Auction Blocks: Criminals Unload Counterfeit and Stolen Goods on eBay

Criminals use online auctions as a place to unload stolen, diverted and counterfeit products. EBay does little to stop them, creating more work for CSOs. Here's what smart companies do.

The group of retailers scored its first victory when eBay put a $500 cap on any gift card offered for sale at the site, and barred any single seller from offering more than $500 worth of gift cards in one week. (This also helped with another common scam: the sale of gift cards purchased with stolen credit cards.)

One day in June, CSO found more than $11,000 worth of Macy's gift cards being offered by one seller alone. (The seller was later shut down. eBay's Durzy says the company has a group of people who monitor auctions for banned items, but that "there's always going to be a lag time.") So the program isn't perfect. But it's a vast improvement, Jones says. "We still see times where eBay misses stuff, but the problem is about half of what it used to be. Although they've taken longer than we like, we're really starting to see some payback with the partnership with eBay."

Brand owners can report sales of banned products, such as high-dollar gift cards, using a standard listing violation form available to anyone on the site. They also can report counterfeit and pirated goods through an eBay program known as VeRO, for verified rights owner. Companies say that eBay has streamlined the VeRO process and become adept at shutting down reported auctions that involve counterfeit goods or items that are not allowed on the site.

At World Wrestling Entertainment, Stacy Papachristos, an associate counsel for intellectual property, takes a typical approach. Papachristos identifies hundreds of copyright infringements on eBay every weekoften a recording of a pay-per-view event that WWE has not yet released on video, or a T-shirt that she knows is not authorized because it shows a WWE performer wearing someone else's logo.

"[EBay is] making it easy for us to shut down the auctions," says Papachristos. She opens the infringing auction in her Web browser and clicks a button that says "report," smacking down the auction by the next day. "They don't ask us any questions. If for some reason I happen to shut down [an auction] that's legitimate, the person can file an appeal, which hasn't happened."

Papachristos also sends a cease-and-desist letter to the eBay seller, threatening legal action if the person does not stop selling counterfeit goods and reimburse WWE for past sales. (EBay's privacy policy states that it releases seller names and addresses, as well as other personal information, to VeRO participants; a subpoena is required for more detailed information, including Social Security number, financial information and the IP address of the seller's computer.) She won't say how much money she gets in a typical month, but she indicates that it makes the two days a week she spends on the project worth the company's while.