Ebay Fined $61M By French Court For Sales of Fake Goods

A court in France ordered eBay to pay more than 61 mega-dollars to the parent company (LVMH) of Givenchy, Fendi, Marc Jacobs and Louis Vuitton, because a user sold fake goods on the website. eBay has been sued by other 'luxury goods' vendors (such as Tiffany's (US), Rolex (Germany) and L'Oreal (EU)). Problems stem from some companies demanding that their merchandise (even legal merchandise) not be displayed nor sold as it is a violation of their 'property.' Others have complained that eBay is too slow to take down claims. Apparently eBay was hit with two violations: 1) eBay illegally allowed legitimately purchased and owned products made by LVMH to be resold on its website by 3rd parties not under the control of LVMH, and 2) not doing enough to protect LVMH's brands from illegal sales. eBay has said it will appeal. So eBay is to know what products every company allows to be sold before allowing them to on auction?

(There's also coverage at Yahoo News.)

Update: 07/01 17:15 GMT by T : That's LVMH throughout, rather than LVHM, as originally rendered.

Comments

Even by petty French standards, this is sad

[elrous0]

The French government and courts have a long history of issuing prejudiced laws and decisions in favor of French companies (especially in cases where the opposition are American or British companies), but this is disturbing even by their standards. While ostensibly about counterfeit goods, this ruling goes FAR beyond that--giving the original producer full control of resell rights for even LEGITIMATE goods. In short, the ruling (if allowed to stand) basically says that no one actually owns any physical object anymore or can resell said object without permission of the original producer.

Want to resell your Corrola? Sorry, you have to get Toyota's permission first.

Want to resell your house? Not unless the original builder says okay!

Want to sell your soul? Well, that one you can do. Just become a French judge!

Re:Even by petty French standards, this is sad

[haystor]

The French companies are laughing until they're sued by the raw goods producing companies and told they can't distribute their handbags.

Re:Even by petty French standards, this is sad

[Swizec]

So basically like what we have in the music and software worlds pretty much? You don't quite own that CD, you're just allowed to use it because the product they leased to you is on it ... something like that?

Re:Even by petty French standards, this is sad

[jellomizer]

And yet they wonder why the French Echonomy is sagging.
If the seller fears retribution from using and reslling french products. They will not get French products in the first place. 3rd party sales while doesn't direcly effect the bottom line it does get product awarenes of your goods.

If you get a used Toyota and you love it. If you choose to get a new car you may buy a Toyota. or other perople see that your used toyota has lased so long and they want a new car they would get a new Toyota, also the person who has sold the car if they liked it the chances are they would use the money to buy a new car of the same make, if they have brand loyality to that make.

I understand forgeries, as it could tarnish the brand names. But for legit items let them resell them.

Re:Even by petty French standards, this is sad

[Erez.Hadad]

I think that by collapsing the entire chain we get the alligators (or an animal activist acting on their behalf) sue the skin-producing companies for reselling their hides. At least that will get some good out of this.

Re:Even by petty French standards, this is sad

[andphi]

In other news, the cows have filed charged Louis Vuitton with Mass Moo-der as well as filing a Motion for Summary Judgemoont against the plaintiffs.

Re:Even by petty French standards, this is sad

[The Ultimate Fartkno]

Even by pun standards, that's udderly horrible. I have quite a beef with you, my friend.

Re:Even by petty French standards, this is sad

[The Ultimate Fartkno]

I don't know who you are, but you have quite a bit of nerve to come stampeding into a conversation you weren't involved in. Have you no manners? You act like you were born in a barn. I suggest you think before you post next time, lest you re-veal yourself to be more of a boor than you already have.

Re:Even by petty French standards, this is sad

[Reziac]

That's a good point. Where does something become "restricted" from further sales -- at the retail level? At the wholesaler? at the initial processor of raw materials?? at the point of origin (mines, farms, sheep, etc.) for said raw materials?

I can just see it... "You may not resell this sweater without permission from all the sheep whose wool was used to create it."

