eBay Fined for Not Spotting Fakes

Discussion
Jul 09, 2008

By Bernice Hurst, Managing Partner, Fine Food Network

LVMH (Louis Vuitton Moët Hennessy), the French holding company specializing in luxury goods, has successfully sued eBay for not taking sufficient steps to prevent fakes being sold through its auction site. A French court has ordered eBay to pay 40 million euros (U.S. $63 million) in damages. eBay was also ordered to cease all its sales of LVMH perfumes, whether genuine or fake.

The Independent newspaper in Britain reported that LVMH had claimed that 90 percent of the perfumes, watches and handbags with LVMH-owned labels offered for sale on eBay were actually fakes. Another part of the LVMH complaint asserted that perfumes with the Christian Dior, Kenzo, Givenchy and Guerlain labels should only be sold by trained staff in approved places.

Pierre Gode, an LVMH board member, said the ruling was a “groundbreaking decision that will help protect creativity.” Mr. Godet also called the ruling “an answer to a particularly serious question on whether the Internet is a free-for-all for the most hateful, parasitic practices.”

Announcing its appeal, eBay called the ruling an attack on consumers, rather
than counterfeiters.

“This ruling is not about our fight against counterfeits,” it said in a statement. “It is about an attempt by LVMH to protect uncompetitive commercial practices at the expense of consumer choice and the livelihoods of law-abiding sellers that eBay empowers every day. We will fight this ruling on their behalf.”

eBay already spends $20 million a year worldwide on trying to identify fraudulent offers on its site, the company said. And since the original lawsuit was filed in 2006, eBay had intensified its efforts to the extent that it was “not the same company.” Its statement added: “The ruling also seeks to impact the sale of second-hand goods as well as new genuine products, effectively reaching into homes and rolling back the clock on the internet and the liberty it has created.”

This isn’t the first time eBay has been sued over its business model. In early June, the auction site was fined for the distribution of fake Hermes handbags. Tiffany & Co. has sued eBay in the U.S. on similar grounds although that suit hasn’t been settled.

Discussion question: Do you side with LVMH or eBay in this case?

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17 Comments on "eBay Fined for Not Spotting Fakes"


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MARK DECKARD
Guest
MARK DECKARD
13 years 10 months ago
I side with eBay who is the victim of “deep-pocketitus.” The same activity happens on FREE advertising sites like Craigslist.com. Who gets sued then? Buyers beware. The law of the internet is the law of the jungle. The good roams freely with the bad. The trick is tracking down the little 3rd world factories across the globe that produce these goods. The bigger second trick is getting US Customs to inspect for and verify RN numbers, seize fakes and then go after everyone involved in the supply chain. IT DOESN’T GET HERE BY CONTAINER OR INDIVIDUAL PACKAGE WITHOUT CLEARING CUSTOMS…. However, although this would be the easiest and most effective method of stopping the problem at the source, only a small percentage of inbound shipments are ever actually inspected. It would take a major revamping and refunding of staffing and budgets allocations when has a government entity ever been effective at anything and what is their motivation as long as the duties and taxes are flowing in?
Dan Raftery
Guest
13 years 10 months ago

By calling the ruling an attack on consumers, eBay implies that they believe consumers benefit from counterfeit goods. This is about more than intellectual property protection. It includes quality and safety. eBay is trying to hide behind the Internet cloud that shows up on PowerPoint slides. It appears that this tactic is not working as well as it has in the past.

Unfortunately, eBay is not the only company that uses the Internet to market goods. The problem is not just this one company, it is the ubiquity and ambiguity of the channel. A big outfit like eBay is an easier target than the rest, but this is certainly a step in the right direction. Now, how to protect intellectual property and consumers in the entire channel….

David Biernbaum
Guest
13 years 10 months ago

eBay should be held to exactly the same laws that govern the free enterprise system; no more and no less.

Pradip V. Mehta, P.E.
Guest
Pradip V. Mehta, P.E.
13 years 10 months ago

I side with LVMH in this case. I do not see how a court ruling can be an attack on consumers. The focus of anticounterfeiting efforts should be the merchants of such merchandise. If they do not trade in counterfeit merchandise, the manufacturers will have no incentive to make such merchandise.

Charlie Moro
Guest
Charlie Moro
13 years 10 months ago

Does anyone believe the Rolex on Broadway in NYC is a real one, at $25? While there should be a way to shut down the black market of counterfeits, will the next lawsuit be against the City of New York for not enforcing the copyright laws in the same way eBay is being sued?

I think we need to aim a little higher up the food chain for enforcement.

Gene Michaud
Guest
Gene Michaud
13 years 10 months ago

I side with LVMH but also believe this is a bigger problem then just eBay. We all know there are many businesses/individuals willing to sell fakes. However, there are also many consumers who are very much aware that they are buying fakes and willing to do so in hope of being able to falsely present their wares to impress friends and others. Sad but true.

