A third-party vendor, Belle Boutique, is found to have sold China-made counterfeit luxury products like watches, apparels and bags through major e-commerce platforms, such as jumei.com, a beauty product seller, and jd.com, an e-commerce leader.

The two e-commerce giants have already issued statements of apology and vowed to stop cooperation with Belle Boutique, a small dealer based in Hebei province. They also have offered the fraud victims free and unconditional product return services.

The scandal is set to diminish consumer confidence in the two e-commerce giants, because people use their websites to buy luxury goods not only for the low prices they offer, but also because of the belief that the two reputable companies (both are industry leaders and listed on the US stock market) will not sell fake products.

The two companies could pay a dear price because their websites would now register fewer hits and they might easily become the target of shorting capital in the US stock market.

Some US-based investment research companies, such as Muddy Waters LLC, have accused a few Chinese companies of "financial cheating" and selling "fake products", which caused their stock prices to drop, at times steeply. Jumei's stock price, too, dropped sharply after the Belle Boutique incident came to light. If investment research companies step in and issue unfavorable reports, investors could continue to dump Jumei stocks, causing greater loss to the company's shareholders.

Consumers should draw lessons from the incident. If international luxury brands generally offer very small discounts, how come the two e-commerce platforms were offering many watches and bags of globally famous brands at very low prices? Rational consumers should have questioned the reason for such huge discounts before deciding to buy.

One of the problems with e-commerce in China is that, even after realizing that the products they have been delivered are fakes, many consumers tend not to report the fraud to intellectual property rights protection agencies so long as the retail websites agree to refund the products. By doing so, the consumers miss the opportunity to let regulators and other consumers know about the frauds in which the websites are involved. In a way, these consumers help the websites to continue cheating unsuspecting customers.

So, are such consumers partly blamed for the retail frauds? Perhaps not, because as rational individuals, they are entitled to make decisions that they think are the most appropriate. What needs a rethink is the regulatory and legal system that has allowed commercial cheating to go unchecked.