The world’s biggest online auctioneer, eBay, was ordered by a French court on Monday to pay €38,6-million in damages to luxury goods group LVMH for negligence in allowing the sale of fake bags, lipsticks and designer clothes.
The fine of more than £30-million is the biggest eBay has faced in Europe and is the latest episode in a series of long-running legal battles it has fought with fashion and cosmetic giants.
The site immediately appealed against the ruling and said luxury goods giants were using the issue of fakes as a ”stalking horse” to attack online commerce and keep a stranglehold of sales outlets to the detriment of consumers.
The confrontation has implications for the access of online shoppers to luxury brands through auction sites and also for eBay’s business model as it faces the issue of how to police its platform of global sites, which at any one time have about 100-million items for sale across the world.
The issue has particular resonance in France — the base for some of the world’s biggest luxury goods companies, who have placed themselves at the forefront of fighting counterfeit.
The French company LVMH, the world’s leading luxury brand, went to the Paris commercial courts demanding €50-million in damages over two issues: first it argued that eBay had committed ”serious errors” by not doing enough to prevent the sales of fake goods in 2006, including Louis Vuitton bags and Christian Dior products; it also argued that eBay had allowed unauthorised sales of perfume brands owned by the groups Christian Dior, Kenzo, Givenchy and Guerlain.
It said that even if the perfumes were real and not fake, their sale on the site violated Christian Dior’s distribution network, which only allowed sales through specialist dealers. The court ordered eBay to stop selling the perfumes or running ads for the brands, or face a fine of €50 000 a day.
The ruling ordered eBay to pay €19,28-million to Louis Vuitton Malletier and €17,3-million to its sister company, Christian Dior Couture, for damage to their brand images and causing moral harm. It must also pay €3,25-million to the four perfume brands for sales in violation of its authorised network.
Pierre Gode, an aide to Bernard Arnault, the LVMH president and France’s richest man, told Agence France-Presse: ”It is a major first, because of the principles that it recognises and the amount sought.”
He said the decision was crucial for the creative industry and ”protected brands by considering them an important part of French heritage”.
The ruling comes a month after another French court ordered eBay to pay the fashion house Hermes €20 000 for allowing the sale of counterfeit handbags.
The site said it had stepped up its measures to prevent counterfeiting since 2006 and now spends £10-million a year keeping the site ”clean”, using programmes to analyse suspicious sales and working with the owners of brand rights.
Last year, two million items suspected of being counterfeit were removed from the site and 50 000 sales stopped. Vanessa Canzini, an eBay spokesperson in Europe said: ”The big issue here doesn’t seem to be to do with counterfeiting — if it was, they would have gone after the counterfeiters. It’s about saying we are a luxury brand, we don’t want others selling our goods, even if they are real. That’s why we will appeal this decision.”
In a statement, eBay said big luxury goods labels had a hidden agenda and were using fakes as a ”stalking horse”.
”It is clear that eBay has become a focal point for certain brand owners’ desire to exact ever greater control over e-commerce. We view these decisions as a step backwards for the consumers and businesses whom we empower every day.”
The group, which saw about $60-billion worth of goods sold across its platforms last year, says that as a host for independent vendors, it has a limited responsibility and capacity to regulate what is sold. But luxury goods groups have accused eBay, which earns a commission on sales, of facilitating forgeries and fakes by providing a marketplace for vendors who knowingly sell counterfeit items.
The site is also facing other lawsuits worldwide: New York jeweller Tiffany & Company has sued the site for turning a blind eye to sales of counterfeits, describing it as a ”rat’s nest” of fake goods. It also faces action from L’Oreal in the United Kingdom and five other European countries. —