Facebook Accused of Counterfeit Ad Scheme

26 October 2012 Internet, IT & e-Discovery Blog Blog
Authors: Peter Vogel

A class action suit filed in New Mexico alleges Facebook violates unfair competition laws by promoting the sale of counterfeit goods from China which are purportedly officially licensed by the National Football League (NFL). On October 22, 2012 Inkies Sports, Inc (dba Krystal’s NFL Shoppe) sued Facebook, Adsage, DHgate, and Doe Defendants 1-100 in US District Court in Albuquerque, New Mexico on behalf of retailers and wholesalers of officially licensed NFL apparel. These counterfeit ads encourage consumers to believe “that they can order a genuine, NFL licensed jersey for $22, as opposed to the MSRP (Manufacturer’s Suggested Retail Price) of $100 to $300.”

Krystal’s Complaint includes these allegations:

  • Ad for counterfeit goods are regularly displayed on Krystal’s Facebook page, leading even loyal customers to question whether these ads are supported, or even sponsored by Krystal’s.
  • Indeed Krystal’s has received numerous comments and complaints from its customers regarding the advertisements, with consumers relating that because the advertisement was on Krystal’s Facebook page, they were led to believe that Krystal’s was somehow responsible for, or in league with, the counterfeiters.
  • As such, Krystal’s has inadvertently been placed in the untenable position of actually lending credence to the counterfeit ads, by virtue of Facebook’s display of those advertisements on Krystal’s page.
  • Krystal’s has lodged public and private complaints with Facebook, but has received no meaningful reply or response.

Facebook’s need to generate ad revenue should not encourage counterfeiters, but based on Krystal’s lawsuit one would conclude otherwise.

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