eBay Fraud Scams exposed

Another Class Action Lawsuit against PayPal is being settled. In particular, the lawsuit alleges that PayPal’s policies and practices constitute deceptive trade practices, fraudulent inducement and misrepresentations, and breach of the PayPal User Agreement. In plain English: this Class Action accused PayPal that it illegally cheated it’s customers who were not smart enough to back they PayPal purchase by a credit card.

So if you were denied full refund by PayPal on purchase you have made and could not recover your funds using a chargeback via your credit card, please take a look at the official Steele Case Settlement website for further information. Officially, here is the description of who qualifies:
On July 24, 2008, Judge Glasser entered an order granting preliminary approval of the Settlement and certifying the following “Class” for purposes of the Settlement: all U.S. based PayPal account holders who funded a PayPal transaction after February 1, 2004, using a source other than a credit card: (i) who subsequently requested a reversal of the transaction through PayPal’s prevailing Buyer Complaint Policy and/or Buyer Protection Policy (collectively, “Policies”); (ii) who did not receive a refund equal to 100% of their transaction payment in response to such request from PayPal or their bank; and (iii) who, through the timely submission of a Claim Form under oath, attest to a reasonable and good faith belief that they would have received a full reversal of such payment had they used a valid credit card in their possession at the time of the subject transaction to fund the payment and filed a timely chargeback request with their credit card issuing bank.

As predicted, eBay’s stance of ‘just a venue’ bringing buyers and sellers together had no leg to stand on in European courts yesterday. Louis Vuitton, Christian Dior and Givenchy won their lawsuit against eBay and a hefty US $63,000,000 fine will perhaps make those at eBay helm think about ignoring the counterfeit problem across eBay sites.

The case against eBay in a commercial court in Paris was brought jointly by six brands belonging to the LVMH group.

Louis Vuitton Malletier, the group’s handbag and luggage section, and clothing brand Christian Dior Couture accused eBay of “negligence” in allowing illegal copies of their goods to be sold in online auctions.

Four perfume brands - Dior, Guerlain, Kenzo and Givenchy - sued for what they called “illicit sales” of their products.

They alleged that even auctions involving their legitimate perfumes were illegal, because only specialist dealers were permitted to sell them.

The court barred eBay from selling the four perfumes in future

According to the judgement, eBay must pay 19.28m Euros in damages to Luis Vuitton Malletier, 17.3m to Christian Dior Couture and 3.25m to the perfume brands.

The BBC’s Hugh Schofield in Paris says the ruling is seen as a landmark, because it could oblige eBay to rethink its business model.

In the traditional tone spin and deny, eBay spokesman defended eBay platform by saying:

“If counterfeits appear on our sites, we take them down swiftly, but today’s ruling is not about our fight against counterfeit. ”

( WHOAAA! BS - eBay does not take fakes down SWIFTLY! As a matter of fact attorneys involved in eBay VERO program continuously complain and document cases where they reported fakes yet eBay refuses to take them down… I mean why would eBay be reluctant to do so? Simple: every sale = percentage of it goes to eBay pocket.)

eBay spokesperson further spins eBay’s position on this ruling:

“Today’s ruling is about an attempt by LVMH to protect uncompetitive commercial practices at the expense of consumer choice and the livelihood of law-abiding sellers that eBay empowers everyday. “

(GEEEZ! Now eBay talks about “uncompetitive commercial practices at the expense of consumer” HA HA HA HA … Tell me another one! Pot calling a kettle black. Just as we speak eBay is trying to remove PayPal competitors from eBay Australia site being told by the Australian Competition Watchdog Agency this is illegal, preventing Google Checkout from competing on eBay properties, issuing a new rule eBay sellers cannot advertise their own web page on eBay ABOUT ME pages…. the list goes on and on!… how is that for uncompetitive commerce practices? Here is an awesome article just published linking these two issues together: eBay: pro-choice, but only when it suits and some quotes from this article:

” eBay is screaming blue murder over being banned from selling Louis Vuitton goods by a French court… meanwhile it is pushing on with banning all payment methods except PayPal.”

“While eBay has reluctantly backed down from imposing its PayPal-and-nothing-else policy after a strict talking to from the ACCC, it hasn’t officially abandoned the policy. A public meeting in Sydney to discuss issues with the ACCC doesn’t seem to have advanced the cause much, and certainly hasn’t done much to neutralise the increasing toxicity of the eBay brand.“

I suppose I am not the only one making the same connection.)

The court barred eBay from running ads for the perfume and cosmetic brands or face a fine of $79,000 per day.

