In response to my negative post about the recent French Court's decision to penalize eBay for the sale of counterfeit and genuine
goods one reader took issue with my comments. He challenged my comment that eBay was making real efforts to stop the sale of counterfeit goods. He reminded me that eBay makes a profit on the sale of the counterfeit goods. And he suggested that I was referring to an earlier decision involving Yahoo! when I referred to already existing limits on the sale of Nazi goods.
Since the issue of eBay's business model is so important I am responding to this reader. But because other facts have come to my attention I will also use this occasion to criticize eBay.
How much does eBay really try to stop counterfeiters? They spend over $20 million dollars each year finding and removing bogus goods. Over 2,000 employees are involved in ferreting out and removing improper goods. On a personal note I was part of a trademark enforcement team that worked with eBay to stop the sale of bogus goods. I always found them to be incredibly cooperative. In fact there were times when I wondered if eBay was almost too willing to side with a brand owner against a vendor.
As is often the case when rights collide, the real question is who must bear the largest share of the risk? In the early days of any new economic engine- whether it be an industrial engine or a post industrial engine- those fueling the engine cannot bear the risk- otherwise the economic engine will sputter and die.
Some estimate that over 60 billion dollars of goods crossed the Ebay platforms last year. If every brand owner holds eBay to the standards set by the French court one can ask: how does their business model survive? Put differently: do we want to preserve a marketplace with limitless choice, lowest market prices, essentially driven by consumers but with a certain degree of risk? Or do we want a marketplace controlled by manufacturers, with limited choice, price controls, very high profit margins and lower risk?
Most of the world has already cast its vote. And the French have lost. Note that the European Union is considering regulations to promote e-commerce in response to restrictive national trade practices.
Yes eBay makes a profit on the sale of counterfeit goods. But I am certain that they would gladly turn over all such profits to brand owners who could demonstrate that such sales were improper.
It is important to remember that the problem of counterfeit goods did not begin with eBay-it is a problem that has plagued luxury goods makers- because their own business model is so vulnerable.
As for the reference to Yahoo! The reader is half right. I was thinking of the Yahoo! decision involving Nazi goods. But it turns out that eBay has apparently self censored itself in response to that decision.
Now then to my criticism of eBay. Ebay owns PayPal, an online payment platform that makes paying for goods won at auction easy and fast. For the consumer. But eBay charges vendors a fee to use PayPal. So vendors can choose to offer PayPal or use Visa, MasterCard etc. Except in Australia. Apparently eBay is attempting to force all vendors in Australia to ONLY use PayPal as the means to pay for goods. Sounds like eBay is trying to create the market in Australia that they are complaining about in France.