Monday, June 30th, 2008

eBay Vows to Fight Following Overreach by LVMH

Earlier today, the Tribunal de Commerce in Paris, France ordered eBay to pay 38.6 million euros ($61 million) in damages to the French luxury goods company Louis Vuitton (LVMH), regarding the sale of counterfeits online.

The ruling stems from a lawsuit filed by LVMH back in the Fall of 2006. Since that time eBay has invested tens of millions of euros in stopping counterfeit goods appearing on the site. In 2007 eBay suspended approximately 50,000 sellers. eBay also blocked 40,000 previously suspended sellers from coming back.

That said, LVMH is claiming that 90% of LVMH goods sold on eBay are fakes. I’d like to see how this number is arrived at, given the extent to which eBay has invested in combatting this problem.

eBay is pointing out that the ruling actually goes well beyond the battle of counterfeits on the site and argues that this decision could, in effect, eliminate legitimate competition in the marketplace should it hold up.

eBay Inc issued the following statement:
If Counterfeits appear on our sites we take them down swiftly, but today’s ruling is not about our fight against counterfeit; 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. It is clear that eBay has become a focal point for certain brand owners’ desire to exact ever greater control over e-commerce. We view these decisions as a step backwards for the consumers and businesses whom we empower everyday.

We believe that the overreach manifests itself through an attempt to impose, in France, a business model that restricts consumer choice through an anti-competitive business practice.

The ruling also seeks to impact the sale of second-hand goods as well as new genuine products, effectively reaching into homes and rolling back the clock on the Internet and liberty it has created. 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.

eBay does more and more to combat counterfeit. We invest more than $20 million each year to ensure counterfeit goods are found and removed. We partner with over 18,000 brand owners around the world to identify and successfully remove counterfeit goods and employ over 2,000 people to carry out this fight on a daily basis. When we find counterfeit goods on our sites we take it down.

Overzealous enforcement of restrictive sales practices are anti-competitive and give consumers a bad deal. This is recognised by European Union policy-makers who are seeking to create a better framework for online sales to promote e-commerce in Europe. We support a free and fair market in Europe and the benefits this will bring for our sellers.

eBay will continue to fight against counterfeit and continue to fight for consumer value through the promotion of e-commerce.

For more information on how eBay currently protects intellectual property, visit the Verified Rights Owner (VeRO) Program site.

Cheers,
RBH

Tagged: counterfeit, ebay, ecommerce, lawsuit, lvmh, tribunadecommerce, vero

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sandiOn 06.30.2008 at 9:45 am Said:

Richard, the truth is ebay does not police its own site. The courts have once again stated as much.

This is not about brands, courts, it is about ebay not doing their job.

If you feel ebay was actually doing their job, you really do not have a handle on how ebay really works.

JohnOn 06.30.2008 at 9:47 am Said:

Quote: “The ruling stems from a lawsuit filed by LVMH back in the Fall of 2006. Since that time eBay has invested tens of millions of euros in stopping counterfeit goods appearing on the site. In 2007 eBay suspended approximately 50,000 sellers. eBay also blocked 40,000 previously suspended sellers from coming back.”

Question: Is the issue that eBay did NOT enforce counterfeit suspensions PRIOR to the case being filed? 90k after the suit is a lot, no? Why so many after the suit being filed? And even better, why don’t they talk about how many were suspended PRIOR to the suit being filed?

Randy SmytheOn 06.30.2008 at 9:47 am Said:

Richard, sorry to say eBay is not going to get much support on this from those sellers they are so vigorously protecting.

From eBay’s statement:

“… a businees model that restricts consumers choice through an anti-competitive business practice”

The pot calling the Kettle black.

implogOn 06.30.2008 at 9:48 am Said:

How odd it is that a corporation would choose to anger and alienate its customers and now entire countries.

That’s disruption on a global scale!

sandiOn 06.30.2008 at 9:59 am Said:

Louis Vuitton received the lion’s share and was awarded 19.3 million euros, or $30.5 million; Christian Dior Couture received 17.4 million euros, or $27.5 million, and Parfums Christian Dior, Parfums Kenzo, Guerlain and Parfums Givenchy, were awarded around 3 million euros, or $4.7 million.

EBay was ordered to stop selling fragrances and cosmetics from those brands immediately, or face a fine of 50,000 euros, or $79,000, a day.

It will be interesting to watch ebay’s famous “people skills” as they kill current listings.

dimesOn 06.30.2008 at 10:04 am Said:

The VERO program does absolutely nothing for customers who discover that they have received a counterfeit item.

It responds only to copyright holders, and only to take down items that are still listed.

eBay should seriously rethink the “only a venue” excuse, which implies that it rents out space to anyone who wants to place an ad.

If that were the case, eBay would charge the same fees to everyone, would not interfere in how the products are ‘displayed’, and would certainly not become involved in the payment process between the people who buy ad space and the people who purchase the advertised goods.

