Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Sat Aug 22 2015 05:42:31

What RICO Lawsuit Could Mean for eBay Sellers

By: Ina Steiner

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Wimo Labs is suing eBay over the way it handles reports of counterfeits. Many sellers are familiar with the VeRO process in which brands report listings to eBay for real or supposed trademark or copyright infringement. But if eBay makes certain changes in response to criticism over its VeRO program, might it have a negative impact on legitimate sellers?

Wimo Labs, which sells the Lunatik product line, sued eBay and some of its sellers, accusing them of racketeering. (eBay said counterfeits were not welcome on its site and said it has a number of sophisticated tools, policies and other measures in place to keep them off.) More information with eBay's full statement is available in Friday's Newsflash.

One point of interest is its description of how eBay handles claims - basically it says eBay should not instruct buyers to return disputed items to sellers:

"Though eBay's policy is not to return counterfeit products, upon information and belief, this is exactly what eBay requires for a consumer to receive a refund. Fake Products are evidence of a crime. See 18 U.S.C.A. 2320. Contrary to law, upon reporting a purchased item as counterfeit, the eBay customer is refunded and instructed to return the product. Instead of taking any action against the Unauthorized Seller, eBay facilitates the Seller's receipt back of the Fake Products, which are likely then resold to another unsuspecting eBay customer."

But eBay is in a difficult position - how does it ensure buyers who say they received a counterfeit don't destroy an authentic item in error? And how does eBay protect sellers from buyers who intentionally say they received a counterfeit item when they've actually received an authentic item? 

Back in 2009, eBay struggled with this issue. It instituted a policy instructing buyers to destroy counterfeits rather than returning them to the seller - but that left sellers completely unprotected from bad buyers.

Here's an excerpt from the original 2009 provision: "When buyers file a claim alleging that the item is not authentic, we require the buyer to destroy the item. Once a buyer confirms destruction of the item, we will reimburse the buyer or provide an eBay coupon."

And one year prior, PayPal had also been called out by sellers for its policy in which it requested buyers return counterfeit items to its partner for destruction - from our July 2008 news article:

"Why does PayPal ask buyers to send counterfeit merchandise purchased on eBay to a warehouse in Texas belonging to a liquidator? That's the question some eBay members are asking, and some are questioning whether PayPal is directing the liquidator to resell counterfeit items rather than destroying them."

eBay quickly backed away from its 2009 policy change in recognition that it had to protect sellers from buyers who reported authentic items as counterfeit whether by mistake or intentionally. 

The real issue with the current lawsuit over the Lunatik counterfeits seems to be the fact that eBay won't work with the maker - it's taking a hands-off approach. Lunatik's maker says that's in contrast to Amazon, which is working with it to try and prevent counterfeits from displaying in search results.

Let us know what your experience has been as a seller, buyer, and brand (if applicable), and if you have any advice for eBay on how to handle the problem of counterfeits and counterfeit claims.




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This user has validated their user name. by: Rexford

Sat Aug 22 08:25:30 2015

If eBay were truly "just a venue", perhaps eBay's defense would be that Wimo Labs should go after the counterfeiters.  However, eBay has their hands into every aspect of a seller's business.

Too late to cry "just a venue" eBay. You aren't.  eBay on cries "just a venue" when they are in court.

And as for seller protection...well that's just a big eBay myth.

Sellers have been reporting counterfeits to eBay for years, especially Chinese counterfeits.  eBay have done nothing. Time to fry in your own grease eBay.

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by: Donkey This user has validated their user name.

Sat Aug 22 08:28:51 2015

Good for them.

I have been reporting counterfeits for years for those Chinese fakers and ebay has done nothing.

The fakers have destroyed my ebay business.

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by: sasikat9 This user has validated their user name.

Sat Aug 22 09:21:57 2015

Maybe this Rico Lawsuit just might have the Ebay ==== in the wringer this time.

But I'm willing to bet the farm that ebay escapes without a squeeze to that ====

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by: rhawk This user has validated their user name.

Sat Aug 22 10:25:52 2015

Depends if ebay can get to the Judge.....or somebody in Obamas administration gets a hold of the judge.  There will be HEAVY pressure to get this thrown out.  Personally, I hope ebay gets taken to the cleaners.

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This user has validated their user name. by: iheartjacksparrow

Sat Aug 22 10:28:30 2015

Don't forget, eBay facilitates the Chinese counterfeiters by sending them samples of vintage items that are good sellers. Heck, eBay probably helped to create the Wimo Labs counterfeits!  

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by: maxmad This user has validated their user name.

Sat Aug 22 10:55:54 2015

This is exactly how ebay acts, they take the money for the sale, profit like they are a retailer, take full control over it's sellers, then the minute something goes wrong,

''we're only a venue''

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by: brokentoys19 This user has validated their user name.

