[kictanet] eBay hit with £30m fine for sales of fake luxuries

[alice]

Hi all,

interesting ruling by French courts on 30th June....of E-commerce and 
brand protection, advertisement consumer protection and so many other 
issues.

best
alice


http://www.guardian.co.uk/business/2008/jul/01/ebay.hitechcrime

eBay hit with £30m fine for sales of fake luxuries


The world's biggest online auctioneer, eBay, was ordered by a French 
court yesterday to pay €38.6m euros in damages to the luxury goods group 
LVMH for negligence in allowing the sale of fake bags, lipsticks and 
designer clothes.

The fine of more than £30m is the biggest eBay has faced in Europe and 
is the latest episode in a series of long-running legal battles it has 
fought with fashion and cosmetic giants.

The site immediately appealed against the ruling and said luxury goods 
giants were using the issue of fakes as a "stalking horse" to attack 
online commerce and keep a stranglehold of sales outlets to the 
detriment of consumers.

The confrontation has implications for the access of online shoppers to 
luxury brands through auction sites and also for eBay's business model 
as it faces the issue of how to police its platform of global sites, 
which at any one time have about 100m items for sale across the world.

The issue has particular resonance in France - the base for some of the 
world's biggest luxury goods companies, who have placed themselves at 
the forefront of fighting counterfeit.

The French company LVMH, the world's leading luxury brand, went to the 
Paris commercial courts demanding €50m in damages over two issues: first 
it argued that eBay had committed "serious errors" by not doing enough 
to prevent the sales of fake goods in 2006, including Louis Vuitton bags 
and Christian Dior products; it also argued that eBay had allowed 
unauthorised sales of perfume brands owned by the group: Christian Dior, 
Kenzo, Givenchy and Guerlain.

It said that even if the perfumes were real and not fake, their sale on 
the site violated Christian Dior's distribution network which only 
allowed sales through specialist dealers. The court ordered eBay to stop 
selling the perfumes or running ads for the brands, or face a fine of 
€50,000 a day.

The ruling ordered eBay to pay €19.28m to Louis Vuitton Malletier and 
€17.3m to its sister company Christian Dior Couture for damage to their 
brand images and causing moral harm. It must also pay €3.25m to the four 
perfume brands for sales in violation of its authorised network.

Pierre Gode, an aide to Bernard Arnault, the LVMH president and France's 
richest man, told AFP: "It is a major first, because of the principles 
that it recognises and the amount sought." He said the decision was 
crucial for the creative industry and "protected brands by considering 
them an important part of French heritage".

The ruling comes a month after another French court ordered eBay to pay 
the fashion house Hermes €20,000 for allowing the sale of counterfeit 
handbags.

The site said it had stepped up its measures to prevent counterfeiting 
since 2006 and now spends $20m (£10m) a year keeping the site "clean", 
using programmes to analyse suspicious sales and working with the owners 
of brand rights. Last year, 2m items suspected of being counterfeit were 
removed from the site and 50,000 sales stopped. Vanessa Canzini, an eBay 
spokeswoman in Europe said: "The big issue here doesn't seem to be to do 
with counterfeiting - if it was, they would have gone after the 
counterfeiters. It's about saying we are a luxury brand, we don't want 
others selling our goods, even if they are real. That's why we will 
appeal this decision."

In a statement, eBay said big luxury goods labels had a hidden agenda 
and were using fakes as a "stalking horse". "It is clear that eBay has 
become a focal point for certain brand owners' desire to exact ever 
greater control over e-commerce. We view these decisions as a step 
backwards for the consumers and businesses whom we empower every day."

The group, which saw around $60bn worth of goods sold across its 
platforms last year, says that as a host for independent vendors, it has 
a limited responsibility and capacity to regulate what is sold. But 
luxury goods groups have accused eBay, which earns a commission on 
sales, of facilitating forgeries and fakes by providing a marketplace 
for vendors who knowingly sell counterfeit items.

The site is also facing other lawsuits worldwide: the New York jeweller 
Tiffany & Co has sued the site for turning a blind eye to sales of 
counterfeits, describing it as a "rat's nest" of fake goods. It also 
faces action from L'Oreal in the UK and five other European countries.