What have Rolex, Calvin Klein, Nintendo, Estée Lauder and the makers of Callaway golf clubs got in common? They are all brands ferociously fending off independent e-tailers who are cutting prices - some say corners - and selling their luxury goods on a string of unauthorised websites.

The companies claim many sites are not buying merchandise direct from the manufacturer. Instead the goods are obtained through the grey market - a set of unofficial channels from which small e-tailers can acquire luxury items and then sell them to consumers, often at knock-down prices. The grey market is made up of small merchants specialising in discontinued lines, surplus inventory, bankrupt stock and - in extreme cases - counterfeit goods.

In March, games manufactures (and arch-rivals) Sega and Nintendo joined Electronic Arts in filing a lawsuit against Yahoo!, alleging that counterfeit - and illegal - video games were being auctioned on its website. The games manufacturers claimed Yahoo! had created a marketplace and distribution channel for video game pirates.

Then last month, another US firm, the Callaway Golf Company, settled a lawsuit with an e-tailer in Detroit which was selling counterfeit Callaway clubs. Taylor Golf Supply paid Callaway an undisclosed amount and was served a permanent injunction by a US District Court.

According to the Anti-Counterfeiting Group, which represents more than 200 brand owners in the UK, counterfeiting and piracy of consumer goods costs businesses in the EU £250bn a year. And although there are no figures specifically dealing with online counterfeiting yet exist, with an ever-increasing number of goods being sold online, the risk of fake goods turning up on the web is surely on the rise.

But last week, one major UK e-tailer attempted to lift the lid on UK grey market sites. Perfuma.com had just signed supply agreements to sell 35 brands (and plans to add at least another 20 brands by August). Its rivals have no such agreements and Perfuma began to cry foul.

In a press release entitled Counterfeit beauty products being sold online, Stephan Bisse, managing director of Perfuma.com, said: "Unfortunately the internet is ideal for counterfeiters to sell all types of goods, including beauty products." He went on to tell consumers that they will be certain of getting the real thing only if the beauty site has a guarantee that it is authorised to sell its products.

Ostensibly, the aim of the release was to raise consumer awareness of the inherent dangers of grey market goods, but it also served to undermine confidence in smaller sites selling similar products at cheaper prices.

The beauty industry is ideally suited to the internet. Its products have high margins and there is huge growth potential, with sales projected at around £350m by 2004. As a result, a large number of companies are either launching beauty sites or looking for investment.

Bisse admits that many sites might even be unaware that the goods they are selling are fake. But if they are sold without authorisation from the manufacturer, the risk to the consumer is considerable and customers should be warned of the tell-tale signs.

Perfuma offers a no-quibble money-back guarantee, which, says Biss, its competi tors cannot match, because "the provenance of their goods isn't very clear and sometimes counterfeit stock finds its way in there".

But not everyone - not least the small e-tailers - believes that the grey market is bad for the new economy. In any case, grey markets only exist when manufacturers collude to keep prices high. Paul Kitchen, head of Which? Online, says: "A part of me thinks the grey market is not such a bad idea, certainly not from a consumer point of view. The more choice there is, and that includes price, the better.

"The grey market exists because there is a demand for products - but not always at the price the manufacturers want to sell them at."

There is a further twist to the story: not only do the beauty houses want to control who sells their goods online, they also want to own the rights to the keywords we use when accessing search engines.

In March, Estée Lauder won a court case in Germany against Excite and iBeauty.com. Estée Lauder alleged that Excite sold iBeauty the right to use the trademarks, Estée Lauder, Clinique and Origins as keywords to trigger banner ads on websites.

iBeauty was also banned from selling Estée Lauder products that were not available in Germany. Similar cases are pending in France and the US.

So as usual, buyer beware. The best way to avoid the counterfeiters is to buy from authorised dealers, but be prepared to pay up to 50% more for the privilege. Beware of sites selling testers of samples or ones that cannot offer a full product range. This usually indicates someone has bought a job lot.

If the worst happens and you suspect your goods are counterfeit then contact your local Trading Standards Office immediately.