Is Suing eBay the Best Way to Fight Counterfeiting?
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This week’s court judgment against eBay made me wonder how far the problem of fake merchandise has gone and what can be done about it.
One thing that can be done is, of course, what luxury goods producer LVMH did this week: punish the people who are facilitating the sale of the knock-offs. Internet auction site eBay certainly is such a facilitator, even if an unintentional one. I can attest to it personally, having bought a piece of sterling silver jewelry from one of its sellers not long ago. While I didn’t intend to buy a luxury good in the first place (it was intended for my 9 year old daughter!), and paid very little for it, to my surprise it arrived in a box and bag clearly labeled Tiffany & Co. But that distinctive robin’s egg blue was a touch lurid, and the printing of the logotype a bit slapdash. I could only surmise that the packaging came from a press run rejected by the people selling the Tiffany fakes. (That would make my purchase, I guess, a fake fake.)
In the wake of the $63 million judgment against it, it’s fair to assume that eBay will try harder to kick the counterfeiters out – but it clearly isn’t easy. The company already has 2,000 employees fighting that battle every day. So what can you do beyond penalizing the middlemen? You can head upstream and nail the fakers themselves – or head downstream and punish the knowing buyers. Every major luxury brand is fighting on all three fronts.
But it’s not only the luxury goods industry feeling the pain these days. Electronic commerce has made supply chains so efficient and transactions so faceless that any brand that commands a price premium is a target. As Michael Kessler, head of the investigation business that bears his name, put it: “these people will sell whatever will make a buck.” But compared to the luxury goods makers, few companies have the resources to go after the thieves who are capitalizing on their good name. As the costs rise, they have to decide how much is too much to spend on combating counterfeiting.
What's your experience with fake merchandise? And what do you think is the most effective way to fight the fakes?
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A regular dispatch from the front lines of management by the editorial team at the Harvard Business Review. 
Comments
Hi Julia,
you definitely raise a good point here. I personally would argue that eBay might be able to govern their site at least a bit better than they do today. But in my eyes the result from this whole law suit is not about the fine which was imposed on eBay - far from it.
What most commentators seem to miss is the fine point that the court in France ruled that eBay must ban all sales of certain perfume brands from its marketplace. This is remarkable - the court effectively cut my rights as a consumer (and legitimate business) to sell wares which I lawfully posses. I blogged about this a few days ago (http://www.finette.co.uk/blog/index.php/2008/06/french-court-sucks-blood-out-of-ebay-and-open-markets/) - the ruling results in the bizarre situation that you, as a consumer who received a perfume from one of the LVMH brands are not allowed to sell it on eBay if you for example don't like it. Now imagine what it would mean to the world of commerce if this law suits will be replicated across other categories, brands and geographies.
This - for me - is the really interesting issue at hand. Not if eBay should hire 500 more people or deploy better software filters to govern their site.
- Posted by Pascal Finette
July 4, 2008 11:47 AM
I propose an indirect method of confrontation, on lines of "If you can't beat them, join them."
It's clear that the two customer segments are different, though with some products there might be some areas of overlap. In that case, the "fakes" can be seen as a product line at a lower price band, for customers who would mostly never buy the real, and much more expensive product.
Why don't the luxury brands acquire some of the good fakers and make them legit.? I understand, we will have to deal with issues of brand dilution, and for that point alone, most luxury brands, if not all, would be averse to try out this area.
But this is a very lucrative market, and instead of spending millions fighting it, shouldn't we be thinking how to make money out of it?
- Posted by Vivek Sonny Abraham
July 23, 2008 8:09 AM