I checked the eBay.fr site, and there are hundreds of ads still listed for every one of the brands covered in the court case. Given that the court is imposing a fine of an additional €50,000 a day if it fails to stop advertising the sale of the perfume brands, plus another €50,000 a day if it doesn’t remove ads that feature any of the brands, somebody had better get cracking.

DeeOn 06.30.2008 at 10:25 am Said:

I’m reading ebay’s response and I’m shakin’ my head. I’m through being amazed at ebay’s doublespeak but this lil speech is award-worthy.

ebay: “…to protect uncompetitive commercial practices at the expense of consumer choice and the livelihood of law-abiding sellers that eBay empowers everyday.”

HOW can ebay utter the above with a straight face?? They are trying to do the same exact thing in Australia: they are trying to force all Australian ebay sellers to only accepyt PayPal AT THE EXPENSE OF CONSUMER CHOICE!

More ebay doublespeak: “We believe that the overreach manifests itself through an attempt to impose, in France, a business model that restricts consumer choice through an anti-competitive business practice.”

Replace “in France” with “in Australia” and you’ve discovered ebay hypocrisy at its ugliest.

Patricia1On 06.30.2008 at 10:33 am Said:

Perhaps this is the price Ebay has to pay for not taking any real precautions. If they want to be in every aspect of a sale then they can expect to pay up or else tighten things up to a point where they lose sellers and buyers. Now, its their turn to walk the tightrope after enjoying themselves for years! They were far better off being only a venue - but that wasn’t profitable enough for them…now they can pay up for it!

Richard Brewer-HayOn 06.30.2008 at 10:52 am Said:

@ DEE - I can see how the anti-competitive comparison could be made regarding Australia (pot-kettle-black as Randy Smythe put it) at first glance but it is quite different in actuality. No regulation is forcing users in Australia (or anywhere else for that matter) to use eBay for purchases and there are a large number of online retailers out there to choose from when making a purchase of a given item. How is that anti-competitive?

The WSJ Asia published the following article at the end of last week and it addresses what is happening in Australia a little differently to how I’ve seen sellers address here on Ink:

Australia vs. eBay
WALL STREET JOURNAL ASIA
June 26, 2008

EBay is an Internet company that has found a way to make money by offering a product — its online auction platform — that hadn’t existed before. So quick, someone fetch the antitrust regulators.

At issue is eBay’s proposal to require its Australian customers to use its proprietary payment system, PayPal, for transactions. The Australian Competition and Consumer Commission thinks the move is anticompetitive because eBay’s position as Australia’s “leading online marketplace” means that shutting out other payment methods would hobble them unfairly. So on June 12, the Commission issued a draft ruling that would bar eBay from going ahead with its plan. The Commission is now preparing its final verdict on the matter.

Set aside the fact that consumers Down Under have plenty of choices of where to trade their goods online, including Trading Post, an offshoot of telecommunications giant Telstra, Gray’sOnline Auctions, Oztion and several other smaller operators. EBay is certainly more popular, but in a market with low barriers to entry mere success doesn’t an antitrust offender make. The Commission’s investigation smacks of a basic misunderstanding of how market competition really works.

The Commission’s draft finding is also anti-innovation, since eBay’s experiment with a new business model is also at stake here. The company argues the move to PayPal will improve the user experience by reducing payment fraud. But it’s also trying to determine the market price for the valuable platform it provides to sellers. EBay already charges a fee for each auction it hosts. Now it wants to see if use of its platform is worth the additional fees sellers must pay to accept PayPal payments.

Little wonder that the main objectors are the sellers, who pay PayPal’s fees. Most, like Phil Leahy of the Professional eBay Sellers Alliance, say they’re defending consumer choice. But given their own financial stake in the outcome, they’re not exactly disinterested consumer champions. They object to the price eBay wants to charge. No regulation is forcing these sellers to use eBay.

The other “aggrieved” parties are banks and credit card companies such as the Australian Bankers’ Association and American Express, which argue that they’ll lose business if eBay shuts them out. EBay responds that other forms of payment — namely bank-to-bank transfers and credit cards — aren’t as cheap or secure as PayPal. These companies could respond by improving their products. Instead, they’re making their case to the antitrust regulator rather than to consumers.

EBay may be the dominant player today in Australia and in other big markets such as the United States and the European Union. But its position isn’t sacrosant. Established companies and start-ups are trying everyday to find ways of retailing online that will offer maximum benefits to both consumers and sellers. If anything, the low barriers to entry for online traders make the Internet an even more fluid — and innovative — marketplace than most. As Yahoo! has found out recently, the fortunes of technology companies can change swiftly when a better idea comes along.

The danger here is that regulators will stop such innovation in its tracks, to the detriment of entrepreneurs and consumers. This would be particularly ironic in Australia, which has thrived in recent decades by unleashing market forces, not shackling them. The successes of companies like eBay are just that — successes, not threats.