Re:Even by petty French standards, this is sad

[porcupine8]

3rd party sales while doesn't direcly effect the bottom line it does get product awarenes of your goods.

I would say it DOES affect the bottom line. Let's say I'm choosing between a Toyota and a Honda, pretty much equivalent models for $20,000 each. If I know I can resell the Toyota five years from now for $10,000 but that Honda won't let me resell the Honda ever, well, the Toyota just became a lot cheaper than the Honda in the long run!

Now, some people may not think this way when it comes to designer bags - but a LOT do. There are many women who can only afford to carry around a collection of $500-1000 bags because they keep one for a couple of months then sell it to a consignment shop for half price to help buy the next one. Still an expensive hobby, but suddenly within the reach of someone who's upper-middle-class instead of only celebrities.

Re:Even by petty French standards, this is sad

[Nursie]

"The French government and courts have a long history of issuing prejudiced laws and decisions in favor of French companies"

The US Government and courts have a long history of issuing prejudiced laws and decisions in favour of US companies (look at online gambling and a billion other things)

The British Government and courts have a long history of issuing prejudiced laws and decisions in favour of British companies (see the fiasco around BAE systems and the serious fraud office being stopped from investigating them for "National Security" reasons)

Everyone's at it. And the people of the whole world are the losers.

Re:Even by petty French standards, this is sad

[porcupine8]

My point (which I realized after I hit post I never stated directly) was that it can directly affect the bottom line because people are more likely to buy something they can resell than something they can't.

The example you give is an extreme case where it sounds like the market was flooded with used items due to the company screwing over their resellers, plus those people could have afforded new ones if the used ones hadn't been available.

People buy cars with the intention of selling them after a few years. People who buy older used cars often can't afford the new ones anyhow. If a car manufacturer suddenly stopped allowing their cars to be sold used, they would get far fewer new purchases because of it. Same for these people and their handbags - all the people who buy designer items BECAUSE they can then sell them at a consignment shop later. The people who then buy them on consignment could never afford them new. Cutting off any sale of a used handbag would result in fewer new sales, because the people who had been buying then selling would stop AND the people who had been buying used couldn't afford to start buying new.

Re:Even by petty French standards, this is sad

[S.O.B.]

I've never seen someone so shamelessly milking a pun.

Re:Even by petty French standards, this is sad

[Palinchron]

The difference is that on the cases you mention, you aren't contractually bound; instead, you are bound by the law. The people producing and selling these items don't set these restrictions, the government does.

First sale?

[llamalad]

Does France not have anything along the lines of the 'first sale' doctrine?

http://en.wikipedia.org/wiki/First-sale_doctrine

Re:First sale?

[Lord Crowface]

Indeed they do. It's called "Exhaustion of Rights" and is an EU-wide legal doctrine. At least in Germany, interpretations of this have gone so far as to completely void the "no resale" clauses in licenses for products like AutoCAD and various OEM releases from M$, but I'm not sure if the French interpret it quite as broadly.

Here's the Wikipedia article, for what its worth: http://en.wikipedia.org/wiki/Exhaustion_of_rights

L@@K

[larry bagina]

A++ douchebags, would sue again.

Re:Mega-dollars?

[Anonymous Coward]

When the hell did that become any sort of standard?

Three kilodays ago.

Not 'property'

[twatter]

It doesn't matter that the term is enclosed in quotes in the submission. We're talking about trademarks here. If these companies don't take action regarding this they will be allowing their trademarks to be diluted, making them more and more difficult to defend.

This has nothing to do with IP.

Any defendant in court for trademark infringement can bring up the fact that the plaintiff is allowing eBay to sell thousands of cheap imitations. And they would win the case based on that, probably.

Trademark law pretty much requires things like these be done, and the companies have no choice but to go after the entity facilitating the sales.

It's not nice, but that's what it is.

Received from eBay yesterday, revised terms!

[ciscoguy01]

Received from eBay yesterday, revised user agreement and privacy policy terms. What a coincidence!