Sat Aug 22 11:09:12 2015

People should download and read the entire court filing. Then just for fun track down the sellers named. LOL

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by: queenfloraday This user has validated their user name.

Sat Aug 22 11:57:48 2015

Didn't D Weing publicly announce that he was promoting Chinese knock offs of vintage items that were sought after such as the ''Pan-Am'' carry on bag? Makes ya wonder.....?

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by: ebay-dreckfresser This user has validated their user name.

Sat Aug 22 12:02:26 2015

   Ebay, as ''a venue'' is protected from any and all liability for the sale of counterfeits on its site under the Digital Millennium Copyright Act (DMCA), provided that ebay ''takes down'' any specific listing reported by the rights holder via a DMCA or Vero ''take down affidavit.'' In fact,  Ebay has no obligation under the DMCA to take action against counterfeits reported by ordinary buyers and sellers - and in fact ebay takes no action against counterfeiters when buyers or other sellers report them to ebay via the ''Report Item'' link in a listing.

Ebay has no obligation to independently investigate and stop counterfeiters on its site, even when reported by the rights holder, absent a DMCA ''take down'' affidavit specifying a specific listing that infringes the rights holder's copyright or trademark. Upon receipt of a DMCA or Vero take down affidavit, ebay is obligated to remove the designated listing only.

I read the Complaint prepared by the lawyers in the RICO lawsuit, and unfortunately, they base the lawsuit on various ebay policies and practices that are permissible under the DMCA, albeit unethical. The Complaint doesn't anticipate or address ebay's DMCA defense by negating ebay's ridiculous claim that it is ''just a venue.''  Those lawyers missed the primary issue and as a result they will be blindsided when ebay raises its own compliance with the DMCA as a complete defense.

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This user has validated their user name. by: iheartjacksparrow

Sat Aug 22 12:17:42 2015

@queenfloraday - Yes, it was:

http://www.ecommercebytes.com/C/abblog/blog.pl?/pl/2014/8/
1407783663.html

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This user has validated their user name. by: Ming the Merciless

Sat Aug 22 15:10:08 2015

Ebafia indeed should be sued under the RICO statutes but this filing in questionable, IMO.

Any RICO case against ebafia should also include the dozens of other policies that restrain trade, violate FTC regulations, collusion with diamond sellers, etc.

An aggregate of different illegal policies would make a much stronger RICO case, IMO.

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by: RCL This user has validated their user name.

Sat Aug 22 16:25:47 2015

The thing that intrigues me is the allegation about the algorithm. It is obvious that search results are skewed. If they get discovery, they can see what the search engine is deliberately doing. Way back when Chinese sellers would sell Buy It Now for 99 cents and 25 to 45 dollars shipping, even then eBay would DO nothing to stop those sellers. I think once someone gets a real peek inside, eBay is going to have a PR catastrophe.

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by: ajeweler This user has validated their user name.

Sat Aug 22 17:16:22 2015

about time, personally I hope they jail every single one long term, this counterfeit crap has gone way too far and the "vintage looking" or "vintage style" that as a seller by Freebay policies that are written say vintage must be 25 years old and older, antiques 100 years or more, only if you are a U.S. seller china does not have to adhere to these policies.

freebay harbors and protects these people that wrecked the collectables business and vintage

ebay is NOT "just a venue" they are partners so they should be liable as they collect percentages and tell one what ,when, were and how to list

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by: pace306 This user has validated their user name.

Sat Aug 22 21:56:41 2015

@dreck

I read it too, and as someone whos been in VERO's cross hairs and has gotten lawyers letters & more to deal with them ..... I agree with what you say ... BUT...

What you described in regards to DMCA is called "Safe Harbour". As long as eBay acts on the take down notices it recieves and acts "responsibly" to prevent copyright or trademark infringment - are they safe.

John Donohue's act of getting people to make similar items, crosses that line. Whether or not those items logos are in the public domain or the license has run out is something for the lawyers to dig up (but I doubt it).

eBay tried the "we are just a venue" routine in France and it 1/2 worked. They were STILL found liable for other claims (not RICO).

eBay, besides being part and parcel of every sale (thats not "just a venue") also facilitates the fraud and copyright/trademark violations by ignoring them. I cant agree that they have no obligation to do something when items are reported - personally I cant see that "read" in the law - but I may be wrong.

I do agree with you that eBay PRETENDS it doesnt have to and does not remove listings that are claimed to be counterfeit or copyright/trademarked from users when the "report this listing" feature is used.

