Federal Investigators Target eBay's Counterfeit Marketplace

Congress receives report on consumer risks from online counterfeit sales.

March 5, 2018, Los Angeles, CA – eBay has a credibility problem. eBay is under fire for some shady practices - enabling and facilitating U.S. and cross-border scam artists to freely unload of an inexhaustible supply of counterfeit goods, mostly from China, on unsuspecting consumers. eBay takes a transaction fee for each item sold.

• Last week, the U.S. Government Accountability Office ("GAO") issued a report on undercover online purchases of counterfeit consumer goods including eBay (NASDAQ: EBAY)¹ concluding in part that "counterfeit goods harm the U.S. economy and can pose a threat to consumers." Read the full GAO report ¹. A Senate hearing “Protecting E-commerce Consumers from Counterfeits”, Orrin Hatch (R-Utah), is scheduled for Tuesday, March 6, 2018.
• Forbes recently deemed the e-commerce giant a "cesspool of counterfeits and other illegal and potentially dangerous goods."²
• The Counterfeit Report®, a popular consumer advocate and industry watchdog, identified over 3 million counterfeits on eBay, removed over 1.9 million counterfeits, and purchased over 2,300 fakes from eBay. Just this tiny research sample identified over 730,000 counterfeits sold to eBay buyers. One eBay seller, boasting of over 5,000 sales of an indisputable fake product, remains despite eBay's counterfeit policy and repeated counterfeit complaints sent to eBay dating back to 2016.

eBay would like consumers to believe that it provides an honest and safe place to buy name-brand goods – and only authentic name brand goods - but that's not true. While eBay hides behind illusory counterfeit policies³ and ineffective website policing, the consequence is destroyed U.S companies and retailers, lost U.S. jobs, and deceived consumers spending good money for bad products.

The Counterfeit Report's research revealed eBay engages in a number of alarming and deceptive practices that offer little, if any, protection to buyers;

• eBay didn't notify buyers they received a counterfeit after receiving a manufacturer's counterfeit notifications, even when the items were dangerous or potentially deadly.
• eBay allows counterfeit sellers to repeatedly relist counterfeit, and fake items (trademark items that don't exist in any authentic product line), including OTC drugs.
• Reported counterfeit listings can remain active for weeks, even months, until the item is sold out or eBay gets around to it; "We have been experiencing higher than normal volume and are working diligently to remedy the situation."
• eBay sends direct email solicitations promoting banned, counterfeit and inarguably fake items, e.g.; "badge LAPD Police Officer Police US is ending soon"
• eBay admits it removes counterfeit and negative feedback left by buyers. (View the Business Insider article)
• There is no indication in eBay seller feedback of the sellers reported counterfeit sales history - even sellers with over 100 counterfeit listings removed from eBay.

How did eBay address The Counterfeit Report's research? Publicly, eBay claimed "we applaud the efforts" and "have reached out to [The Counterfeit Report] to discuss how we can work together in a more formal manner to keep eBay a place where people can shop with trust and confidence." Behind the scenes however, eBay threatened legal action, blocked The Counterfeit Report's test purchase accounts (and by extension any protection afforded eBay consumers), denied counterfeit product refunds, and removed product warnings and feedback from eBay listings.

Consumers wouldn't suspect the eBay items below are all fake - none exist in an authentic product line. Despite repeated complaints, they are still sold on eBay.

(Photo: ©The Counterfeit Report)

Monster® never made a Tron model headphone. Supra® never produced a "Justin Bieber" model skateboard shoe, and the Drew Technologies® Mongoose® Pro vehicle diagnostic interface cable was never made in purple. Vans® does not make or license the use of the VANS® trademark on iPhone 6, 7 or 8 phone cases. Authentic Dr. Numb is not made in the 10g size shown here. Counterfeit Dr. Numb® 5% Lidocaine Cream submitted for ingredient testing did not contain any Lidocaine as indicated, but Tetracaine, a potentially fatal drug. Composite Resources, Combat Application Tourniquet® (C-A-T®), has been supplied to the U.S. Military, police, first responders and the public worldwide for the past decade but was never produced in tan. Counterfeit versions of the C-A-T tourniquet have catastrophically failed during actual life-saving applications. Your life could literally be riding on this counterfeit Group-A Autosports® vehicle suspension part -the Skunk2® control arm was never made in the colors shown. An automobile suspension part failure can cause a catastrophic accident with fatal consequences to those in, and around, the counterfeit equipped vehicle. The various micro SD® memory cards shown were never produced in any authentic product line in the capacities shown, or licensed by SD-3C, LLC, the right holder of the microSD® trademark. ICOM® never made a V87 model amateur radio, and pharmaceutical giant Novartis does not make its OTC anti-fungicide medication, Lamisil® in the liquid form shown.

Companies that facilitate criminal activity and profit from dishonest sales which impact consumer safety, jobs and public trust create a public perception of deception with impunity. However, their reputation damage is only a small part of the problem: the value of counterfeit and pirated goods is forecast to grow to $2.8 trillion, and cost 5.4 million net job losses by 2022⁴ while manufacturer's brand integrity is tarnished or destroyed.

Consumers seeking authentic items would be safer and better served buying directly from the manufacturer or authorized retailer.

Footnotes:

⁽¹⁾ Report to the Chairman, Committee on Finance, U.S. Senate
Full Report: Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market
GAO-18-216: Published: Jan 30, 2018. Publicly Released: Feb 27, 2018.
Summary: https://www.gao.gov/products/GAO-18-216

⁽²⁾ Wade Shepard, "As Amazon And eBay Flood With Illegal Goods From China, Beijing Cracks Down On Foreign E-Commerce"
Forbes (Nov. 22, 2017), available at: https://www.forbes.com/sites/wadeshepard/2017/11/22/as-amazon-and-ebay-flood-with-illegal-goods-from-china-beijing-cracks-down-on-foreign-e-commerce/#7223f1604dfd

⁽³⁾ eBay Counterfeit Policy; "You can't list replicas, fakes, counterfeits or other illegal copies on eBay"

⁽⁴⁾ THE ECONOMIC COSTS OF COUNTERFEITING AND PIRACY
The report was prepared for The International Chamber of Commerce, Business Action to Stop Counterfeiting and Piracy unit (ICC BASCAP) and The International Trademark Association (INTA)
January 2017
Frontier Economics, Ltd.