Received: Jun-30-08
Changes to the eBay User Agreement and Privacy Policy

I'm writing to let you know that the eBay User Agreement and eBay Privacy Policy have been updated, effective immediately for new users and on August 13, 2008, for current users.

The most important thing to keep in mind about this update is that your rights, and our responsibilities, under the User Agreement and Privacy Policy have changed very little. This update was spurred by an international project, rolling out now, that will make the user agreements and privacy policies for eBay platforms around the world much more consistent. This way, when you interact with any eBay platform around the world, you can be sure that very similar policies apply to you no matter where you do your transactions.

There is one substantive change to our User Agreement I'd like to point out. We changed the "Content" and "Liability" sections to accommodate a new program we're rolling out worldwide. That program makes catalogs of content and product descriptions available to sellers, so they can easily include complete and up-to-date product information for the items they list.

Similarly, we've revised the Privacy Policy's "Disclosure" section to make sure that the language we've used there accurately reflects the ways in which we're transferring information between companies in the eBay Inc. corporate family to streamline services, fight fraud and provide you with the best, most relevant experience when you use any of the sites or services of the eBay corporate family.

With these changes, we continue to make sure that our legal documents are consistent with the ways our sites and services are evolving and that we meet the needs of our user community. We hope you'll agree that these changes will make the eBay sites and services work better for you. If you accept the new User Agreement and Privacy Policy, you don't need to take any action. If you do not wish to accept the new User Agreement or Privacy Policy, please refer to our Help pages for instructions on how to close your account.

Thank you for using eBay and we look forward to many more successful transactions!

Sincerely,

Scott Shipman Senior Counsel -- Global Privacy Practices eBay Inc.

The important change is in the liability section:

Liability
You will not hold eBay responsible for other users' content, actions or inactions, or items they list. You acknowledge that we are not a traditional auctioneer. Instead, the sites are a venue to allow anyone to offer, sell, and buy just about anything, at anytime, from anywhere, in a variety of pricing formats and venues, such as stores, fixed price formats and auction-style formats. We are not involved in the actual transaction between buyers and sellers. We have no control over and do not guarantee the quality, safety or legality of items advertised, the truth or accuracy of users' content or listings, the ability of sellers to sell items, the ability of buyers to pay for items, or that a buyer or seller will actually complete a transaction.

We do not transfer legal ownership of items from the seller to the buyer, and nothing in this agreement shall modify the governing provisions of California Commercial Code 2401(2) and Uniform Commercial Code 2-401(2), under which legal ownership of an item is transferred upon physical delivery of the item to the buyer by the seller. Unless the buyer and the seller agree otherwise, the buyer will become the item's lawful owner upon physical receipt of the item from the seller, in accordance with California Commercial Code 2401(2) and Uniform Commercial Code 2-401(2). Further, we cannot guarantee continuous or secure access to our services, and operation of the sites may be interfered with by numerous factors outside of our control. According

Stupid and dangerous

[khton]

This is not the first time that French courts show a complete misunderstanding of how the Internet works... And this goes even further than net economics.

Most french used cars are still sold via a single newspaper called "La Centrale des Particuliers". Should this newspaper verify that each car is rightfully owned by its seller ? I cannot imagine any judge trying to enforce this...

Hopefully, this judgment shall be broken by the "Cour de Cassation", because it does not make any sense. Maybe the judge was only trying to get some publicity. This happens a lot,

Craig'slist has the right idea.

[jd.schmidt]

While it is VERY silly to expect EBay to prevent all counterfeit items AND that whole resale of trademarked items is scary, it might point out a flaw in their business model. Consider a "consignment" store or pawn shop that takes a cut of each sale and is stocked with stolen and fake items. Eventually, if you have enough of this nonsense, I think it is fair to consider that store a fence and not a legitimate business.

The more EBay takes a "cut" of each sale, the more they become part of the transaction. Perhaps a flat fee. I am sure EBay wants to make as much profit as possible, but if they become a party to each transaction they can't help but take on some liability.