Heather McDonald, partner at law firm Baker Hostetler, said: “eBay has policies and procedures in place where they will intervene in an action between a buyer and seller if there’s a problem, and they profit directly on the basis of every item that is sold on their Web site.

“This gives them an affirmative obligation to take steps to make sure that illegal goods aren’t sold, and they certainly have the ability to do that.

“They have been able to make sure that you can’t buy a handgun and they have been able to make sure that you cannot buy pornography or prescription narcotics or other medicines on eBay.

“They have the ability to do this, they have just chosen not do and to rest the entire burden of policing eBay on the shoulders of the trademark and copyright holders whose rights are being infringed here.”
Sources:
BBC News
CNN News

The Tiffany lawsuit is next in line…I doubt eBay will win that one….
This is an article from the NYTimes: http://www.nytimes.com/2006/01/29/technology/29ebay.html
Highlights below:
“Company officials say they do everything they can to stop fraud. The company says only a minute share of the items being sold at any given time — 6,000 or so — are fraudulent. But that estimate reflects only cases that are determined by eBay to be confirmed cases of fraud, like when an item is never delivered.”

“The Tiffany lawsuit, in addition to accusing eBay of facilitating counterfeiting, also contends that it “charges hundreds of thousands of dollars in fees” for counterfeit sales.

In 2004, Tiffany secretly purchased about 200 items from eBay in its investigation of how the company was dealing with the thousands of pieces of counterfeit Tiffany jewelry. The jeweler found that three out of four pieces were fakes.”

“The women say that by watching the listings they have uncovered a ring of a half-dozen or so counterfeiters, most of them living in Rhode Island within a few miles of one other. They say the sellers supply one another with fake jewelry, conceal the fact that they are buying from one another to boost their seller status, and regularly dole out positive feedback to each other to fool potential buyers.”

This just skims the surface. Everything from handbangs, makeup, perfume, autographs, software, movies, music, iPods, etc. are fake. Today, the consumer assumes that the item is fake until proven authentic.

You can fool some people all the time and you can fool all people some time but you cannot fool all the people all the time. eBay stock is reflecting the opinions of shareholders. As usual eBay is underperforming Nasdaq, EBAY shares lost 17.66% in June, compared to Nasdaq loss of 13.55%… so this bad economy stock market losses argument is out the window as well.

Feel free to post your opinion on the one of the most frequented eBay stock forums here:
http://messages.finance.yahoo.com/mb/EBAY

Update 7/11/2008 eBay denied stay in LVMH case

The French Court of Appeals today denied eBay’s (EBAY) petition to stay an injunction issued June 30 by a Parisian court that requires eBay to halt all sales of four LVMH (LVMUY) perfumes over any site worldwide that is accessible from France, according to an eBay spokesperson.

An eBay spokesman says the company “will comply as technically and humanly possible” with the injunction while it continues to pursue its appeal of the ruling.

In a statement, LVMH says that today’s denial of the stay “confirms the seriousness of the faults committed by eBay’s sites . . . and confirms the significance of the legal precedent set by the Paris Commercial Court’s Judgment on June 30, 2008.”

The perfumes brands affected are Kenzo, Guerlain, Christian Dior, and Givenchy.

The lower court’s order bans not just sales of counterfeits, but sales of genuine bottles of these perfumes, because LVMH chooses to limit sales of these products to exclusive licensed distributors, and it does not permit its licensed distributors to sell over eBay.

Thus, the order bans so-called graymarket sales — sales of genuine products through unauthorized channels — which are not considered illegal in the United States, but are in France. According to lawyers for both sides, the injunction even forbids individuals from reselling genuine LVMH products that they received as gifts.

The injunction apparently takes effect immediately, and violations will be punishable by daily fines of 50,000 euros (about $80,000).

Here is a notice eBay has placed on its French site about today’s ruling.

There were times not so long ago that any time there were some negative news about eBay, the eBay PR department would issue some positive news fluff PR releases and effectively counter the negative news with positive.

Lately, there are so many negative news articles in just about all major media that it is simply impossible for eBay PR to cover up all that negative publicity.

As eBay gets negative billing on Major media, as opposed to few independent blogs, millions of readers become will suddenly have confirmation of their own “hunch” that ‘there is something rotten in the state of eBay’.

• Forbes : Reserve Not Met, Gurus Dump eBay advising investors to dump EBAY shares 02.25.08
• Forbes on eBay losing counterfeit lawsuit to Hermès in France 06-09-2008, summarizing other ongoing lawsuits by major design houses against eBay.

