Hal Varian on the Fashion Industry

Hal Varian writes about the fashion industry and intellectual property protection:
"Recently, two law professors, Kal Raustiala of the University of California, Los Angeles, and Chris Sprigman of the University of Virginia, wrote a fascinating paper that outlines the workings of the fashion industry and how it manages to function without much intellectual property protection.

At one time, the fashion industry did have a self-imposed system of intellectual property protection. In the 1930s, the Fashion Originators’ Guild prohibited copying among its members and urged retailers not to sell items from those who copied other designs. The guild was reasonably successful in these efforts. But in 1941, the Supreme Court held that its practices violated antitrust laws, and since then the fashion industry in the United States has had no intellectual property protection for designs.

A result has been that “piracy” of designs is common in the fashion industry. Designers constantly experiment with new shapes and colors. If a particular style catches on, it is quickly copied. Skinny jeans have been fashionable for the last few years, but there are signs that the trends are now moving toward straight-leg designs. If the tide changes, pretty soon everybody will be selling straight-leg jeans.

According to Mr. Raustiala and Mr. Sprigman, the fashion industry can survive without intellectual property protection because of two interacting factors that they refer to as “induced obsolescence” and “anchoring.”

The first factor means that clothes become unfashionable before they wear out, so trendy people have to keep buying new clothes every year. When you are wearing the same thing as your cool friends, that’s great. But when you start seeing that style on decidedly uncool people, it’s time for something new — which the fashion industry is happy to provide.

But how do the fashionable decide what the next big thing is? Or perhaps more to the point: how does the fashion industry convey to their consumers what they should be wearing? How does the industry “anchor” the consumers in this season’s fashions? This is where copying comes in. If all the designers are showing baby doll dresses in the spring of 2006, then there’s a good chance that is what everybody will be wearing by the summer of 2006.

Mr. Raustiala and Mr. Sprigman argue that the lack of intellectual property protection actually promotes the functioning of the industry. If the extension of copyright to fashion prevented clothes manufacturers from copying each other, the industry would be ceding a major role to the lawyers and become much less creative. We’d see the same thing year after year. In other words, women’s fashion would look much more like men’s fashions — boring, boring, boring.

Since I have the same fashion sense that most economists have — that is, none whatsoever — I cannot attest to the accuracy of the law professors’ description of the fashion industry. But it is consistent with other examples of what happens when there is no intellectual property protection."