Sales tax revolt

[Just Some Guy]

Sounds like a perfect excuse for the French to stop paying sales tax. If the item doesn't actually belong to you, why should you be responsible for paying for it?

Oh, and I think LVHM might want to explain to government why they've been hiding at least $61M of their property from the tax authorities.

Two problems and some sanity...

[Noryungi]

Before everyone gets on their high horses about this, remember:

1) French companies sued mainly because fake goods were sold on eBay. Selling fake stuff (anywhere, on the net and off) is a big problem for French luxury companies.

2) French companies also sued to prevent people selling real luxury goods at cut prices. This is abusive since it criminalizes legal owners and sellers in order to protect their 'official' resellers. However, eBay has appealed and I am pretty certain this will be struck down by the French courts.

Finally, of course, this leaves the problem of certifying that, let's say a Chanel bag, is the real thing on eBay and not a fake. This could be helped by supplying some sort of authenticity voucher that sellers could produce if asked by eBay.

That would solve the problem: eBay could simply say to a seller "please show us the voucher that says this is the genuine article or pull your offer". Yes, I know, what's to say the seller is not going to produce a fake voucher, but still.

The thing with France right now is that they are trying to combine two things: e-commerce and checking that articles sold are genuine. Not an easy thing to pull off, and these fscking French companies are not taking the right path (suing instead of cooperating). Then again, maybe eBay just refused to cooperate, and they thought suing was the easiest way to obtain results and a more cooperative eBay.

So - as strange as it may seem right now - this could have a positive impact on the quality of eBay auctions. Think about it for a moment, before posting stupid French jokes.

Re:Reason to love America

[elrous0]

You didn't read up on this case very well. The suing companies were not only saying that ebay had the obligation to remove counterfeit goods bearing their name, but unauthorized sales of LEGITIMATE goods as well. In other words, the companies were claiming the right to control ALL AVENUES of sale and resale of their goods (asserting that only they can authorize any sale or resale of their original product). And, sadly, the court agreed with them.

Re:Mega-dollars?

[A.K.A_Magnet]

No, that would be a Mebidollar (I assume you were meaning $2^20, since $2^10 would be a Kibidollar). ;)

eBay doesn't care about finding real fakes

[sjbe]

I understand forgeries, as it could tarnish the brand names. But for legit items let them resell them.

You are right of course but eBay's problem is that eBay cannot be bothered to seriously check. The ONLY way to be reasonably sure an item is not a fake is to inspect it in person and have a full documentation trail detailing who bought it, where they bought it, and when. This is what they do in the art world to authenticate pieces. Since eBay never physically inspects ANY merchandise sold on their site, there is no way they can possible determine if an item is a fake.

From my own experience I've sold some high end luxury goods on consignment through eBay. (Louis Vuitton, Gucci, Rolex, etc) In each case I had a full documentation trail, the parties were known to me or my close associates, and we had the items physically inspected by an expert in that merchandise to ensure authenticity. Through eBay's VeRO program we were accused several times of pedaling fakes even though we had the real thing. There was no opportunity for us to prove that we had authentic merchandise though we certainly could have done so were there any means to plead our case. Our auctions were summarily taken down and we were given strikes with no recourse of any kind. To be sure there are a TON of actual fakes on eBay but eBay sure as hell can't tell the difference. Worse, to avoid lawsuits they've given brand holders full power to remove auctions that they should have no power to influence under the first sale doctrine.

The problem is that eBay's incentives are all wrong - they just want their fees and no lawsuits - and they've handed responsibility (through VeRO) to trademark and brand holders whose incentives actually contradict the law. Louis Vuitton doesn't want ANY of their products sold via eBay regardless of authenticity. So eBay users get screwed in the deal either way. Sellers can have their auctions pulled for no good reason and buyers can't be reasonably sure of authentic products because eBay refuses to check. The winners here are definitely not you and me.

