eBay fined €1.7m for selling LVMH perfumes

A Parisian court has fined eBay  €1.7m after users of its French web site continued to buy and sell Louis Vuitton Moet Hennessy (“LVMH”) perfumes in breach of a 2008 injunction.  The injunction was granted after the luxury goods conglomerate, which includes brands such as Louis Vuitton and Christian Dior, successfully sued eBay for €40m in June 2008 for selling fake goods using the company’s brand.

On the basis that online sales degrade the product’s image, the company was granted an injunction barring not just the sale of counterfeit goods but also the sale of genuine products.  On LVMH’s request, the court recently reviewed eBay’s compliance with the order and found more than 1,300 incidents of users advertising cosmetics and perfumes made by the company in breach of the injunction.

The award raises the issue of selective distribution, that is a company’s power to control the distribution of its products.  From LVMH’s perspective, the injunction is a victory in its fight to retain control over which outlets sell its products.  It argues that such control is critical in maintaining the quality and security of its products.  But representatives of eBay have responded by describing the injunction as an abuse of selective distribution and an unfair restraint of trade.  A representative of eBay in France has stated that the decision was anti-competitive and will hurt consumers by preventing them from buying and selling authentic items online.  The eBay representative termed the fine ‘disproportionate’ given the steps taken by eBay to comply with the injunction.

LVMH’s success against eBay has been the exception rather than the rule in cases brought by luxury goods companies against the online auction site.  Although French courts have appeared willing to find in favour of the luxury brands, as seen with judgments in favour of both LVMH and Hermes International in 2008, other European courts have generally found in favour of eBay when similar cases have been run.  EBay has indicated its intention to appeal the recent French decision and an appeal against the 2008 verdict has already been scheduled for next year.  The outcome will hopefully provide some further guidance for e-commerce companies in relation to the risks of providing a platform for users to buy and sell authentic luxury goods online.

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