(FYI - I would have linked to the above but it is accessible only with a WSJ account)

permacrisisOn 06.30.2008 at 11:21 am Said:

I don’t care about PayPal- they’re inept. Speaking about this case and just about this case,

The outcome IS a bit heavy handed. No provision is made for any kind of recurring fair-use payment from ebay in acknowledgement that these types of things go on. Nor does the compaint give ebay any means (or incentive) to cooperate directly with LVH either.

For a time, blank CD’s cost a dollar, part of which went to an artists fund when the RIAA feared that people would only copy CD’s and not buy them. Why not do something like that?

Like it or not LVH has got to admit, a lot of the buzz for their products come from people seeing them on ebay which is free advertising.

In addition LVH should have made a clarification between new and used product sold anywhwere online not just as it pertains to ebay.

Bsides all anybody has to do to get around the requirements (and exonerate ebay in the process) is list “purse” picturing an LVH clone with two punched holes and no label, then simply provide a screw-on nameplate shipped inside.

Best match will kill ebay, as is deserved. But this is nothing. 65 million, that’s ebays electic bill for crying out loud.

I did chuckle though, as this came on the same day as the YouTube answering machine message, which said, “eBay will begin to focus only on luxury goods”….

I’ll bet they will.

Randy SmytheOn 06.30.2008 at 11:27 am Said:

Richard,

eBay is a public company that for years has forced its will on competitors, vendors and sellers because they could, to complain now that somebody else is doing the same thing is just plain silly.

All of that previous behavior has come back to bite the corp. in the a$$.

sandiOn 06.30.2008 at 11:30 am Said:

The company argues the move to PayPal will improve the user experience by reducing payment fraud.

Do the ebay executives keeo straight faces when they make bold face lies?

As a buyer, I go pay using Paypal, initially Paypal shows who I am making a payment to, for what and how it is being paid for.

My bank account is ALWAYS first choice. Truth of the matter is I have a savings account opened just for Paypal purposes, it has a sum total of 50 bucks in it. Sorry Paypal is not the company I trust to keep my actual bank information - I am willing to accept the loss of 50 bucks, but no more.

I want to use my credit card. I have to use IE whenver I need to use paypal because the basic html is poorly done and they have loose table tags so if I am not using IE I do not even see the link to select a different payment method.

Ok, there is the first two “negative buying experiences”, 3 if you count paypal thinks I am incapable of protecting myself.

Now I click other payment options, select my credit card, click ok which brings me to a page explaining how I should use my bank account because Paypal will protect me. I click the button saying I REALLY want to use my credit card. Now 5-7 minutes later depending on how Paypal is working that day I finally get to the point where I can pay.

There is absolutely nothing “fun” about using paypal as a buyer.

Now if the buyer accepts Google, the expect me to use my credit card, they do not ask me stupid questions, they do not question my rationale for using a credit cvard.

And all the bull**** Paypal makes me go through has nothing to do with my safety, my buying experience, it deals specifically with Paypal making more money PERIOD.

Sorry, but Paypal has nothing to do with y buying expiernce, Paypal could care less about keeping me safe - my credit card companies does a much better job at that.

TonyOn 06.30.2008 at 12:05 pm Said:

No matter how you dress it up, the move to paypal only in Australia is anti competitive and it’s not surprising that people are going to point that out. There are plenty of places to buy Louis Vutton merchandise, it’s not like ebay is the only venue.

However two wrongs don’t make a right, this ruling is more about restrictive practices than counterfeit goods, sure the counterfeit issue is the stick being used to beat ebay with, but the underlying issue is restricting sales to stop competition, there are some fundamental principles at stake here and ebay are right to appeal, even if their double standards on issues like this will leave users and observers shaking their heads.

RobOn 06.30.2008 at 12:23 pm Said:

At least eBay apparently has an impartial and independent legal venue to hear and fight their case.

Anyone who has ever sold on eBay knows that eBay presumes a Seller to be guilty of any allegation. Further, since eBay is the police, prosecutor, judge, jury and executioner, there isn’t any way to really appeal.

eBay: this is another stepping stone on the way to oblivion.

Chris @ TameBayOn 06.30.2008 at 12:56 pm Said:

I think people may be missing the most important point here. The court cases aren’t just about counterfeit goods and eBay getting an expensive rap accross the knuckles.

It’s about giving manufacturers the right (or not) to decide which channels their products can be sold in and banning seller from reselling legitmate goods, obtained legally, in secondary (or gray) markets.

Imagine if a company like for instance 20th Century Fox suddenly decided they didn’t want their DVDs resold on eBay and a couple of other film companies followed suit. Suddenly most of the media sellers on eBay would be out of business just because a couple of companies objected to the channel being used for their goods.

Think about what you sell and what would happen if the manufacturers whose products you sell took a dislike to eBay as a channel - that’s the major import of the French courts decision.