eBay found liable for the sale of luxury goods on its site despite court injunction

eBay found liable for the sale of luxury goods on its site despite court injunction

George Nathanael is a JD candidate at Osgoode Hall Law School.

Last week a French court ordered eBay to pay €1.7M in damages to LVMH Möet Hennessy Louis Vuitton, a holding company of a number of luxury goods brands, for failing to comply with an injunction set as part of an earlier ruling. The injunction, from a case decided last year, banned eBay users from selling various perfumes, even if they were authentic. Along with that injunction, eBay was fined almost €40M for negligently allowing the sale of counterfeit goods trademarked by such companies as Christian Dior. The online auction and shopping company originally said that it would appeal the prior decision, but it has yet to do so.

The court found that over a thousand LVMH products had been posted on eBay’s website by users since the time of the injunction. Apparently eBay has used special software and other measures in order to curb this activity, but these actions were deemed to not be enough for the court. Based on its current model, the reality is that eBay will likely never be able prevent all banned goods from being sold on its site. This decision could lead the way for more litigation claims from other luxury brands against eBay and others, and it is uncertain what measures would have to be taken by online auction platforms to satisfy the requirements of similar injunctions.

On a related note to this case, the European Court of Justice has put forth the view that “[t]he quality of luxury goods is not only the result of their material characteristics, but also of the allure and prestigious image which bestows on them an aura of luxury”. Along these lines of argument, since eBay gets commission off their sales, they should be held responsible for allowing a platform for trading luxury brands at lower costs, thus ostensibly damaging the reputation and image of these brands. LVMH has claimed that its carefully planned distribution network ought to be protected.

Alex von Schirmeister, a manager of eBay in France, has stated that the enforcement of such restrictive distribution provisions is "highly anti-competitive". Though I am not sure if I agree with this exact framing of the matter, I do think that that the mode of thinking that this decision seems to be based on vests too much power in the hands of brand owners. Control of authentic products to this extent infringes one of the basic rights of most systems of tangible property law, that of the owner to be able to transfer his or her property. If selling a luxury handbag (that an individual has legitimately purchased earlier) over eBay for a quarter of the retail price is damaging to the brand’s image to such a degree that it must be banned, what about selling that same bag for a tenth of the price at a garage sale? I would think that such collateral effects on intellectual property should not trump a more historically fundamental tenet, but perhaps this French court takes its high fashion a little more seriously than I do.