PARIS (Reuters) - In the touristy Saint-Ouen flea market, not far from the Stade de France where athletes will compete in this summer's Paris Olympics, police officers swarmed in at dawn on April 3 and shut down 11 stores selling counterfeit bags and shoes.

They confiscated 63,000 items of clothing, shoes and leather goods, including fake Louis Vuitton and Nike ( NKE ) products, and threw them into garbage compactor trucks on the spot. Ten people were arrested.       

Michel Lavaud, police security chief for the Seine-Saint-Denis suburb that will host Paris 2024 athletics and swimming events as well as the closing ceremony, described the operation as part of a pre-Olympics crackdown on knockoffs.

Fake fashion is big business. Counterfeit branded clothing alone is estimated to have cost companies in France 1.7 billion euros ($1.83 billion) in lost sales on average each year between 2018 and 2021, according to the European Union Intellectual Property Office.

"We've been talking about the problem of counterfeits for the last two years," Lavaud said, adding the police was looking to intensify its efforts. The raid in the world's fashion capital bears some similarity to clean-ups carried out by previous Olympic hosts like Beijing in 2008, which had mixed results, as well as London in 2012 and Rio in 2016.

But the police crackdown on street merchants in Seine-Saint-Denis, where one in three lives in poverty according to French national statistics, has drawn criticism for pushing people already in economically precarious situations into further difficulty.

Axel Wilmort, a researcher with French social science institute for urban studies LAVUE, said he had noticed a sharp increase in police presence and repression of informal market sellers on the outskirts of Paris over the last three months, with frequent police patrols and the installation of metal barriers preventing vendors from setting up stalls.

"There is a will to erase all signs of precarity, poverty and undesirables," he said, adding that law enforcement officers often do not differentiate between counterfeit sellers and vendors of legal second-hand wares.

Police in Paris did not respond to a request for comment.

Police raids on informal merchants near Paris' iconic Montmartre hillside have multiplied since February, with 10 carried out over four days in early June to dismantle a market of around 1,000 sellers, according to a letter, seen by Reuters, from the district mayor to the interior minister. Seventy tonnes of products were destroyed in March alone, the letter said.

Reuters documented in April how street vendors have been caught up in a vast police operation aimed at ridding deprived Paris suburbs of petty crime before the Games.

LUCRATIVE GAME

The roughly 15 million visitors expected to attend the Olympics in Paris - a magnet for luxury goods shoppers - are a tempting target for sellers of fake designer items.

Sensing a threat to branded merchandise, Paris 2024 organizers and the International Olympic Committee both became members of French intellectual property protection association UNIFAB last year. The organisation works with brands to raise awareness around the risks linked to fake products, which often breach safety regulations and help fund illegal activities.

"We've been working a lot ahead of the Olympic Games," said UNIFAB's CEO Delphine Sarfati-Sobreira.

Paris 2024 sponsor LVMH, the world's biggest luxury conglomerate, is a prominent member. LVMH did not respond to a request for comment on the recent anti-counterfeit measures. The company has said it works closely with authorities and customs officials to enforce its intellectual property rights and to defend consumers from counterfeiters.

France had already dialled up its fight against fakes. Last year, customs seized 20.5 million counterfeit products, a 78% increase on the 11.5 million confiscated in 2022, according to data released in May.

  This spring, UNIFAB helped train 1,200 customs agents to verify the authenticity of Olympics merchandise, with the red Paris 2024 mascot and clothing the most likely target for illegal replicas, according to officials. French authorities also have 70 agents fighting counterfeits online, looking to dismantle local and international criminal networks.

"Paris doesn't want to be known as the counterfeit capital of Europe," said intellectual property lawyer John Coldham, a partner at Gowling WLG in London who worked with brands during the 'Fake Free London' pre-Olympics operation of 2012. A bigger concern for French fashion houses may however come from foreign shoppers' reluctance to visit Paris during the Olympics, rather than from revenues lost to counterfeits. 

Air France-KLM warned last week it expects a hit of as much at 180 million euros this summer as some foreign tourists avoid the French capital. LVMH and rivals have said they are not anticipating a revenue boost from the sport event, and may shift their focus elsewhere.

"Luxury companies are indicating that they are ready to receive shoppers elsewhere than in Paris: from the Cote d'Azur, to Milan and beyond," said Luca Solca, a luxury goods analyst at research and brokerage firm Bernstein.

(Reporting by Layli Foroudi and Mimosa Spencer in Paris, Helen Reid in London, Editing by Lisa Jucca)