eBay dealt big blow on counterfeit pill-related charges

Officials say this is the first settlement of its kind with an e-commerce company.

Feb 1, 2024 - 08:30

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eBay dealt big blow on counterfeit pill-related charges

eBay (EBAY) - Get Free Report might want to think about rebooting 2024.

The first month of the year has proven to be a bit costly for the online retailer.

Earlier this month eBay agreed to pay a $3 million fine related to a personal vendetta some of its former executives and employees waged against a Massachusetts couple that had been critical of the company.

The U.S. Department of Justice charged the company with stalking, witness tampering, and obstruction of justice as part of a "harassment and intimidation campaign" that targeted David and Ina Steiner, who had criticized eBay’s business practices in their EcommerceBytes newsletter.

The harassment took the form of anonymous deliveries of such items as a book on surviving the death of a spouse, a bloody pig mask, a fetal pig, a funeral wreath, and live insects.

The company also sent the couple private messages using sock puppet accounts on Twitter threatening to visit the victims’ home—which eventually happened, as the harassers sent people to surveil the couple's home and put a GPS tracking device on their car.

Some eBay executives were fined and sentenced to jail time for their role in the harassment campaign, which dates back to 2019, and then-CEO, Devin Wenig, who stepped down.

Not good? Well, it gets worse.

Pill presses sold on eBay

eBay apologized, and current CEO Jamie Iannone said, "Since these events occurred, new leaders have joined the company, and eBay has strengthened its policies, procedures, controls, and training.”

Okay, that’s been cleared up, and we can all move on, right?

Well, maybe not.

It seems the Justice Department has another, much larger bone to pick with the San Jose, Calif. company.

Justice officials said on Jan. 31 that eBay agreed to pay $59 million and enhance its compliance program to settle charges that violated the Controlled Substances Act in connection with thousands of pill presses and encapsulating machines sold through its website.

Government officials said this was the fourth-largest CSA settlement in history and the first such settlement with an e-commerce company.

Pill presses and encapsulating machines can be used by criminals to manufacture illegal drugs, the DOJ said.

The CSA regulates certain pharmaceutical manufacturing equipment, including pill presses and encapsulating machines, by requiring identity verification of purchasers, record-keeping, and reporting to the Drug Enforcement Administration.

When used with a mold, stamp, or die mimicking commonly prescribed controlled substances, pill presses are capable of producing counterfeit pills that appear indistinguishable from legitimate pharmaceutical drugs, including pills that are sometimes laced with fentanyl.

Justice officials alleged that eBay did not comply with CSA requirements for thousands of pill presses and encapsulating machines that were sold through its website, including high-capacity pill presses capable of producing thousands of pills per hour.

eBay says 'it acted lawfully'

“Through its website, eBay made it easy for individuals across the country to obtain the type of dangerous machines that are often used to make counterfeit pills,” U.S. Attorney Nikolas P. Kerest for the District of Vermont said in a statement.

“Our investigation revealed that some of these machines were even sold to individuals who were later convicted of drug-related crimes," Kerest added.

eBay also agreed to maintain and enhance its compliance program regarding its prohibited and restricted items policy regarding sales of pill presses, counterfeit molds, stamps, dies, and encapsulating machines.

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The company said in a statement that it is "proud of its well-recognized, proactive, and voluntary efforts to remove the products that were the subject of the government’s inquiry from our marketplace."

"While eBay acted lawfully and denies the DOJ’s allegations, we determined that this agreement is in the best interest of the company and its shareholders as it avoids the costs, uncertainty, and distraction associated with protracted litigation," the company said.

In addition, eBay said its actions to remove products that could be used for counterfeit pills "prior to any request from the DOJ or other authorities, and years before the government turned its attention to these products, prevented tens of thousands of potentially problematic listings from appearing on our marketplace."

"Government officials have repeatedly commended eBay for our partnership with law enforcement and efforts to support investigations into illegal pill press usage," added the company.

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