Suit Could Change Way eBay Does Business

Discussion
Feb 02, 2006
George Anderson

By George Anderson


A suit brought by Tiffany & Co. against eBay alleging it failed to take adequate steps to ensure counterfeit goods were not sold on its site could have profound impact on how the online marketplace conducts business if the jeweler wins the case.


Joseph Berghammer, an intellectual property attorney with the firm of Banner & Witcoff Ltd., told TechWeb News, “If Tiffany wins, this is a ground-breaking case. It changes the electronic marketplace. EBay would no longer just provide a tent, it would also have to provide police.”


Tiffany claims that in 2003 and 2004 it got eBay to remove more than 19,000 counterfeit items being passed off as its own.


Ebay argues that it cannot be held responsible for every item being auctioned through its site.


Ina Steiner, editor and publisher of AuctionBytes.com, said it’s possible that, even if the court does not side with Tiffany, major changes may be coming eBay’s way through new legislation enacted by lawmakers.


“It really may come down to lawmakers getting involved if consumers feel they are not being protected in the marketplace,” he said. “Ebay may have regulation thrust upon them.”


EBay spokesperson Hani Durzy said the company continues to cooperate with Tiffany but, ultimately, it is the responsibility of brand manufacturers to protect their trademarks. “(The trademark) owners are the only ones who can truly understand who owns the rights, and what is fake and what is real,” Durzy said.


James Swire, lead attorney for Tiffany and a partner in the law firm Arnold & Porter, said eBay is looking to have its cake and eat it, too.


He argues that eBay advertised the availability of Tiffany items on its home page and sponsored links on search engine web sites. Many of the items eBay was promoting turned out to be fakes.


Mr. Swire argues that about three out of every four products identified as a Tiffany item on eBay are fakes and that the auction site is aware of this but has not stepped in to address the fraudulent behavior.


Moderator’s Comment: Should online auction sites be responsible for the goods sold through their service? What would a Tiffany victory in court mean
for eBay and other similar sites serving consumer and business markets?

George Anderson – Moderator

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20 Comments on "Suit Could Change Way eBay Does Business"


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Mark Lilien
Guest
15 years 1 month ago

As far as legislation is concerned, it would be a battle between the lobbyists for the brands versus the millions who love eBay and eBay’s lobbyists. If eBay was more careful, they could emphasize that any brand names used would have to be proven or guaranteed by the seller. EBay’s largest business is used cars, and they’ve artfully addressed the trust issues in that category very well. Given that accomplishment, it’s likely they can address the counterfeiting and misrepresentation issues too. And we should all take a moment to acknowledge the skill of Tiffany’s publicity strategy.

Gregory Saylor
Guest
Gregory Saylor
15 years 1 month ago

It would be the end of eBay as we know it. The issue of authenticity is between the buyer and seller as it is in all Flea Markets.

Race Cowgill
Guest
Race Cowgill
15 years 1 month ago
I very much agree with a number of you, and I see something in every post that makes a lot of sense. Yeah, sorry to admit I’ve been ripped off via eBay as well. So I can very well understand the ire on buyers’ parts, and on Tiffany’s. Good question! — Is eBay a retailer? Do they resell products they purchase? Not really. They seem to be more like classified ads in the newspapers. But I agree with many of you: eBay does not seem to do such a good job of preventing and punishing fraud. Like so many large internet businesses, they are almost impossible to reach for rapid response, as in being able to phone them somehow. They have seemingly bought into the “do it all online” mentality that many internet companies have adopted. I obviously am no attorney, and I know so little about the complexities and ramifications of the issues involved, I hesitate to say what I am about to: I hope the Tiffany’s suit is NOT judged against eBay. On… Read more »
Craig Sundstrom
Guest
15 years 1 month ago

I’ve racked up 400 eBay purchases from more than a dozen countries, and the number of bad – or even marginal – sales I can count on one hand. But I also buy along narrow product lines, at low prices, and usually have as-good-as-or-better knowledge of what I’m buying than the seller; change any one of these variables, and the story could well be different.