Re:eBay doesn't care about finding real fakes

[croddy]

VERO is also the program through which Ebay has given Scientology carte blanche to illegally infringe on first-sale rights of people with used RTC gear. Until Ebay takes a modicum of responsibility for the rampant and obvious illegal abuse of VERO (or cancels it altogether) I want nothing to do with Ebay.

Unfortunately, everything Ebay's help pages say about canceling your account is a falsehood. I've been asking them to close my account since February and I am still able to log in and I still get their weekly spam messages about my favorite sellers.

Ebay was cool back when it had something resembling competition. Now it's just another bloated, useless pig doing the bare minimum it must to continue collecting monopoly rents.

Not about fake goods at all

[Ed Avis]

Indeed, this has little to do with counterfeiting. From the BBC news article:

Four perfume brands - Dior, Guerlain, Kenzo and Givenchy - sued for what they called "illicit sales" of their products.
They alleged that even auctions involving their legitimate perfumes were illegal, because only specialist dealers were permitted to sell them.
The court barred eBay from selling the four perfumes in future.

It will be interesting to see what Brussels has to say about this.

Re:GO USA!!!

[Anonymous Coward]

OH my GOD a FRANCE is INVOLVED!!! QUICK, hate speech!!! GO USA!!!!!

Blind to the facts

[Senjutsu]

"The Rolex trademark recordation with Customs indicates "Import of Goods Bearing Genuine Trademarks or Trade Names Restricted." This means that genuine Rolex products can only be imported with the permission of the trademark owner, Rolex Watch U.S.A. Inc. A private individual can hand carry one Rolex watch from a trip overseas without obtaining permission. Bring in more than one, and they will all be seized as a trademark violation. Purchasing a Rolex from overseas by mail is also a trademark violation." Title 19 U.S.C. 1526(a) and (b)

Buy a legitimate Rolex from a foreign seller on eBay and try having it sent to you, and see how your tune changes.

The "designers" need to be taken down a notch

[billcopc]

I'm sure everyone caught it, but for yet more emphasis:

1) eBay illegally allowed legitimately purchased and owned products made by LVMH to be resold on its website by 3rd parties not under the control of LVMH, and 2) not doing enough to protect LVMH's brands from illegal sales

LVMH can tell their retailers how to sell the products, as they have a direct contractual relationship. They CANNOT tell the end-user, or anyone else beyond that first hop, what to do with it, what to charge for it, or which orifice to insert it. There's no licensing agreement, you don't have to sign a 2-page contract in order to buy a stupid shiny watch or pink bag. There's no LVMH auditor that comes to your dressing room and checks your papers every time you spritz on a bit of Eau-de-Poopoo.

Next point: illegal sales (counterfeit items). Ebay does not handle the actual items. Ebay does not have omniscience and superman laser vision. Ebay has no way to even guess that a seller is peddling fakes. In many cases, even the end-user can't tell the fake from the original (which says a lot about how cheap the real one is!). With the intrinsic right of resale, you can't outlaw resale, so the guy selling fakes is indistinguishable from a reseller (well, except for his plentiful stock, delivered every week from Singapore)

The fact that a French court actually upheld this ridicule tells me Ebay should withdraw its services from France, along with all its subsidiaries and sister companies. If France wants to be hostile toward online businesses, then they're more than welcome to do without. Some smaller, skeevier company will fill in the void, until they get burned as well. The French government is a mockery, and everyone has the freedom to stand at their border, point, and laugh.

Troll? Nice....

[NeutronCowboy]

I take it someone with mod points and no knowledge of France had a stick up his butt.

Look. I lived there for nearly 20 years. Some things are great about it, some things suck. But there are a couple of things that are critical to know if you want to have any chance at understanding how the French work:
- The state - and its bureaucracy - is the foundation of the nation.
- It's a country that is split along many lines.
- It's a country with a (self-defined) mission.
- It is conservative, but has a history of progressing through revolutions.
- Art and culture come first.
- Anglo-Saxon style survival of the fittest and invididualism is abhorred.

Pretty much everything follows from that.