eBay Loses Counterfeit Suit (Update)

Up until now, it has been luxury retailers who have taken eBay to task. Earlier this month, the company was fined 20,000 euros, or about $32,000, in damages to French luxury brand Hermes. Tiffany(TIF Quote - Cramer on TIF - Stock Picks) also has filed a similar suit against the company.

But Lindsay points out that counterfeits are not limited to just luxury goods, and the whole site could now be vulnerable.

"Unless they can solve this very quickly, it's an issue that can come back over and over," he says.

Indeed, the cost to monitor counterfeits across all categories could prove astronomical for eBay given the millions of items on the site. And unlike rival Amazon(AMZN Quote - Cramer on AMZN - Stock Picks), where 70% of its products come directly through the company, all of eBay's products come through outside sellers, making it much more difficult to police.

Lindsay notes that Google(GOOG Quote - Cramer on GOOG - Stock Picks) has run into similar problems with monitoring content on its online video site, YouTube. Last year, Viacom(VIA Quote - Cramer on VIA - Stock Picks) sued the company for $1 billion, accusing it of allowing users to post more than 160,000 unauthorized clips on the site. The case is still pending.

For the most part, eBay has left buyers and sellers to work out their differences, but now the company may be forced to intervene. Already, it has started to take steps in that direction by introducing a new ranking system that determines what order sellers are listed in the search results based on buyer feedback.

Shares of eBay were recently down 52 cents to $27.09.

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