The issue here, of course, is whether or not eBay (and its brethren) take “reasonable” steps to prevent fraud. Obviously that’s a subjective question, and the answer changes daily w/advances in technology, but all you Darwinists out there who think the issue can be solved – and your high school Latin put to use – by shouting “caveat emptor” are simply being unrealistic: no business can, ever has, or ever will succeed in disavowing what happens under its roof…and the fact that this is an e-business does not change that.

John Lert
Guest
John Lert
15 years 1 month ago
I’m disappointed by the extent of bias in favor of eBay in these comments. Granted, it may be impossible to “screen everything,” but once eBay was fully aware that a thriving trade in counterfeit Tiffany merchandise is being conducted through its web site, for it to take the attitude that it simply can’t do anything about it (except collect the fees from the sale, of course) begins to border on aiding and abetting the crime. From having used eBay extensively, I feel strongly that their business policies give the seller in each transaction much more power than the buyer and literally invites fraud and irresponsible behavior. I would like to propose a Silver Bullet solution, though — one simple policy that eBay could institute that would go a long way to solving the problem and making the site a much more balanced marketplace. Let every buyer in an auction with a selling price above $50 have the unliateral right to require the use of an escrow service on the transaction, at buyer’s expense. While such… Read more »
Jeff Weitzman
Guest
Jeff Weitzman
15 years 1 month ago

This is not an all-or-nothing issue. It may be unwise to hold eBay liable for everything sold on its site, but there is a lot of ground in between that and their having no liability. What about when eBay features an item on its home page? That confers legitimacy based on eBay’s “endorsement.” Shouldn’t eBay have some responsibility to ensure that it is touting legal items? What about the fees derived from fake items? EBay may not be liable for the damages caused by counterfeits, but should they profit from it? Should a pawn shop owner not be liable to some extent for trafficking in stolen goods?

Like most legal issues, these are not easy to untangle.

Ed Dennis
Guest
Ed Dennis
15 years 1 month ago
EBay is a very successful business model. The problem arises when they police their site – and they do. I have seen auctions suspended when fraud was suspected. EBay does police their site, they just do a poor job. In some cases they will ignore reported fraud or get around to checking the item days after the auction has ended. Give us all a break and get off some of the billions you are making and write a program that screens any reported branded product that lend themselves to fraud (Rolex, Tiffany, LV, Hermes, etc.). Any suspect item advertising itself as new or like new should be screened. All items coming out of the Far East or Eastern Europe should be screened. Any large auction operation (Power Sellers) should be screened. EBay can solve this problem – it just requires their attention. A lawsuit shouldn’t be necessary to get someone to do the right thing. If a lawsuit is necessary then eBay should be held responsible for every crooked or deceptive auction completed via their… Read more »
Tom McGoldrick
Guest
Tom McGoldrick
15 years 1 month ago

It is up to the companies to protect their brands. EBay is more similar to a city than a distributor. They provide the space and infrastructure and promote the community, but no guarantees. If a business opens up in a city selling counterfeit merchandise the city police will shut it down, but the city is not liable. EBay does some of its own police work and will shut down criminals but cannot be held liable.

It would be like suing New York for the fake Rolexes sold on the street corner.

Always remember, WWW stands for Wild Wild West.

Ryan Mathews
Guest
15 years 1 month ago

I think the Romans had it right — “Caveat Emptor.” If you want to make sure you’re buying Tiffany, you ought to buy directly from Tiffany. That said, Tiffany is absolutely correct in vigorously pursuing trademark protection.

Bernice Hurst
Guest
15 years 1 month ago

I never cease to be amazed by eBay’s success and the huge number of people who take the transactions on trust. Obviously the vast majority are legitimate but it is definitely risky and therefore up to the buyer to decide how much risk is too much. That said, I do not think that either eBay or any other retailer should be able to abdicate responsibility. There are just too many loopholes in businesses’ favour that leaves suppliers and customers up the proverbial creek without a paddle.

David Livingston
Guest
15 years 1 month ago

EBay should not be responsible. They are only connecting buyer with seller. Let the buyer beware. Unfortunately a lot of people are not willing to accept the blame when they get scammed. A quick glance at the member’s feedback rating and years of being a member of eBay is typically all one needs to evaluate the buyers and sellers.

