eBay Fraud Scams exposed

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.