• Business Week Auctions on eBay: A Dying Breed on 6-3-2008: As consumers opt for fixed-price purchases, what happens to the company that perfected the art of online bidding—and the scores of e-auctioneers?
• Business Week eBay Auctions: Going, Going… on 6-19-2008 :
  The thrill of the hunt is fading for buyers, and longtime auctioneers aren’t happy with higher fees

• 
  Sunday Times UK Edition on 6-22-2008 : eBay’s small sellers rebel. This year’s conference took place in Chicago and was the most controversial in the seven-year history of eBay Live. The company had been expecting 10,000 people. It looked like half that number had turned up and the exhibitors’ hall seemed to have been reshuffled to hide the gaps.

• Australian News.Com.Au : My way or the highway, says eBay on 6-18-2008 : EBAY Australia has fired off a strongly worded letter to its 5 million customers, warning that failure to comply with its new PayPal ruling will result in an immediate removal of product listings. This is the strongest sign yet that nothing will stop plans to make PayPal, an eBay subsidiary, the only electronic payment mechanism available on the auction website. EBay’s directive comes despite a preliminary ruling last week by the competition watchdog that restricting transactions to PayPal would be anti-competitive.
• 
  NY Times EBay Tries to Buy a Little More Love From Sellers on 6-20-2008 : The key problem with eBay is that the value of what it offers has not kept up with the price it charges sellers. Between the fees to list items on eBay — essentially advertising — and the PayPal transaction fees, eBay often charges about 13 percent of each transaction. Sellers can pay a tad more, about 15 percent, to sell items through Amazon.com’s Marketplace service, where they get a little more protection against fraud and a site that arguably offers a better experience for their buyers. Or they can set up their own Web site and buy advertising and transaction services a la carte — an ever-more-effective option as people increasingly shop through search engines. These days, many consumers associate eBay with fraud and scams as much as they did with unique items and bargains a few years ago.

• 
  Wall Street Journal EBay Angers Sellers, Pleases Buyers on 6-24-2008 : EBay has operated a feedback system that let buyers rate their experience with sellers and vice versa. The company has now shifted to a system under which only buyers rate sellers. The sellers say that leaves them open to forms of blackmail and extortion by buyers, such as threatening to leave negative ratings if sellers won’t make such concessions as giving partial refunds to buyers who contend they pay too much.

• Wall Street Journal EBay Gets Little Love from Software Makers on 5-22-2008 : Software & Information Industry Association says many of those programs are pirated, and it hopes to publicly shame the e-commerce giant into cooperating with the software industry’s anti-piracy crusade. The software-industry trade group criticized eBay for being “totally non-responsive” to its efforts to eliminate fake or copied software from the auction site, says Keith Kupferschmid, the head of intellectual property at SIIA.

Check out the comments on the above articles. There are thousands of unsatisfied eBay sellers and buyers reacting to recent eBay changes.

eBay shares fell from $30.38 to $28.17 in past 30 days. Yahoo finance forum for EBAY stock is flooded with unhappy EBAY sellers and buyers who resourced to account for their negative experiences with eBay and PayPal there as more and more eBayers realize that eBay will not listen to any other voice of reason but it’s Shareholders and financial bloggers are also noticing the trend: Here is a lates article eBay Falls from Grace from Yahoo Tech Ticker Blog

Online auction giant eBay was convicted Wednesday of selling counterfeit goods and ordered to pay 20,000 euros (30,000 dollars) in damages to French luxury group Hermes, Hermes’ lawyer said.

eBay was convicted on basis of these arguments by Hermes’ attorneys:

• eBay was more than a mere host for the counterfeit items.
• eBay is an active player in the transaction because not only does it offer a number of services to improve the sale, but when it does not work well enough or fast enough, they intervene with the client.
• They are perfectly informed of the transactions since they take a percentage cut.

This appears to be a landmark case since for the first time, eBay was found guilty of complicity in aiding in sales of counterfeit goods and eBay’s usual argument “We are just a venue” was thrown out of the window.

It is perfectly possible that Hermes sought such a low punitive damages so it would be easy
to win this lawsuit and then this ruling can be used as a precedent ruling in other cases pending vs. EBAY.

Luxury fashion houses Louis Vuitton and Dior Couture have also taken legal action against eBay before the Paris commercial court, respectively seeking 20 million and 17 million euros in damages.

Both brands accuse eBay of complicity in the sale of counterfeit goods by allowing buyers and sellers to transact without imposing any controls.

Also in France, the auction industry took legal action against the online giant last December, accusing it of encouraging trade in pirated and stolen goods.

And in a potentially major case, the cosmetics giant L’Oreal last September launched legal action against eBay in five European countries including France, over the sale of bottles of counterfeit perfume.