Ive personally asked many times why sellers are allowed to use copyright pictures - I call and report them to senior CS agents (American ones in San Jose and Utah) and I am ignored. They say they cant/wont/dont care.

eBay only removes listings when either payed off - ala Skullcandy or sued (threat or actual suit) ala Monster.

For everything ELSE, eBay just ignores it since the money is too good to pass up.

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by: gizmo This user has validated their user name.

Sat Aug 22 22:06:02 2015

Just the word RICO , is Federal. Must be someone on the inside. Im sure as time goes on , more will come to fruition. Many charges will likely come forward , as people are questioned , or have already. And Donahue thinks he is safe , hhmmm./*&$#  
The shipping FVF has em scared , obviously. Got em on the run boys , dont let up, till one of em squeals.LOL

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by: pace306 This user has validated their user name.

Sat Aug 22 22:07:55 2015

For clarification:

eBay can STILL (and in most opinions is) liable for contributory trademark infringement.

That was decided in the second part of the case (separate case number).

The Appeals Court wrote “The more difficult issue, is whether eBay is liable of contributory trademark infringement—i.e., for culpably facilitating the infringing conduct of counterfeiting vendors.”  

If eBay was warned then they can not use DMCA Safe Harbour as a defense.

The court did make a finding that “eBay appears to concede that it knew as a general matter that counterfeit Tiffany products were listed and sold through its website"

In 2004, luxury brands Dior, Kenzo, Givenchy, Guerlain, Christian Dior Couture, and Louis Vuitton Malletier united against eBay in France and filed a suit in Paris for trademark infringement and unfair trade practice.  The owners of these famous marks argued that the goods sold by eBay were often of questionable origin, and that most high-end products were, in fact, counterfeit goods.  These retailers argued that eBay knows that a large portion of the goods are not legitimate, benefits from these sales, and has a duty much like any store owner to actively monitor goods known to be suspect.

On June 30, 2008, the Tribunal de Commerce of Paris delivered a series of decisions sanctioning eBay and awarding these brands over 40 million Euros.  Louis Vuitton received the lion’s share by collecting over 8 million euros in damages, 10 million euros in punitive damages, and 1 million euros in reparation to moral prejudice.  The court ordered eBay to publish the judgment in three nationwide newspapers, and display for three consecutive weeks the judgment on the home page of eBay.fr in both French and English. Finally, the court awarded attorney fees and costs.

In a very harsh opinion, the Court noted that eBay cannot be perceived simply as an Internet service provider or a simple computer platform used by sellers where buyers are left on their own.  Much like the famous auction house Hotel Drouot located in Paris, an online auction house has a civil responsibility under French Law for the goods it sells.  The court stated that resellers must require that frequent suppliers be registered with the commerce and trade ministry, these sellers must be listed on the union trade charters, and behaviors of sellers should be monitored to ensure only legitimate goods are sold.

The tribunal put the onus on eBay to enforce adequate measures to prevent illicit goods from entering the market.  For example, sellers could be asked to provide receipts of purchase or even certificates of authenticity. eBay could also be made to notify customers when the origin of a good appears doubtful.

As a result of this decision, on the website eBay.fr, a notice is now prominently displayed below the eBay search box that reads, “Counterfeit goods are a plague. Let’s stop it! To know more...”).


Whether any of this will be enough to "put eBay in its place" ...? only time will tell!

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This user has validated their user name. by: Rexford

Sun Aug 23 08:54:49 2015

iheartjacksparrow, that evidence is like gold to Wimo Labs. Everything from war medals to Pan Am bags. When I first read that article I was thinking "what in the he** are the doing?".

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by: Eric Saeger This user has validated their user name.

Sun Aug 23 10:58:11 2015

I love this.
If, at the very least, it inspires those jerks at eBay to keep all that Chinese trash somehow segregated from US core, I know I for one would be back in the money.

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This user has validated their user name. by: LasVagueness

Mon Aug 24 00:55:23 2015

forum.purseblog.com is replete with stories of luxury goods sold via eBay/PayPal where buyers 'claim' the item they received was counterfeit. And by luxury goods, that could mean a 10k Hermes Birkin bag. The stories are blood-curdling especially when eBay/PayPal sides with the buyer even though the seller has a receipt. Scammed sellers will go to extraordinary lengths to prove their merchandise is authentic. Some of these stories go on for a hundred pages or more and are not resolved for many months. I applaud their tenaciousness.  

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by: flybuy This user has validated their user name.

Mon Aug 24 01:28:04 2015

I am no legal eagle but have certainly seen the fakes in the designer hand bags on Ebay.  
With Ebay split from paypal, it will be more tempting for them to look the other way as long as the money is coming in.
What is funny is a lot of the new money in China want to buy goods from here and the EU. Even they do not want their own junk.  

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