eBay told to pay $61 million over sale of phony fashions

Associated Press

July 1, 2008

PARIS - A French court ordered eBay Inc. to pay more than $61 million to a high-end fashion company yesterday because counterfeit goods were sold on the auction site.

The fashion company, LVMH Moet Hennessy Louis Vuitton SA, is home to such prestigious brands as Louis Vuitton, Givenchy, Fendi, Emilio Pucci and Marc Jacobs, and had complained that it was hurt by the sale of knockoff bags and clothes on eBay.

Pierre Godet, an adviser to LVMH Chairman and CEO Bernard Arnault, said the Paris court's decision was "an answer to a particularly serious question, on whether the Internet is a free-for-all for the most hateful, parasitic practices."

EBay countered that LVMH is trying to crack down on Internet auctions merely because it is uncomfortable with the business model, which tends to cut out the middleman.

"If counterfeits appear on our site, we take them down swiftly," eBay spokeswoman Sravanthi Agrawal said. "But today's ruling is not about counterfeits. 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 every day."

She said eBay hopes to appeal the ruling.

EBay has been sued repeatedly by luxury goods companies over its users' attempts to sell counterfeit products. Other plaintiffs against eBay have included jewelry company Tiffany & Co. in the United States, watchmaker Montres Rolex S.A. in Germany, and cosmetics giant L'Oreal SA in Europe.

Some companies have demanded that eBay forbid sales of even their legitimate products on the site because of alleged trademark infringement, while others accuse the auctioneer of reacting too slowly to reports of violations.

The San Jose, Calif.-based company is a magnet for counterfeiters because of the sheer volume of products sold through its auction system and the difficulty of patrolling the fast-moving transactions. Like Google Inc.'s approach to removing copyright-infringing videos from its subsidiary YouTube, eBay relies heavily on intellectual-property owners to alert the company to suspicious postings on its site.

Even so, eBay has argued that it spends millions of dollars a year trying to clean up counterfeit goods.

This ruling came down against eBay on two fronts. The court faulted the online company for "guilty negligence," for not doing enough to prevent fake goods from being sold on its site. The court also ruled that eBay was responsible for the "illicit sale" of perfumes from the LVMH empire, which can be sold only through the brands' "selective distribution networks."

High-end fashion companies like LVMH make their money by selling exclusive products, and fight a never-ending battle against cheap ripoffs and alleged affronts to their trademarks.