eBay will challenge French protectionism

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Unless you’ve been asleep for the last 24 hours, you’ve probably heard that eBay were fined €38million yesterday by a French court, for not doing enough to stop the sale of counterfeit merchandise on their site. Le Monde trumpeted that “eBay will be forced to change its business model”, and I’ve seen a disturbing number of sellers saying that the fine .

What seems to have been missed in many of the reports, but is potentially much more significant for sellers, is that eBay have also been banned from allowing the listing of four perfume brands. Kenzo, Guerlain, Dior and Givenchy had sued eBay, not over the sale of fakes, but because genuine merchandise sold on the site was not sold through the manufacturers’ official distribution channels.

The court cited the need for specialist knowledge when selling these products, just as Lancome did when they decided to sue both eBay and unauthorised sellers of their produce. This, frankly, is nonsense: we’re talking about perfume you can pick up off the shelf in Boots, not pharmaceuticals. It’s restriction of trade, and shouldn’t be allowed under European law. By getting their case heard on the back of the LVMH counterfeiting issue, these perfume brands have managed to neatly obscure that their case is all about protectionism. If you get a bottle of Poison for Christmas, and you’d really rather have a bottle of Flowers, you can now forget selling one on eBay and picking up the other at the same time: French law now apparently thinks this is illegal. This cannot be good news for sellers or or buyers: it can’t be good news for anyone but the perfume companies, who can now keep their prices as high as they like.

eBay have said they will appeal the decision. In a statement published on eBay Ink, they said

today’s ruling is about an attempt by LVMH to protect uncompetitive commercial practices at the expense of consumer choice and the livelihood of law-abiding sellers that eBay empowers everyday. We believe that this ruling represents a loss not only for us but for consumers and small businesses selling online, therefore we will appeal … The attempt to use the ruling to confuse the separate issues of counterfeit and restrictive sales suggests that counterfeit suits are being used by certain brand owners as a stalking-horse issue to reinforce their control over the market.

It’s crucial that the two issues are kept separate, because they are different: fakes destroy buyers’ trust in eBay; bargain branded goods are what keep them coming back. However much as sellers we might want eBay to do more to keep fakes off the site, no seller should be supporting the perfume houses’ attempts to control their markets.

8 Responses

  1. Sue, eBay will appeal this judgement and the portion regarding the perfume should be stricken (I’m not sure if they can throw out just one segment of the suit or not.), but we can’t let eBay off the hook on this.

    Their indifference is what caused these lawsuits to see the light of day in the first place and eBay are using that portion of the lawsuit to get out of any responsibility for the counterfeits.

  2. The issues are separate to a degree, but the link between the issues is what has led to a restraint of trade. Generally this official resellers and specialist knowledge angle should have been laughed out of court, but the counterfeit issue opened the window of opportunity.

    So unfortuantely they go hand in hand.

    As someone who has been critical of ebay lately, I find the reaction of some ebayers over this issue to be somewhat ridiculous. I can understand sniggers that ebay who are trying to impose paypal on Australia are complaining about restraint of trade, but the bottom line is that this is a threat to all independent traders, other companies will be watching this unravel with one eye on their own protectionist angles.

    So you’re right, no seller should be supporting the perfume sellers attempts to control their markets.

    Those selling fakes are the people who need kicking off ebay, maybe if they’d concentrate on that rather than silly DSR’s, sanctions and dolphins it would aid them in their case.

  3. Tony,

    Many of those sellers who are applauding this don’t have any exposure to the luxury item business and can’t relate. They don’t see the slippery slope.

    If anyone knows whether a portion of the suit can be reversed or not please comment. I would like to see the portion regarding counterfeits stick.

  4. eBay – impaled opon the stake of uncompetitive business practices by a company that sells Veblen goods. 🙄 For a company that has mastered uncompetitive business habits itself this is terribly ironic. 👿 Bad karma or what?

  5. This seems to be in clear violation of EU primary legislation to
    the extent that I’m surprised its even having to be appealed.
    My first pass at it is that some national courts still seem to be
    in the habit of finding in favour of their own nationals even in
    the face of the Community law unless and until the cases
    are appealed simply because they can. This judge is clearly
    in need of a good kicking!

  6. Yes it is a slippery slope. How long before all companies start saying “you can only sell our goods through official channels”? Record companies are already trying to restrict the sale of promos, how long before they try to restrict the sale of second hand CDs? Soon you won’t be allowed to sell anything unless you’ve made it yourself….

    The counterfeit argument is of course a totally different matter.

  7. Ex eBay UK MD and now Senior Vice President, eBay Marketplaces, Europe Doug McCallum has written an open letter to all eBay users emphasising the difference between the counterfiet issue and the over zealous enforcement of restrictive sales practices. He says “We will continue to fight against counterfeit but we will not accept outdated attempts to restrict the Internet to the detriment of our community.”

  8. “we do not agree with overly broad attempts to protect uncompetitive commercial practices”
    “Overzealous enforcement of restrictive sales practices are anti-competitive and give you, our buyers and sellers a bad deal”

    Trying to force Australian sellers into only offering Paypal as a payment method…..

    Telling me I have to offer Paypal on eBay UK or I can’t sell….

    What would you call these Doug?


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