Estée Lauder sues Walmart, alleging sale of counterfeits

Estee Lauder lawsuit filed Walmart A lawsuit has been filed in California federal court over allegations that the department store retailer sells counterfeit beauty products on its website and fails to do enough to ensure only authorized and genuine products are offered to consumers.

Estée Lauder said it purchased, inspected or tested a number of products sold. walmart.com Le Labo, La Mer, Clinique, Aveda, Tom Ford and Estée Lauder used trademarks but were determined to be counterfeit, according to the lawsuit filed Monday.

The products include fake versions of Estée Lauder’s Advanced Night Repair serum, Le Labo fragrance, Clinique eye cream, La Mer lotion, Aveda hairbrush and Tom Ford fragrance.

It’s unclear when Estée Lauder purchased and tested the products, but the lawsuit comes several months after CNBC published an investigation into counterfeit beauty products and fraud. walmart.com.

Two of the counterfeit products named in CNBC’s investigation (Estee Lauder Advanced Night Repair Serum and Clinique Smart Clinical Repair Wrinkle Smoothing Eye Cream) were also cited in Estée Lauder’s lawsuit. It is unclear whether the products named in the lawsuit are the same counterfeit products that CNBC provided to Estée Lauder.

Estée Lauder and Walmart did not immediately return requests for comment.

While the products are sold by third-party sellers on Walmart’s online marketplace, Estée Lauder said the company plays an active role in facilitating those sales to shoppers. The former beauty company called Walmart’s behavior “excessive, outrageous, dishonest… despicable and harmful.”

Counterfeit products were promoted and advertised to shoppers on the platform, Estee Lauder’s trademarks were used in search engine optimization tools to drive traffic to listings, and Walmart profited from the sales, the complaint said.

Additionally, the complaint states that “a Walmart.com shopper would reasonably believe that the seller of the product is Walmart and not third-party sellers,” which could cause confusion among shoppers.

At the center of CNBC’s investigation into Walmart’s online marketplace were the steps the company took, or did not take, to vet its third-party sellers and the products they offer to prevent fraud and counterfeit sales on the platform.

Estée Lauder said in its complaint that Walmart supports the “reputation and professionalism” of sellers allowed to operate on the platform, but that the retailer actually “does little to ensure that only authorized and genuine products are offered for sale.”

“This situation is clearly [counterfeits] The complaint states that sales were permitted on Defendants’ website despite their stated careful selection process for who they selected as their Marketplace seller/partner. Accordingly, Defendants knew or had reason to know that the vendors with whom they partnered were ‘regularly inspecting.[ed]’ She was selling products that violated the Estée Lauder Trademarks.”

Walmart’s online marketplace has become a key part of its strategy to grow profits faster than sales and better compete against its longtime rival. Amazon. The online platform’s rapid growth helped Walmart soar to a $1 trillion market cap last week, catapulting it into an exclusive club comprised almost entirely of tech companies.

However, CNBC’s research revealed that the strategy also brings risks. Offering counterfeit, potentially dangerous products to shoppers through third-party sellers in the marketplace exposes Walmart to liability and could undermine the customer trust that is at the core of its brand.

Since a court decision in 2010 Tiffany sues eBay With fake products on the platform, it can be difficult for brands to hold platforms accountable for their role in selling counterfeit goods. Experts have previously told CNBC that they sometimes avoid lawsuits unless there is extreme or blatant behavior.

A bipartisan shopping mall Safe Shop Act federal bill Aiming to prevent the sale of counterfeit products on online marketplaces, the platform promotes better veterinary sellers and the products they offer, following Tiffany v. It was designed to address some of the issues raised by the eBay decision. When platforms comply with certain anti-counterfeiting measures, they can avoid liability if the seller offers a fake product.

Brands have widely supported the legislation, but it has failed to pass at least three times so far. That’s partly because Walmart and other online marketplaces such as Amazon, Etsy and eBay have lobbied against the issue, two U.S. Senate aides, who spoke on condition of anonymity because the discussions are private, previously told CNBC.