrances.

Are ‘smell-alike’ fragrances illegal?

Companies that develop less expensive knock-off fragrances rely heavily on consumers’ familiarity with a reputable brand. They claim that they offer an almost identical product, albeit without the costly packaging, advertising and marketing. As the introductory cases showed, large perfume houses have struggled to protect their creations from knockoffs. The U.S. legal system is arguably more tolerant of smell-alike brands so long as they clearly state a disclaimer separating them from the name brand. There have been exceptions, however. For example, in 2017, Coty, a high-end fragrance company, sued in U.S. courts Excell Brands, which sold nearly identical-looking products labeled in small text saying “our version of” various Coty fragrances. Coty won the case on trademark infringement, false advertising and unfair competition. However, copyright of fragrances (as opposed to trademark protections) is tougher to secure and enforce, as legal systems in many countries such as France don’t think perfumes are eligible for copyright protection. (See “Smellalikes, Dupes, and Clones — Trademark Infringement and Trade Dress [Part 1, maybe],” by The Perfume Baby, June 18, 2019; “Coty Inc. v. Excell Brands, LLC,” Casetext, Sept. 18, 2017; and “Perfumes and fragrances: legal protection,” by Anna Realmuto, Arlaw, Oct. 3, 2019.)

Counterfeit perfumes differ from knockoffs in one major aspect: Bogus perfumes explicitly mislead consumers with packaging (and pitches from con artists) that falsely assert they’re the original branded fragrance. Both, however, can contain subpar ingredients and in some cases lethal ones.

The ultimate ‘killer’ fragrance

Can a fraudulent fragrance actually kill you? It can, if it’s a fake Nina Ricci perfume bottle laced with the deadly nerve agent Novichok.

Two Russian assassins smuggled the bottle into England that poisoned former Russian double agent Sergei Skripal and his daughter, Yulia, in March 2018. Several months later, an individual found the perfume bottle and applicator boxed up in a charity receptacle and took it home where he tried to reattach the applicator to the bottle. He gave the tainted perfume to his girlfriend, who quickly fell ill and later died in a local hospital. (See “Revealed: How ‘assassins’ faked a Nina Ricci perfume bottle full of toxic nerve agent then ‘recklessly threw it away,’ leading to the death of British woman,” by Charles Bayliss, DailyMail.co.uk, Sept. 5, 2018.)

Phony products create phony authenticity

Using counterfeit products even exacts a price with how individuals perceive themselves and how others perceive them. Even though people buy counterfeit products to convey positive qualities, research indicates that wearing counterfeit items actually diminishes one’s sense of authenticity. Authentic fragrances that align with our identity enhance our own self-expression and foster genuine connections with others based on honesty and trust. Fragrance then serves as a medium through which we create meaningful interactions and establish lasting impressions — something bogus fragrances consistently fail to achieve. (See “The Counterfeit Self: The Deceptive Costs of Faking It,” by Francesca Gino, Michael I. Norton, and Dan Ariely, Association of Psychological Science, 2010.)

The experience of wearing fake products leads to a feeling of being inauthentic, known as the counterfeit self, which plays a role in how counterfeit products affect unethical behavior due to the priming effect. Wearing counterfeit versions of high-end fragrances fools people into believing they possess the social status and wealth associated with the authentic scent. The research also reveals that people can’t accurately predict the impact counterfeit products have on their ethicality, which further highlights the deceptive nature of their costs. (See “The Counterfeit Self: The Deceptive Costs of Faking It.”)

Consumer vulnerability

Consumer susceptibility to types of fraud varies with different demographics. Consumer fraud targets the elderly, the less educated and the poor because of lower levels of cognitive ability and social interaction. (See “Consumer Vulnerability to Fraud: Influencing Factors,” by Jinkook Lee and Horacio Soberon-Ferrer, The Journal of Consumer Affairs, March 4, 2005.) That’s not to say a young, educated person who has a temporary lapse in cognitive discernment couldn’t fall victim to a scent scam.

These bogus products make their way from global distribution networks into independent discount retail locations, flea markets, online websites — even from street corners and the trunks of cars. While appearing as petty counterfeiting, the revenue from the wholesale global distribution of counterfeit goods often helps fund other criminal enterprises such as illegal drugs, human trafficking and terrorism financing.

No one is immune from falling victim to counterfeit scams. The Fraud Susceptibility Index helps explain how people fall for counterfeit products. The index uses three variables that help determine if someone is susceptible to being conned: Paradox of value (a person is attracted to an item with low utility value but high emotional value), information asymmetry (the seller knows more about the product than the buyer), and direct/indirect diffusion (a high likelihood of the rapid spread of “a good deal” by word of mouth). (See “Fraudulent facets: shining a light through diamond fraud,” by Donn LeVie Jr., CFE, Fraud Magazine, May/June 2018.)

