EBay ordered to pay £31m damages over fake goods

Published on Monday 30 June 2008 22:19

THE internet auction house eBay has been ordered to pay £31 million in damages for selling fakes over the internet, in a ruling that could have important implications for online businesses worldwide.

A French commercial court yesterday ordered eBay to pay LVMH Mot Hennessy Louis Vuitton, home to prestigious brands such as Fendi, Emilio Pucci and Marc Jacobs, for selling counterfeit goods, including Louis Vuitton-branded handbags, perfumes and sunglasses.

The auction site was also criticised for the unauthorised sale of four perfume brands – Christian Dior, Kenzo, Givenchy and Guerlain.

LVMH told the court that in 2006, some 90 per cent of the LVMH-branded goods for sale on eBay were fakes. A judge ruled the site had not done enough to halt "illicit" sales of LVMH goods.

LVMH yesterday hailed the Paris commercial court's decision as "very important" in discouraging trade in pirated and stolen goods.

Pierre Godet, an adviser to LVMH chairman Bernard Arnault, said the 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".

However, eBay said it would appeal the ruling and criticised LVMH for trying to promote "uncompetitive commercial practices" at the expense of consumer choice and the livelihood of law-abiding sellers.

Vanessa Canzini, an eBay spokeswoman, told The Scotsman that companies such as LVMH should be doing more to police the marketplace and protect their brands.

She said: "EBay have in place a programme called Certified Rights Owners Programme (Vero), which launched in 1998 and has 18,000 members ranging from Marks & Spencer to Adidas and Timberland.

"This allows people who hold the intellectual copyright on brands to report items to eBay they believe are counterfeit. As soon as eBay is made aware of the concerns, it removes 90 per cent of all suspicious items within four days and all of them will disappear from the website inside a day of it being flagged up."

However Graham Robinson, managing director of Farncombe International, which investigates counterfeiting, warned customers would be forced to bear the costs of any further crackdowns. He said: "EBay will have to take increased surveillance and safeguarding measures which means extra human and software resources.

"EBay users are likely to be charged additional fees as a result of these court cases. What remains to be seen is whether this renders eBay's business model unworkable."

Bargains galore … but are they the genuine article?

IT IS the ultimate global marketplace, raking in billions of pounds and attracting thousands of new users every day. And in the gloomy economic climate eBay is the perfect place to pick up a designer must-have at a fraction of the designer's price tag.

First on my shopping list was a Chloe Paddington bag, as seen swinging from the arms of celebrities such as Nicky Hilton and Nicole Ritchie.

Almost instantly I find a black tote bag with a cute padlock detail for 350. It seems a bargain – given I would pay 895 in a boutique – making me question its authenticity.

Of course, a giant, costly handbag needs designer make-up to put in it, so I search for cosmetics and come across a maple-sugar Este Lauder for only 3.50 – an astonishing 7.50 less than I would pay in the shops.

Of course, according to current trends glossy, pouting lips must be pared with an enormous pair of designer sunglasses, a la Victoria Beckham. I find an oversized pair of Chanel shades with the famous double-C logo emblazoned in diamante on the frame.

Accompanied by a hard case and a cleaning cloth, they are a snip at 30. But are they genuinely from the exclusive Paris fashion house? As they retail at 150, I doubt it.

Perhaps, I will have more luck with Herms goods. The luxury goods retailer won damages from eBay last month and any seller would be taking a risk attempting to sell counterfeit Herms goods.

A pretty golf-swing design Herms scarf – normally costing 165 – is going for a mere 60. A bargain, but like most of the "designer" goods offered on eBay, I have no guarantee that the accessory is genuine.

Ruling paves way for further lawsuits

Is this a landmark ruling?

It is a first in terms of the amount and many of the principles recognised. The award is considerably more than the 16,000 judgement Herms won against eBay earlier this month for allowing the sale of fake products.

Could this mean an end to online shopping?

It would be very difficult to restrict online shopping because it crosses international borders.

This makes enforcing intellectual property rights difficult as it is unclear whether the legislation of the country of the buyer or seller is applicable.

Will this court ruling stop market traders selling fake goods on street stalls?

No, trading standards officers from local councils are in charge of cracking down on pirate goods.

What is eBay doing to keep counterfeits off its site?

Last year it removed 2.2 million potentially counterfeit listings and suspended 50,000 sellers.

Are we more likely to see more legal action against eBay?

The ruling paves the way for more lawsuits. One pending judgment is the case brought by Tiffany & Co, the New York jeweller, against eBay. As damages cases in the US are the biggest in the world, all eyes are on the settlement to see how much is at stake.