Persistent “brand fake” suits will kill litigants’ secondary markets

eBay has been successfully sued by Louis Vuitton & Company over brand fakes being sold on the site. eBay may have lost this case because the courts are unable to discern between platforms and the users of said platforms, but there’s a bigger issue at hand. eBay maintains that the companies suing them are more concerned with controlling their respective markets:

“If counterfeits appear on our site, we take them down swiftly,” eBay spokeswoman Sravanthi Agrawal said. “But today’s ruling is not about counterfeits. Today’s ruling is about an attempt by LVMH to protect uncompetitive commercial practices at the expense of consumer choice and the livelihood of law-abiding sellers that eBay empowers every day.”

I’m inclined to agree – everyone wishes they were DeBeers, but the way eBay is spins this could make one think they are the sole victim here. In actuality, I think that these litigants are inadvertently killing their own market with their efforts.

The luxury goods set, the primary targets here, rely on consistent turnover of their product to maintain their appeal. Each year new designs come out, and are paraded across magazines – the affluent, early adopters (the core customer base) are first to grab the goods. But these “must have now” industries don’t rely solely on the top tax bracket – if they did they wouldn’t bother advertising – instead they would rely on the word of mouth circling elite cocktail parties. No, there is a secondary market that wants to be like the elite, and their avenue for “upper-crustship” is simply looking the part. These wannabes can’t really afford draping the latest LV bag over their arm each and every season, but they mortgage themselves to the hilt to do so anyway.

And when the extraordinarily overpriced item shows up on the credit card bill, they pass on last season’s via any means they can to get that bill paid – one of those means just so happens to be an internet site called eBay. eBay is marketplace, and marketplaces provide liquidity – all Louis Vuitton and the rest of their ilk are doing when they sue eBay is reducing that liquidity. It’s no different than if the SEC, the NASD, and the Fortune 1000 got together and declared that secondary stock sales could no longer be executed via an online brokerage account – their shares would plummet thereafter.

I suspect the volume of brand-named handbags being hucked will start doing the same fairly soon.

UPDATE: Ditto.