Return of the amygdala hijack

Going hand-in-hand with consumer vulnerability and scent-induced emotions is the idea of the “amygdala hijack.” Daniel Goleman coined the term in his book, “Emotional Intelligence: Why It Can Matter More Than IQ,” (Bantam Books, 1995) to describe a condition where any strong positive or negative emotion increases blood and oxygen to the almond-shaped amygdala in the brain, which impairs the rationality function of the brain’s prefrontal cortex.

When this happens, critical thinking, discernment and problem-solving skills are impaired, which plays directly into the fraudster’s game. It’s not hard to imagine an amygdala hijack happening to someone when they’re approached by an individual who’s offering to sell JAR Bolt of Lightning perfume (normally about $765 per ounce) for $200, and likely not in the unique hand-cut crystal bottle. Who can resist such a deal when for $200 you can smell like a million bucks?

Identifying counterfeit platforms

Organizations around the world are actively investigating and prosecuting organized counterfeit enterprises. The Office of the United States Trade Representative (USTR) publishes the Notorious Markets List (NML) that identifies known global counterfeiting and piracy markets. The 2022 edition lists 40 global online platforms that deal in counterfeit and pirated products. Some of those platforms include entities known as “bulletproof  ISPs” that have lenient policies counterfeiters favor. (See “2022 Review of Notorious Markets for Counterfeiting and Piracy,” Office of the United States Trade Representative, USTR.gov.)

These markets pose a significant threat to the interests of U.S. intellectual property owners, workers, consumers and the economy due to the extensive amount of intellectual property infringement activities that occur. Some of these identified markets are known to have a mix of both legitimate and illegal activities, while others openly or allegedly operate solely for engaging in or aiding unlawful activity.

Major perfumers fight back

LVMH, which owns Louis Vuitton, Christian Dior, Fendi, and Givenchy brands, aggressively pursues fragrance counterfeiters with 60 lawyers and an annual budget of $17 million. The company developed its own in-house blockchain tool called Aura that harnesses the power of Ethereum blockchain technology and seamlessly integrates with Microsoft’s Azure services. (See “Perfume makers are fighting back against an illegal fake scent boom.”)

For analyzing complex perfume mixtures, nuclear magnetic resonance spectroscopy (NMR) can distinguish individual components in a single analysis. Since 2018, NMR technology has helped companies differentiate between authentic and counterfeit perfumes. (See “NMR provides effective discrimination of counterfeit perfumes,” Bruker.com.)

Proactive product protection measures

Pursuing copyright and trademark infringement of fragrances and perfumes is costly as an after-the-fact approach for luxury consumer companies today. Many are now embracing edgy technology applications to protect their intellectual property and products.

Cosmetics company Mixer uses radio Frequency Identification tags (RFID) technology to obtain digital information from a product and distinguish it based on its distinct digital identifier, which is stored in an embedded RFID tag within the product. Unlike barcodes that rely on images, RFID uses radio waves to connect with microchips. This advanced system lets brands effortlessly keep tabs on their products at every step of the supply chain, with detailed data and improved inventory control. (See “ Helping Mixer to digitalize the cosmetics market with RFID technology,” Checkpointsystems.com.)

Holograms embedded in packaging are a challenging obstacle for counterfeiters. Their unique optical properties enable them to diffract light and produce lifelike three-dimensional images that can’t be replicated with scanning or photocopying. Holograms are synchronized with smart platforms in order to provide real-time authentication and management. For cosmetics companies whose business is greatly influenced by their brand image, holograms can provide robust protection against counterfeit products, as well as assist in preserving brand value and consumer trust. (See “RMG holograms the best solution for detecting counterfeit cosmetics,” cosmeticsbusiness.com, Jan. 13, 2023.)

Phony scents are never a ‘good deal’

What motivates individuals to buy counterfeit fragrances, cosmetics or any other fake product? No doubt most people believe the benefits of counterfeits are greater than any potential costs and thus make a rational choice. However, it’s also possible that in their zeal for a deal, people ignore or underestimate the negative and potentially harmful consequences of embracing counterfeit perfumes, fragrances and cosmetics.

Counterfeiters, like all consumer con artists, bank on the emotional, financial and/or cognitive vulnerabilities that plague many people. Their well-crafted tales can catch many off guard, as our natural instinct is to trust others while giving way to unchecked emotions, beliefs and gullibility. Our brains are wired to be drawn to captivating stories, and these smooth-talking scammers skillfully create narratives that tap into deep desires and aspirations. It can be too tempting for some people to want a “discounted” designer or celebrity perfume, while paying little heed to the dangers to their physical health and emotional well-being.

Donn LeVie Jr., CFE, is a staff writer for Fraud Magazine and has presented and served as a career strategist at ACFE Global Fraud Conferences since 2012. Now retired, though speaking at ACFE conferences occasionally, he has led people and programs for Fortune 100 companies, the U.S. federal government, and academia for more than 30 years prior to his becoming a leadership influence strategist, award-winning author and speaker. Contact him at donnleviejr@gmail.com.