Brand owners score important point in eBay battle

In a decision that is bound to be welcomed by many brand owners, eBay has been ordered to pay more than €38 million (£31.6 million) to the LVMH group.

A commercial court in Paris held that eBay had failed to take satisfactory steps to prevent the sale of counterfeit goods on its French online auction site. This latest decision comes less than a month after another French court ordered eBay to pay €20,000 to luxury goods firm Hermes for the sale of counterfeit handbags.

Kate Swaine, director in the Brands team at Wragge & Co LLP, said: "This is a real blow to eBay. With other lawsuits pending by Tiffany and L'Oreal, it may be forced to introduce far more stringent vetting procedures for online sales."

The bulk of the damages have been awarded to Louis Vuitton Malletier (over €16 million) and to Christian Dior (over €19 million) in relation to sales of counterfeit products such as handbags. However, the ruling does not just relate to the sale of counterfeit goods, but also to the unauthorised sale of genuine products.

Four perfume brands Dior, Guerlain, Kenzo and Givenchy were also awarded approximately €3 million for eBay's sale of perfumes. Even if genuine, the court determined that these products could only be sold through the authorised distribution network. Failure by eBay to remove these products from its site will attract a further €50,000 fine for each day that the products remain available.

Kate Swaine added: "This decision is likely to have repercussions for eBay's business model, which has come under attack from brand owners. They believe it does not do enough to police its site and prevent the sale of counterfeit goods."

"eBay insists that it should not be held responsible for illegal sales by its customers and that it spends $20 million each year ensuring that counterfeit products are identified and removed. It would appear that the French courts, at least, do not believe that this is enough."

eBay has said that it will appeal against the ruling, saying that it is anti-competitive and an attempt to enforce restrictive sales practices to the detriment of consumers and small businesses.