France Faults eBay Over Fake Goods

Pierre Godé, an adviser to luxury goods group LVMH, at the French courthouse, called the eBay decision "an answer to a particularly serious question."
Pierre Godé, an adviser to luxury goods group LVMH, at the French courthouse, called the eBay decision "an answer to a particularly serious question." (By Antoine Antoniol -- Bloomberg News)
By Pierre-Antoine Souchard
Associated Press
Tuesday, July 1, 2008

PARIS, June 30 -- A French court on Monday ordered eBay to pay more than $61 million to luxury goods group LVMH for letting counterfeit products and its branded perfumes be sold on the auction site.

LVMH, home to prestigious brands such as Louis Vuitton, Givenchy, Fendi, Emilio Pucci and Marc Jacobs, hailed the Paris commercial court's decision as "precedent-setting."

The court battle involved two titans of their industries in a country where courts often have taken a tough regulatory line on Internet commerce and freedom of speech in cyberspace.

EBay lost the ruling on two fronts, and company spokeswoman Sravanthi Agrawal said eBay will seek to appeal the ruling.

The court faulted the online auctioneer for "guilty negligence" for not doing enough to prevent fake goods from being sold on its site, LMVH said in a statement.

An LVMH spokeswoman, speaking on condition of anonymity because of company policy, said its studies showed that 90 percent of the luxury group's branded products sold on eBay were counterfeits.

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," the statement said.

Asked whether that meant that smaller online vendors also could be targeted, the LVMH spokeswoman said no, insisting that the French group was more concerned about the "mass-distribution network."

"We're not going to accuse Monsieur X or Madame Y," she said.

EBay said LVMH is trying to crack down on Internet-based auctions in general because it is uncomfortable with the business model.

"If counterfeits appear on our site, we take them down swiftly," 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.

Luxury companies such as LVMH make their money by selling exclusive products and fight constant battles against counterfeiters who sell imitations of high-priced goods, such as Louis Vuitton handbags.

Pierre Godé, an adviser to the chief executive of LVMH and Dior, Bernard Arnault, called the decision "an answer to a particularly serious question, on whether the Internet is a free-for-all for the most hateful, parasitic practices."

The case wasn't the first by LVMH to protect its brands in cyberspace.

In 2005, a Paris court ordered Google to pay about $260,000 plus other costs to Louis Vuitton for breach of trademark.

That court ordered Google to stop displaying advertisements for Louis Vuitton's rivals when Web users typed Vuitton's name or other trademarks into the search engine.

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