The commercial court in Paris ordered the online giant to pay a total of £30m compensation to LVMH in a dispute over fake goods sold on eBay.
The ruling, which found eBay guilty of failing to prevent the sale of counterfeit goods on their site, also barred the company from allowing specific perfume brands, such as Dior and Givenchy, to be sold in future, because they were not being offered through approved outlets.
While the restriction on which luxury goods brands they can offer will certainly hurt, it is the setting of a legal precedent that eBay have a responsibility to police transactions on their site that threatens the very business model which has made them such an online trading phenomenon.
It is widely believed that French courts in such cases tend to favour protecting domestic interests, but eBay are facing a similar challenge from jewellers Tiffany in the United States, and with the success of the LVMH case, other luxury goods brands unhappy with the trade in counterfeit goods on eBay may be considering their options too – specialist intellectual property lawyers in the US have already predicted that copycat lawsuits will soon be forthcoming.
eBay have done much to tighten security on their site in recent years, removing fake goods as soon as they are notified about them and introducing their Verified Rights Owners (VeRO) program, which helps users search the site for counterfeit items and have them removed more quickly.
The costs of policing the site are likely to get ever higher, but legal bills in fighting off lawsuits could prove even more costly.
EBay have already announced that they are to abandon their live online bidding programme, which had led to a number of legal problems, and last year they faced a lawsuit in India after Harry Potter author J.K. Rowling accused them of being responsible for breach of copyright through the sale of pirate ebooks.
Only last month, Hermès scored a similar victory in France to LVMH. L’Oreal and Rolex have also made successful challenges.
Whatever the outcome of the Tiffany case and the LVMH appeal, the political fallout from the threat to the eBay business model is another story. A vast number of people across the globe – thought to be well over 1m, many of them in the United States – currently make their living by trading on eBay.
If legal rulings threaten their livelihoods, they will doubtless look to their political representatives to intervene.
By Ivan Macquisten