Kai Clarke
Guest
15 years 1 month ago

Auctions have been selling products on an “as is” basis for years. Tiffany is out of bounds here. So long as eBay has a disclaimer (and it does) stipulating that it cannot be held responsible for the authenticity of every item sold on its website, then it should not be responsible for these. Tiffany is asking auctioneers to guarantee authenticity of its products in an aftermarket. This is an absurd position and Tiffany’s lawyers know this. EBay is an auction site. Since it does not purchase or gain possession of any of these products, it cannot be held as the purveyor of the goods. Combine this with their stated warnings on the validity of goods and this lawsuit will certainly be dismissed, as it should.

Paula Rosenblum
Guest
15 years 1 month ago

I believe eBay SHOULD be responsible to make sure the items sold are not counterfeit. The “grey market” is one thing, and heaven knows many retailers sell shoes and clothes and other merchandise purchased from diverters, but outright counterfeit? It is most definitely the responsibility of a retailer to confirm the validity of their products.

I suppose the next question is: What is eBay, really? A retailer, a distributor or a community? I say it’s a cross between a retailer and a distributor, and most assuredly needs to accept responsibility for this problem.

The other issue: counterfeiting is bad for eBay’s business. I’ve got a bogus bottle of name brand shampoo that cost me over $90 (the whole reason I bought on eBay in the first place). It’s the last time I will buy something like that there. They lost me. They’ll lose others.

Camille P. Schuster, PhD.
Guest
15 years 1 month ago

This will be an interesting suit to follow. EBay does do screening as to the credibility of people buying and selling based upon whether they actually send the items and pay their bills. Being challenged on the authenticity of an item is a new twist. If they are held responsible for that, then the way is clear to sue any retailer selling any item that is a knock-off.

Art Williams
Guest
Art Williams
15 years 1 month ago

I find it difficult to see how eBay could effectively pre-screen everything to determine if it was a fake or not. I do think that they should take a very strong position against anyone caught in fraudulent behavior. They need to take a stand that they will not condone or tolerate deliberate misrepresentation of items sold on eBay. It’s important that they come across as part of the solution and not part of the problem, in my view.

Mark Hunter
Guest
Mark Hunter
15 years 1 month ago

This has significant implications, not just for eBay and other internet sites but also for traditional retailers. If Tiffany is successful with eBay then you could argue a commercial property owner would also be responsible for ensuring everything being sold by the retailer they lease space to is legit. The cost to monitor this activity could quickly get out of control. A possible defense people may use could come out of the “lemon laws” passed in most states to protect buyers of new and used cars. Result of many of these laws has been for the seller to offer the buyer an “as is warranty” exempting the seller from any liability. This same strategy could be what eBay and others have to put in place, should Tiffany win.

Peter Fader
Guest
15 years 1 month ago

This is very similar to the charges (and defense) raised in the Napster trial from a few years back. Next thing you know, Tiffany will be suing the people who are buying and selling the items in question….

Nanda Rajanala
Guest
Nanda Rajanala
15 years 1 month ago

EBay should be accountable to its buyers for the goods it sells and the credentials of its suppliers too. EBay customer support has not been responsive to this in my own personal experience. If the company wants to be a mere facilitator for buyers and sellers, it does not justify the huge amounts of money this company is making.

Deborah Thompson
Guest
Deborah Thompson
15 years 1 month ago

How can eBay be responsible for the hundreds of thousands — perhaps millions — of items up for sale? It’s impossible. Each transaction is between seller and buyer. If you’re buying, better make sure the seller is reputable. That’s what feedback is for. Read it!

Ed Dennis
Guest
Ed Dennis
15 years 1 month ago

Sorry, but I have to weigh in with a comment to those of you who utilize the word impossible to describe the task of policing items sold on eBay. With 100% certainty – OK maybe you are right BUT eBay can certainly make a better effort. Software can be created to screen much of the “high end branded merchandise”, rules can be put in place which would not allow for a Rolex watch to be auctioned at a starting price of less than 50% of it’s value. Standards can be applied at the time an item is listed and this can be handled via software. You might even place limits on what an individual could auction until their feedback score exceeds 100 (pick a number). There are issues that can be addressed and should be addressed, eBay will benefit from increased confidence in their service. Those who won’t buy on eBay now might if they had more confidence in the service and less fear of getting ripped off.

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