Etsy criticized as sales platform for counterfeits

A new report accuses online marketplace Etsy of being one of the largest sales platforms for counterfeit products in the world. Subsequently, shares of the e-commerce company, which is above all known as a provider of craft goods, rapidly lost in value.

A report by the investment firm Citron Research depicts the online marketplace Etsy as an important distribution channel for counterfeits. According to the Citron Research note published in February, Etsy’s management had knowingly or at least negligently allowed the sale of suspected counterfeits on its platform. The share of counterfeit goods traded on Etsy had now become too large to continue to be defended as minor, Citron said.

According to Citron, illegal trade on Etsy was further facilitated as sellers on the marketplace could use protected brand names as keywords for paid ads (so-called “ad words”) – and that often, they would then even be labeled by Etsy as trustworthy sellers. The Citron report highlights brands such as Rolex, Disney, and Nike as examples. Citron also stated it believed that Etsy might face actions from US authorities in the future, such as the Federal Trade Commission (FTC) or the US Customs and Border Protection (CBP).

Citron Research is known in the industry as an investment firm highlighting companies that are allegedly underperforming and then betting against their stocks. Shortly after the allegations against Etsy became known, the shares of the online marketplace lost about 8.4% in value.

Etsy stressed that it was expressly forbidden to sell counterfeit products on the platform. In addition, Etsy claimed to have strengthened its own anti-counterfeiting measures and to remove listings that violate its policies. For the online marketplace, however, this is not the first time it has come under scrutiny for alleged involvement in counterfeiting. Back in 2015, a report by the investment firm Wedbush noted that around five percent of all goods traded on Etsy were potentially counterfeit or infringed IP rights. This would correspond to around two million articles. “Etsy has become a go-to destination for counterfeits,” a Wedbush note said at the time. According to that, a sample of heavily affected listings also showed that it was in some cases more likely to come across a counterfeit item on Etsy than on eBay or the Alibaba Group’s AliExpress platform.

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