LVMH and eBay Damages

June 29, 2008

The court decision, a month after eBay was ordered by another French court to pay handbag maker Hermes 20,000 euros for allowing the sale of fakes, is the latest episode in a long fight between luxury goods makers and the online auctioneer.

LVMH had claimed damages of about 50 million euros because it said eBay’s French arm had not done enough to prevent sales of counterfeit items.

eBay issued a 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.’

The conseil des ventes, the group that represents mainstream French auctioneers, has also sued eBay, which it accuses of trying to circumvent laws regulating the auction sector by claiming to be a broker.

The wider implications of the case were mentioned by Julian Heathcote Hobbins, General Counsel at Federation Against Software Theft, who commented:

‘The latest action against from the French court is further proof that until effective measures are put in place to vet auctions and their products for legitimacy, such a trade will flourish. It is not rocket science to realise that items such as software or anything else that should cost upwards of £100 that are being sold on an auction site for a few pounds are likely to be illicit.’

 Read the article by Emily Barber and Nigel Gilroy for a UK perspective on the problem.