EBay fined by Paris court over sales of authentic perfumes

Out-Law News | 30 Nov 2009 | 4:57 pm | 2 min. read

A French court has told internet auction site eBay that it cannot allow sales of luxury goods without the brand owner's permission. EBay has been fined €1.7 million for not stopping the sales of perfumes.

Allowing perfumes made by Louis Vuitton Moet Hennessy (LVMH) to be sold on the French eBay site was a violation of a 2008 Commercial Court order centred on fake perfume sales, that same Court has ruled. The 2008 ruling was centred on the sales of fake perfumes but also barred the sale of some brands even when they were new and authentic.

Intellectual property law expert Kim Walker of Pinsent Masons, the law firm behind OUT-LAW.COM, said that the ruling was consistent with earlier court rulings that are increasingly establishing the right of luxury goods manufacturers to control the retail distribution of their products.

"EBay argued that allowing control was highly anti-competitive, but courts and the European Commission seem to be inclined to allow companies to control the distribution, even online," he said. "This is consistent with the Dior ruling earlier this year from the European Court of Justice (ECJ)."

The ECJ ruled in April of this year that a luxury goods manufacturer could stop a company it had a contract with from selling its goods at discount retailers under the EU's Trade Marks Directive. It said that in the case of luxury goods damage to the goods' reputation was damage to the goods themselves.

"The quality of luxury goods such as the ones at issue in the main proceedings is not just the result of their material characteristics, but also of the allure and prestigious image which bestows on them an aura of luxury," said the ruling. "Since luxury goods are high-class goods, the aura of luxury emanating from them is essential in that it enables consumers to distinguish them from similar goods. Therefore, an impairment to that aura of luxury is likely to affect the actual quality of those goods."

Walker said that these rulings put companies such as eBay in a difficult position, even if they accept the rulings.

"Luxury goods manufacturers can now stop their goods being sold on in a way that could damage their brand," he said. "That puts eBay in the tricky position of having to judge what are and what are not luxury goods."

"With some brands like Dior it might be clear, but with others it might not be. Does selling Levi 501s in a certain environment damage their image?" said Walker.

The French ruling is the result of a request by LVMH that a review be carried out into eBay's compliance with the 2008 order. EBay's appeal of that initial verdict is yet to be heard.

Ebay Europe director Alex Von Schiermeister said that the ruling and behaviour are anti-competitive.

"The injunction is an abuse of 'selective distribution'. It effectively enforces restrictive distribution contracts, which is anti-competitive," he said. "We believe that the higher courts will overturn this ruling and ensure that e-commerce companies such as eBay will continue to provide a platform for buyers and sellers to trade authentic goods."

EBay told the court that it believed that the 1,300 listings on which LVMH based its case were traps set for it.

"To comply with the injunction, eBay used state of the art filtering software to check millions of daily listings, with thousands of listings of authentic items being rendered invisible and inaccessible to French eBay users," said an eBay statement. "In its court submission, LVMH provided detailed information on just 1,341 listings out of 200 million listings that are live on eBay every day. eBay believes that these listings were posted by people who set out to deliberately circumvent the extensive systems that had been put in place."