eBay Told To Dump Dior

A French court ruled July 11 that eBay must remove listings for LVMH perfumes while it appeals a $61 million decision in favor of the luxury brand manufacturer.

Last month, lawyers for LVMH successfully argued before a French tribunal that eBay was responsible for counterfeit items sold on its French site. The court ruled that eBay must pay LVMH $38.6 million euros in damages and remove all listings for LVMH brand perfumes. That includes well known names such as Dior, Guerlain, Givenchy and Kenzo.

EBay faces a 50,000 Euro fine for each day it does not comply. “This decision, which responds entirely to the demands of the LVMH Group, confirms the seriousness of the faults committed by eBay sites,” said LVMH in a statement.

EBay had hoped not to comply with the ruling until its appeal was heard. “We believe that we have a good case given the significant overreach of the Tribunal’s ruling,” said an eBay spokesperson.

EBay's lawyers maintain that the company is blameless for counterfeit sales on its sites. They say that eBay, like any Web message board, is not responsible for illegal activities by its users. Furthermore, they argue that eBay cannot be complicit because the company has no way of identifying illegal knockoffs until notified of their presence on the site by the brand manufacturer. Once alerted, eBay officials remove the itmes, operating in a similar fashion to other user generated sites such as YouTube.

EBay is also arguing that luxury brand manufacturers are trying to use counterfeit cases to keep legitimate high end goods from appearing on eBay's site, which is known for bargains.

The French case is the third one in Europe that eBay has lost. A decision in another counterfeit case-- this time filed in New York by high end jewelry manufacturer Tiffany--could come as early as Monday.

Should eBay lose that case, it would likely have to rethink how it runs its business. As it stands, eBay relies primarily on the brands and the community to flag counterfeit items. Should the company be forced to proactively remove such material, it could require a significant technology investment. It would also likely damage eBay's ability to offer higher end items for sale, since such items would, potentially, have to first be approved by the brand manufacturer.

Worse for eBay, some brands may be able to argue that their merchandise should never appear on eBay's site, as LVMH did before the French court. That would be a real setback for eBay which draws many users with the prospect of getting name brand items at a significant discount and has been attempting to break free of its online flea market image.

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