It’s good to see that European courts are taking tough stance on eBay’s lax approach to crime on their site. eBay consistently denies there are any serious problems with fakes, fraud, scams, hijackings, account security breaches, etc. on it’s site…. while we and other eBay security watchdogs prove this otherwise.

It’s a shame eBay is not interested in cleaning up it’s site and prefers hiding the massive amount of fraud and scams, so trademark owners have to resort to suing eBay. We have pointed out many times that eBay is not genuinely interested in eliminating sales of fake goods on it’s site because eBay is too happy to take it’s commission on whatever is sold on eBay, be it counterfeit, stolen or simply non-existing merchandise.

eBay Shares lost 5.81% down from $31.58 on April 9, 2008 date of Hermes lawsuit initiation, EBAY shares closed at $29.28 on May 30th.

It was speculated when eBay purchased over 25% share in Craigslist that eBay is on a fishing (not phishing) expedition to observe craigslist’s success and then copy it. It is a known fact that beyond it’s founder’s innovative idea to create an online auction, eBay’s executive team has not invented anything since. eBay’s management is great at spending it’s cash on mostly miss (Skype) sometimes hit (PayPal) acquisitions. Less then a month ago we have commented on a eBay vs. Craigslist lawsuit which set the stage for Craigslist initiating their own proceedings against eBay. The full document is available here and it provides some interesting insights into what allegedly goes on behind the scenes. Read the document, it provides a peak into the world of corporate espionage, false advertising, deception and other corporate shinnanagans you won’t find in official company press releases.

eBay is certainly not a stranger to being accused of unfair play and facing substantial fines and penalties for it’s mistakes. Here is a abbreviated history of some legal processes she has faced or is currently litigating:

August 11, 2003 SHARE PRICE 25.46
eBay Accounts for Lawsuit Loss: The auction giant shaves $30M from Q2 results after a patent verdict against it was upheld last week but says it will appeal. February 28, 2008 Case MercExhange vs. eBay settled, As a part of the settlement, eBay purchased all three patents from MercExhange involved in the lawsuit, and related technology and inventions, as well as a license to another search-related patent portfolio that was not asserted in the lawsuit

July 30, 2004 SHARE PRICE 39.16
PayPal Sends Users Notice of Class-Action Lawsuit Settlement: PayPal and plaintiffs reached a settlement in the class-action lawsuit stemming from 2002, when two PayPal users filed class action lawsuits against the online payment service owned by eBay. Some of the accusations by the plantiffs were that, as of early 2002, PayPal was understaffed, hid its customer service phone numbers to save money, had rude and unhelpful phone staff, did not answer customer service email, and “without notice or warning, erroneously and unnecessarily” limited or closed accounts and then made it difficult to restore the accounts.

June 22, 2004 SHARE PRICE 43.60
Tiffany Sues eBay over Fakes : Tiffany said 73% of items purchased on eBay in a study it conducted were counterfeit

April 29, 2005 SHARE PRICE 31.71
Tentative Settlement Reached in eBay Stock ‘Spinning’ Lawsuit : the settlement calls for the payment to eBay of $3 million by Meg Whitman, Pierre Omidyar, Jeffrey Skoll and Robert Kagle, who are officers/directors/controlling stockholders of eBay, and a payment to eBay of $395,000 by Goldman Sachs Group, eBay’s investment banking firm.

In June 6 2006 SHARE PRICE 31.59
Net2Phone, Inc. filed a lawsuit in the U.S. District Court for the District of New Jersey (No. 06-2469) alleging that eBay Inc., Skype Technologies S.A., and Skype Inc. infringed five patents owned by Net2Phone relating to point-to-point Internet protocol. The suit seeks an injunction against continuing infringement, unspecified damages, including treble damages for willful infringement, and interest, costs, and fees

August 7 2006 SHARE PRICE 24.12
Louis Vuitton Malletier and Christian Dior Couture filed two lawsuits in the Paris Court of Commerce against eBay Inc. and eBay International AG. Among other things, the complaint alleges that we violated French tort law by negligently broadcasting listings posted by third parties offering counterfeit items bearing plaintiffs’ trademarks, and by purchasing certain advertising keywords. The plaintiffs seek approximately EUR 37 million in damages.