LVMH has a responsibility to protect their loyal customers, many who have worked very hard to accumulate the needed assets to acquire the real thing and I believe LVMN has worked at accomplishing that objective. eBay should not become an avenue for these criminals and the consumers who support them without making every possible effort to find ways to stop such unfortunate activities.

Craig Sundstrom
Guest
13 years 10 months ago

Could eBay do more(?): Yes (not so much because eBay doesn’t do anything, but because one can always do “more”); SHOULD eBay do more(?): I don’t know: the principle of this model is a low-cost/lightly regulated “free market”…one can only exercise so much control before the model is destroyed.

Li McClelland
Guest
Li McClelland
13 years 10 months ago

There is a distinction between the purveyors on eBay who offer thousands of new (suspect) “designer” goods a month, and the lone individuals or small vintage or consignment sites who are merely helping clean out closets containing a few authentic designer goods that are no longer needed or wanted. In my mind, with their technology it should not be hard for eBay to separate those two kinds of eBay sellers if they really wanted to.

Janis Cram
Guest
Janis Cram
13 years 10 months ago

I side with ebay. Buyer beware.

Ed Dennis
Guest
Ed Dennis
13 years 10 months ago

eBay should be ashamed of their position. eBay has enabled the reward for theft to be increased substantially. In the old days, when you stole an iPod you used it yourself. This constituted a single theft. Now you steal all you can and sell them on eBay. This results in multiple thefts. What is worse is the number of eBay sellers that are offering counterfeit merchandise.

These guys are putting the street vendors in New York City out of business! The critical jobs are being moved off shore. The business of selling fake products has moved out of the back alleys on to the internet via eBay and eBay knows it and takes little if any action.

I’v personally complained over 20 times to eBay about false advertising of product over a 4 month period before any action was taken. How many buyers were defrauded over this time period? Maybe a hefty fine will convince them to devote some attention to this problem.

Jeb Watts
Guest
Jeb Watts
13 years 10 months ago

As much as eBay irritates me, I side with them on this. eBay is a vehicle to sell. They caution people about counterfeit items and predatory sellers on their site. If it sounds too good to be true, it probably is. eBay cannot verify the authenticity of every item auctioned on their site. It is and always will be “Caveat Emptor.” If these companies want to stop the sale of counterfeit items, they are welcome to contact each seller of these items.

David Livingston
Guest
13 years 10 months ago

I side with eBay. Hopefully a French court does not have any jurisdiction regarding eBay. This would be like fining a toll road because it allowed stolen cars to be driven on it. Or suing a television station because it showed infomercials on too good to be true miracle products. It’s a simple case of going where the money is. No sense wasting time suing the nickel and dime criminals in some third world country who are selling the fake products. eBay is far from perfect but they do their best to police their site.

Kai Clarke
Guest
13 years 10 months ago

eBay is not the copyright or patent infringement police. How are they to know which products are real, or which ones are fake? Why should they be expected to enforce these copyrighted items when that is clearly the position of LMVH. This lawsuit should never even have been heard, much less ruled. Copyright protection or infringement is a criminal matter, not a civil one, that is the focus and intent of our copyright and patent laws.

Mark Lilien
Guest
13 years 10 months ago

eBay’s management probably knew since forever that folks list fakes. LVMH probably feels pressure from their authorized retailers to restrain discounters. eBay’s management is very innovative at selling extra-cost options, like automobile inspections. Why not sell “counterfeit insurance”? A warranty for an extra 1% that the item is real. Doesn’t help LVMH stop discounters, though. But LVMH can easily solve that issue by recording a printed serial number on each item, and to whom it was sold.

James Avilez
Guest
James Avilez
13 years 10 months ago

I think common sense should play into anything you buy on eBay. If those Diesel jeans for “buy it now $49.99” doesn’t tip you off, the fact that the merchandise will be shipped from Russia, Thailand, Hong Kong or Australia should.

Robert Thomas
Guest
Robert Thomas
13 years 10 months ago

eBay is a marketplace where fakes are sold and it would take an awfully big set of blinders on their management to say it is not. I doubt they are spending 20 million a year on trying to stop the problem. Since eBay chooses to do business around the world they choose to open themselves up to jurisdictions around the world. Since fake products have been linked to the funding of terrorists, some even in the US, the business of fakes should not be ignored.

Linda Bustos
Guest
Linda Bustos
13 years 10 months ago

I think the manufacturers and re-sellers of the merchandise need to be held accountable, not eBay. But eBay should do what it can to establish the means of accountability. Right now its buyer/seller feedback revolves around customer service, shipping follow-through, item-as-described etc.

Could there be a mechanism where listing for luxury brands has a special section for authenticity–the customer providing feedback of real vs. fake? The question then lies, can you trust the customer feedback? A competitive eBay seller may purchase one item simply to get the competitor removed off eBay, crying “fake!”

This is complicated. I side with eBay here and echo the sentiment “buyer beware.”

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