Etsy shares hit by counterfeit claim by short seller Citron

Citron Research, a research group formerly headed by notorious short-seller Andrew Left, has launched a blistering attack on online retailer Etsy, calling it “the largest organised clearing house for counterfeit goods in the world” in a new report.

The research note claims that Etsy’s management has allowed this to happen “knowingly or, at the very least negligently,” and has encouraged and promoted the activity by “selling placement and status to the millions of sites that regularly violate copyright laws.”

Shares in Etsy have lost around 10 per cent of their value since the report was published. It’s not the first time that the company – which built its brand around “handmade” and craft items – has come under scrutiny for counterfeits on its platform.

A few years ago its share price also came under pressure when another report from Wedbush suggested around 5 per cent of all items sold on Etsy might be fake – equivalent to around 2m items – and said, "Etsy has become a go-to destination for counterfeits."

Citron’s note claims that the retailer is “walking on eggshells with the FTC, DOJ, SEC, Customs and Border Protection, and the multitude of brands whose trademarks are being stolen and exploited daily.”

“Etsy behaviour is bordering on criminal as it knowingly or negligently sells trademarked keywords to counterfeiters,” it continues, pointing to examples including Rolex, Disney and Nike.

“We have no doubt that Etsy will respond by directing investors to how many sites they kicked off for violation and how they are vigilant on regulating their marketplace,” continues Citron. “That is obviously bullshit. As they not only allow this to happen, they sell ads to the counterfeiters for prime positioning.”

Etsy had this to say in its defence.

“Etsy is proud to be home to millions of unique, handcrafted, and customised goods, and the integrity of our marketplace is critical to our business,” it said in a statement.

“We are dedicated to fostering a trusted and safe platform, and as Etsy has grown, we have increased investments in a variety of sophisticated tools to protect our community against bad actors. Counterfeit items, fraud and other illicit practices are explicitly prohibited on Etsy, and our dedicated teams work diligently to remove listings that violate our policies.”