A French court today ordered auction giant eBay to pay 38.6 million euros (about $61 million dollars) in damages to the French luxury goods company LVMH, maker of Louis Vuitton bags and Dior perfumes. This judgment was a huge setback for eBay in one of several legal battles over the sale of counterfeit goods through their auction service.
LVMH claimed 90 percent of the Louis Vuitton bags and Dior perfumes sold on eBay are fraudulent. The court decision was based on their opinion that eBay does not do enough to police its auctions to stop counterfeit sales.
Another court case one month ago involved Hermes International of France and their claim that eBay does not prohibit the sale of counterfeit handbags; eBay was ordered to pay 20,000 euros (about $32,500 dollars). Tiffany and L’Oreal have been involved in similar disputes.
With LVMH, eBay immediately appealed the decision.
In terms of the hobby of collecting original props and wardrobe, obviously issues of authenticity are very relevant. However, given that there is not a “manufacturer”, and that all props and their history and provenance are typically unique, prompting eBay to make efforts to police its own marketplace and uphold their own statutory policies is something I don’t expect to be corrected anytime soon.
Back to the LVHM case, it is interesting to review the two press releases and eBay’s characterization of the suit and judgment as “an attempt by LVMH to protect uncompetitive commercial practices at the expense of consumer choice”, while with eBay’s “PayPal-only” setback in Australia this month, eBay’s position is that limiting consumer choice in payment method to PayPal-only is not anti-competitive (see eBay’s “PayPal Only” Debate Framed: Anti-Competition vs. Anti-Consumer Protection).
LVHM Group Press Release
EBay Found Guilty of Gross Misconduct towards the LVMH Group
June 30, 2008, 1:43 PM ETBusiness Wire – Press Release
The commercial court in Paris has, in a ruling announced today, upheld a claim made by Louis Vuitton Malletier and Christian Dior Couture against eBay.
The court has ruled that, by allowing the sale of counterfeit goods on its website to the detriment of Louis Vuitton Malletier and Christian Dior Couture, eBay was guilty of gross misconduct and of detrimental breach as, through accountable negligence, eBay had not taken the necessary measures to prevent the sale of the counterfeit goods on its site.
The court has also ruled that, in allowing the sale of perfumes carrying the brands Christian Dior, Guerlain, Givenchy and Kenzo, products which can only be sold through the network of distributors, agreed by the companies which own these brands, eBay was guilty of practicing unlawful sales.
To compensate for all damages, the court has ordered eBay to pay 16.4 million euros to Louis Vuitton Malletier, 19.28 million euros to Christian Dior, and 3.192 million euros to the perfume brands. The verdict is one of provisional execution. Moreover, the court has also added that a report of the decision must be published in three French or international newspapers. Finally, eBay must report the verdict on both its French and English sites.
The Paris commerce court’s verdict will make case law. For the first time in France it clearly states the principle under which auction sites that operate on the web have to ensure that their activities do not permit unlawful dealings. The court has dismissed as without foundation the argument used by eBay to exonerate itself that its clients are solely responsible for their illegal undertakings when transacting. eBay is not a host but a broker.
This verdict represents an important step in the protection of brands and designs against parasitic practices. The court brings an important contribution to the protection of creative works which make up an important part of our national heritage and generate many jobs in France.
About LVMH
LVMH Moet Hennessy Louis Vuitton is the world’s leading luxury goods group. The Group is represented in Wines and Spirits by a portfolio of brands that includes Moet & Chandon, Dom Perignon, Veuve Clicquot Ponsardin, Krug, Ruinart, Chateau d’Yquem, Hennessy, Glenmorangie, Ardbeg, Belvedere Vodka, Chopin, 10 Cane, Chandon, Cloudy Bay, Terrazas de los Andes, Cheval des Andes, Green Point, Cape Mentelle, Newton.
Its Fashion and Leather Goods division includes Louis Vuitton, the world’s leading luxury brand, as well as Celine, Loewe, Kenzo, Givenchy, Thomas Pink, Fendi, Emilio Pucci, Donna Karan, Marc Jacobs, Berluti, StefanoBi as well as eLUXURY, the authoritative online source for luxury goods on the Internet. LVMH is present in the Perfumes and Cosmetics sector with Parfums Christian Dior, Guerlain, Parfums Givenchy, Parfums Kenzo, Perfumes Loewe as well as other promising cosmetic companies (BeneFit Cosmetics, Make Up For Ever, Acqua di Parma and Fresh). LVMH is also active in selective retailing through DFS, Sephora in Europe and the United States, Le Bon Marche and la Samaritaine. LVMH’s Watches and Jewelry division comprises TAG Heuer, Chaumet, Christian Dior Watches, Zenith, Fred and De Beers Diamond Jewellers Limited, a joint venture created with the world’s leading diamond group.
eBay Press Release
eBay Vows to Fight for E-Commerce Following Overreach by Luxury Brands Manufacturer
June 30, 2008 10:20 AM ETBusiness Wire – Press Release
Following the ruling by the Tribunal de Commerce in Paris, France on June 30 2008 in relation to a suit by LVMH the French luxury goods manufacturer, eBay Inc. EBAY issued the following statement:
“If Counterfeits appear on our sites we take them down swiftly, but today’s ruling is not about our fight against counterfeit; today’s ruling is about an attempt by LVMH to protect uncompetitive commercial practices at the expense of consumer choice and the livelihood of law-abiding sellers that eBay empowers everyday.
“We believe that this ruling represents a loss not only for us but for consumers and small businesses selling online, therefore we will appeal. 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 everyday.
“We believe that the overreach manifests itself through an attempt to impose, in France, a business model that restricts consumer choice through an anti-competitive business practice.
“The ruling also seeks to impact the sale of second-hand goods as well as new genuine products, effectively reaching into homes and rolling back the clock on the Internet and liberty it has created. The attempt to use the ruling to confuse the separate issues of counterfeit and restrictive sales suggests that counterfeit suits are being used by certain brand owners as a stalking-horse issue to reinforce their control over the market.
“eBay does more and more to combat counterfeit. We invest more than $20 million each year to ensure counterfeit goods are found and removed. We partner with over 18,000 brand owners around the world to identify and successfully remove counterfeit goods and employ over 2,000 people to carry out this fight on a daily basis. When we find counterfeit goods on our sites we take it down.
“Overzealous enforcement of restrictive sales practices are anti-competitive and give consumers a bad deal. This is recognised by European Union policy-makers who are seeking to create a better framework for online sales to promote e-commerce in Europe. We support a free and fair market in Europe and the benefits this will bring for our sellers.
“eBay will continue to fight against counterfeit and continue to fight for consumer value through the promotion of e-commerce.”
About eBay Inc.
Founded in 1995, eBay Inc. connects hundreds of millions of people around the world every day, empowering them to explore new opportunities and innovate together. eBay Inc. does this by providing the Internet platforms of choice for global commerce, payments and communications. Since its inception, eBay Inc. has expanded to include some of the strongest brands in the world, including eBay, PayPal, Skype, StubHub, Shopping.com, and others. eBay Inc. is headquartered in San Jose, California.
Past articles published by the Original Prop Blog related to other legal disputes and court proceedings can be found via the portal below:
Jason De Bord