France's eBay ruling may affect the US

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On June 30, the Paris-based Tribunal de Commerce ordered eBay to pay $61 million to French luxury goods group LVMH for allegedly allowing the sale of counterfeit goods on its Web site. The ruling raised eyebrows throughout the e-commerce world, especially in light of a similar lawsuit filed against the online auctioneer by Tiffany & Co. in the US.

The site was accused of having counter­feit products for sale, allegedly including fake versions of designer brands such as Christian Dior and Louis Vuitton. EBay is appealing the ruling.

While the French ruling may change the way online retailers do business overseas, some legal experts say it will not have much of an effect domestically, and does not guarantee a similar outcome in the Tiffany case.

In most US case law, Internet platforms generally have “some exemption of legal liability,” says Ronald Mann, a law pro­fessor at Columbia University. “In this country, there is already precedent that Internet companies are exempt from some liabilities that other venues are not.”

Tiffany & Co's suit accuses eBay of turning a blind eye to sales of counterfeits, describing it as a “rat's nest” of fake goods. Tiffany claims that 95% of all the items sold on eBay under the Tiffany trademark are fakes and that the site's measures for policing this trade are inadequate.

Mann said in other countries, such as France — where there isn't as much legal precedent pertaining to the Internet — such a ruling could influence future cases. EBay also faces action from L'Oreal in the UK and five other European countries.

EBay says it takes down counterfeiters “swiftly” but that the case was about more than the sale of counterfeit goods.

“We believe that this ruling represents a loss not only for us but for consumers and small businesses selling online,” the company said in a statement regarding the French ruling. “It is clear that eBay has become a focal point for certain brand owners' desires to exact ever greater con­trol over e-commerce.”

The company added that the ruling pro­moted “anti-competitive business practice.” Paul Rapp, an adjunct professor of art and entertainment law at the State University of New York at Albany, agrees.

“It seems anti-competitive, and a restraint of legitimate trade,” he says.

Rapp also questioned the legitimacy of LVMH's claim that eBay doesn't ade­quately monitor counterfeit goods on its site. “If it was a case where there was a known seller of counterfeit goods on the site, and eBay was told about [that] and did nothing, that's different. But that's not the case here,” he says. “How is eBay going to determine [that] every good [on its site] is not counterfeit?”

Other e-commerce companies took notice of the ruling. Mark Griffin, general counsel for Overstock.com, said while the company is not currently operating in any overseas markets, it soon will be, and so must continue to be vigilant regarding counterfeiters.

“We have people who work with our auction site who can identify goods that are lookalikes,” he says. “We are not per­fect, but we are very responsive.”

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