Flipkart Offers US Footwear Brand Skechers Out-Of-Court Settlement In Fake Products Case

Six months after filing a case against Flipkart, US-based footwear brand Skechers has been offered an out-of-court settlement by the Walmart-backed company.

“Flipkart has offered some cash payment and a commitment to do a certain amount of business for Skechers as an offer to settle out of court,” said a person aware of the matter to ET.

An email sent to both Flipkart and Skechers did not elicit any response till the time of publication.

Flipkart Vs Skechers: What’s The Case?

Here is the series of events leading up to Flipkart’s offer for an out-of-court settlement to Skechers:

• In December 2017, Skechers filed cases in the Delhi high court against online sellers for selling fake products under the Skechers brand name
• The accused included Flipkart and four of its sellers — Retail Net, Tech Connect, Unichem Logistics, and MarcoWagon
• Earlier, Skechers, with the help of court-appointed local commissioners, raided seven warehouses of the sellers in Delhi and Ahmedabad
• 15,000 pairs of fake ‘Skechers’ shoes were found during the raids

At that point in time, Skechers had issued a statement that said: “Flipkart is an online marketplace that helps sellers connect with customers across the country, We only act as an intermediary. We conduct our business with the highest standards of integrity and are fully compliant with all the rules of the land. We cannot comment on the current issue as it is sub-judice.

Earlier, an investigation by News18 revealed that 60% of the sports goods and 40% of the apparel being sold in online “sales” on ecommerce platforms such as Flipkart, Shopclues, and Snapdeal were fake. The report said that manufacturers of fakes and counterfeit sellers were using “loopholes in the Information Technology Act to sell such products while online retailers were shrugging off responsibility by claiming to be intermediaries.”

The Case History

After the December 2017 row, for the next three months, there were no updates from either end on the case.

However,  in April 2018, Flipkart filed a criminal complaint against one of its employees and against major supplier MarcoWagon, making allegations of cheating, fraud, forgery, and breach of trust.

In July 2018, reports surfaced that MarcoWagon Retail had sent a legal notice to Flipkart India, the B2B arm of ecommerce unicorn, for non-payment of dues amounting to INR 20 Cr ($2.9 Mn).

MarcoWagon also alleged that it was asked by Flipkart India to import Skechers shoes from suppliers in China that were pre-designated by ecommerce player.

Fakes Abound On Ecommerce Sites

Over the past few years, several petitions have been filed by consumers and companies against online sellers for selling fake products. Previously, companies such as Tommy Hilfiger, Lacoste, and Calvin Klein have helped confiscate thousands of fake products, mostly apparel, through court-aided raids on warehouses, owned by either sellers or small, niche fashion platforms.

In July last year, Paytm Mall also delisted more than 85K online sellers and suppliers in an effort to block fraudulent merchants from signing up on the ecommerce platform.

Flipkart is one of the largest online marketplaces in the country. Through its ‘Flipkart Assured’ model, the company keeps a check on the genuineness of products sold on its platform, but it doesn’t seem to be in control of the quality of these products.

Skechers, on the other hand, is looking to expand rapidly in India by setting up its own manufacturing units, introducing new categories, and set up more offline stores.

In September 2017,  Skechers had announced plans of setting up 400 more retail outlets in India within the next five years from the 100 outlets at present. The company is also planning to launch a new line of accessories.

Flipkart may be able to settle the Skechers case out of court, but this will not solve the problem of counterfeits on it platform. In fact, this is a problem all Indian ecommerce platforms should seriously take note of and address.