September 6 2006, SHARE PRICE 27.53
Parfums Christian Dior, Kenzo Parfums, Parfums Givenchy, and Guerlain Société also filed a lawsuit in the Paris Court of Commerce against eBay Inc. and eBay International AG. The complaint alleges that we have interfered with the selective distribution network the plaintiffs established in France and the European Union by allowing third parties to post listings offering genuine perfumes and cosmetics for sale on our websites. The plaintiffs in this suit seek approximately EUR 9 million in damages and injunctive relief

April 26th, 2007 SHARE PRICE 34.22
eBay, PayPal face court action Class action alleges unfair monopoly: eBay warned shareholders yesterday that it is facing a possible class action suit in the state of California and is likely to be hit by more patent cases. The suit alleges that eBay and PayPal acted “to improperly ‘monopolise’ the forms of payment that sellers can use on eBay”.

August 2007 SHARE PRICE 33.54
class-action lawsuit in which attorney John Fabry stated, “eBay has been deceiving millions of consumers over the years by claiming their auctions start when submitted, when in reality they do not begin for at least several hours, and up to 24 hours. However, the clock starts running on your selected auction time even though eBay hasn’t posted it yet

Jan. 10, 2008 SHARE PRICE 30.36
Lawsuit Filed against eBay Over Coin Listing Policy: The American Numismatic Association (ANA) and the Professional Numismatists Guild (PNG) are suing eBay for defamation and unfair and deceptive trade practices

May 13, 2008 SHARE PRICE 31.41
Craigslist has filed a countersuit against eBay, alleging that the auction site used its minority stake in Craigslist to engage in unfair and unlawful anticompetitive behavior, false advertising, trademark infringement, and other misdeeds.

Update: 5-15-2008 Craigslist illustrates on their blog how eBay uses deceptive advertising on Yahoo providing a screenshot of advertisements eBay ran up even on the morning of 5-14-2008. Interestingly enough, if you try to search on Yahoo for www.craigslist.org or craigslist.org those deceptive ads no longer appear.

Craig posted on his blog in blog.craigslist.org a response to eBay’s lowsuit filed against Craigslist, alleging that CL BOD unjustly dilluted eBay’s stake at the company.

eBay is sure to deepen alienation with it’s two major competitors. First the ongoing tiff with Google over eBay’s refusal to allow Google Checkout as a payment option that ultimately sunk eBay listings from prominent search result positions on Google seach and now a legal action against it’s other most prominent competitor CL.

Craig said in his blog:

“We are surprised and disappointed by Ebay’s unfounded allegations, which came to us out of the blue, without any attempt to engage in a dialogue with us.”

“Coming from a shareholder that views craigslist as a prime competitor, filing suit without so much as mentioning these assertions beforehand seems unethical, and hints at ulterior motives.”

These two sentences characterize eBay perfectly.

Craigslist did not get lawsuit happy when eBay acquired Kijiji and begun directly compete with CL … BACK THEN we were thinking - eBay acquires stake at CL, observes the business so it can copy it’s success and directly compete with them.

This event concides with onlyebay blog celebrating kijiji 400,000 listings in US while Craigslit boasts over 30,000,000 monthly listings according to this Craigslist valuation.

So what does eBay seek to gain by this lawsuit. One observer said that perhaps weakening CL’s financial position by costly litigation may force CL to monetize on more of it’s properties and thus further increase eBay’s paper profits. Better paper profits = more shareholders thinking eBay is worth investing in.

Update: May 2, 2008 :

• CraigsList blog provided additional information.
• eBay provided a link to the Redacted Court Document eBay vs. Craigslist

Online marketplace eBay Inc. said Thursday it reached a settlement with MercExchange LLC over a patent lawsuit filed in September 2001.

San Jose-based eBay (NASDAQ:EBAY) will purchase all three patents involved in the lawsuit with Great Falls, Va.-based MercExchange, along with related technology and inventions and a license to another search-related patent portfolio that was not asserted in the lawsuit.

Financial terms were not disclosed.

“We’re pleased to have been able to reach a settlement with MercExchange,” said Mike Jacobson, eBay general counsel. “In addition to resolving the litigation, this settlement gives us access to additional intellectual property that will help improve and further secure our marketplaces.”

In December a judge upheld an earlier verdict that Bay must pay about $30 million because its “Buy It Now” feature violates MercExchange’s patent.

 source: Silicon Valley / San Jose Business Journal

A leading anti-piracy body has accused eBay over counterfeit software, claiming in a new report that “at least 90 percent of all software available on eBay is illegal.”

The Software & Information Industry Association (SIIA) is an association for software companies whose anti-piracy division acts rather like the UK’s Federation Against Software Theft (FAST) in its efforts to combat software piracy in the workplace. Members include AOL, Adobe, IBM, Intel, Novell, Quark, and Sun, among many others.

During 2007, the SIIA received 427 reports of alleged corporate end-user piracy, and in 17 percent of the cases judged there was sufficient evidence to pursue charges.

By Tom Jowitt, Techworld - full article