eBay Ups the Ante With New Authentication Service Aimed at Fighting Fakes

In light of the rising luxury resale market and consumers’ lack of confidence in buying second hand luxury goods online (due to the saturation of the market with counterfeit goods), eBay Inc. will begin authenticating luxury handbags, footwear and other commonly counterfeited luxury goods this year as a means of distinguishing itself from similarly situated online marketplaces.

The American multinational e-commerce company has said that it will use a network of brand experts to verify the authenticity of goods being offered for sale on its site and that sellers will be able to “pay for the authentication service to win the confidence of shoppers, or shoppers can pay for the service with eBay’s pledge that the sale will be nullified if the item is fake.”

According to Bloomberg, “eBay is following in the footsteps of online luxury consignment startup The RealReal Inc. in San Francisco, which authenticates items and said it sold almost $400 million in second-hand designer apparel, handbags, jewelry and other merchandise in 2016, about double the previous year’s sales. Authentication works best with items priced high enough to pay an expert, hence the focus on luxury.”

This new service will almost certainly give eBay a leg up when it comes to its most direct competitors, such as Amazon and Alibaba, both of which have been hit repeatedly in recent months with claims tied to the existence of widespread counterfeits on their platforms.

Alibaba’s TaoBao platform, for instance, was just re-added to the Office of the United States Trade Representative 2016 “Special 301” Out-of-Cycle Review of Notorious Markets report. An annual blacklist of sorts, the Special 301 details which entities are most egregiously abusing the intellectual property rights of others on a worldwide basis, and Alibaba’s TaoBao was highlighted as particularly problematic this year. According to the report, "The Taobao.com e-commerce platform is an important concern due to the large volume of allegedly counterfeit and pirated goods available and the challenges right holders experience in removing and preventing illicit sales and offers of such goods."

Amazon has similarly come under fire in the past year, in particular. In July, Birkenstock announced that it would cut ties with Amazon.com due to the influx of counterfeits and unauthorized selling on the online shopping site. As a result, the sandals company will no longer supply products to Amazon in the U.S. beginning January 1, 2017. Birkenstock also noted in a letter to the U.S. online giant that it will no longer authorize third-party merchants to sell on the site, either.

Similarly, the widespread sale of counterfeit National Football League merchandise led the league to ban the sale of its licensed goods on eBay, Amazon, and other third-party marketplaces effective April 1, 2016. 

And that is not all. When asked about whether it would ever consider making its goods available on Amazon, luxury goods group LVMH Moët Hennessy Louis Vuitton said “no way” in October, even though the Internet retailer is keen to take on more high-end brands. LVMH - parent to Louis Vuitton, Givenchy, Celine, and Marc Jacobs - said it did not think it was an appropriate platform for its luxury brands, a move that we can certainly assume is due, at least in part, to the proliferation of fakes on the site.

While all of these sites seems to talk a big game about their efforts to fight counterfeit goods, the existence of fakes on these platforms is a complex issue to tackle. For instance, Amazon has long had a report/removal option as part of its site, but the onus is on brand owners, as the trademark holders, to do the reporting. Given the truly huge number of listings on Amazon, that can prove to be a tedious endeavor for brand owners. Moreover, even if they partake in the reporting/removal process and allegedly infringing items/accounts are removed, new ones will inevitably pop up shortly thereafter. This is the reality of the situation when it comes to fighting fakes on the internet. 

As for these sites’ actual legal responsibility, the trademark infringement case that Tiffany filed against eBay in 2010 (for contributory liability) provides quite a bit of guidance. Tiffany alleged that upwards of 70% of the Tiffany goods sold on eBay - by third party sellers - were counterfeit and that eBay had a responsibility to police its website to prevent the sale of counterfeit Tiffany goods. The Second Circuit Court of Appeals held that eBay was not liable for trademark infringement because eBay had an “effective" program - VeRo - to remove the listings of counterfeit goods upon request by the brand owner and because eBay’s boasted a subsequent "prompt takedown procedure.” As a result of this case, as long as Amazon – or one of these similarly situated sites – can show that it has an effective program in place, it has a lot of leeway. 

With that in mind, eBay is taking an interesting step to up the ante for consumers given the state of online marketplaces. While giants like Amazon and Alibaba may be content to lose certain brands due to frustration, it seems eBay has set its sights on a more proactive approach. If users take advantage of the new authentication services, and it proves successful, eBay may just see an influx of users and sellers wooed to make it their first choice marketplace for used luxury goods.