Louis Vuitton Wins $63 Million in Damages against eBay

LVMH, a conglomerate of high-end brands that encompasses labels such as Louis Vuitton, Dior and Guerlain, as well as Hennessey cognac, launched its own research in 2006 as to what proportion of its branded goods sold on eBay were counterfeits. The company found some 90 percent of Dior and Louis Vuitton auctioned on the site were fakes.

In addition to the $63 million awarded LVMH for what it deemed eBay's "culpable negligence," the court forced eBay to pay nearly $20 million in damages for unauthorized sale of the brand's perfumes, which are only legally sold at licensed retailers.

The online auction site immediately appealed Monday's ruling. The site maintains that it spends about $20 million a year on shutting down sellers of fakes and that the ruling was to allow high-end brands to keep up prices.

The LVMH settlement came less than a month after French fashion house Hermès, known for such signature items as the oft out-of-reach Birkin bag, won $30,000 in damages from eBay and sellers over auctions in 2006 of two counterfeit Hermès bags.

The Hermès decision stipulated that eBay run a statement about the court case on its French operations’ home page for three months. The court said that both the site and the sellers were guilty of counterfeiting “by selling Hermès bags and branded accessories on the eBay.fr site and by failing to act within their powers to prevent reprehensible use of the site.”

Besides the infringement on intellectual property laws, the clandestine nature of the counterfeit fashion industry lends itself to supporting other illegal activities.

Valerie Salembier, senior vice president of fashion magazine Harper’s Bazaar, said, “When women learn that this money funds child labor, terrorist organizations and drug cartels, they say, ‘not me.’”

Fashion fakes constitute a $600 billion worldwide industry. Children as young as eight are chained to workstations, forced to sew knockoff wallets. New York City Police Commissioner Ray Kelly alluded that fashion counterfeiting rings helped fund the 2004 Madrid train bombings.

The advent of e-retail has only exacerbated the fashion industry’s struggle against fakes. Nikolay Livadkin, the anti-counterfeiting manager at Louis Vuitton, believes online transactions account for about 20 to 30 percent of trade in counterfeit goods.

Pushing the battle against fakes further uphill is a popular belief that they level the fashion playing field. A study by U.K.-based law firm Davenport Lyons showed that 68 percent of those polled said that buying counterfeit items should not be a crime.