EBay, the online auction website, was ordered yesterday to pay €40 million (£31.5 million) in damages to LVMH, the French luxury goods group, for selling fake handbags, perfumes and haute couture.

The Paris Commercial Court said that eBay had committed “serious faults” through its failure to keep counterfeit goods off its site.The judges ruled that eBay had damaged the reputations of Louis Vuitton and Christian Dior Couture by selling counterfeit products. 

LVMH in giving evidence said 90 per cent of 300,000 products labelled Dior and 150,000 handbags purporting to be Louis Vuitton sold on eBay in the second quarter of 2006 had been fake. 

After a two-year legal battle, the Paris court told eBay to pay €19.28 million in damages to Louis Vuitton, the leather goods arm of LVMH, the luxury retail group owned by Bernard Arnault. The judges ruled that eBay had damaged the reputations of Louis Vuitton and Christian Dior Couture by selling counterfeit products.

LVMH said "The court has dismissed as without foundation the argument used by eBay to exonerate itself that its clients are solely responsible for their illegal undertakings when transacting. eBay is not a host but a broker."

EBay was further ordered to pay  €3.25million to four of LVMH's perfume brands: Christian Dior, Givenchy, Kenzo and Guerlain. The dispute over the perfumes was different, with the brands saying that eBay had no right to sell even authentic goods online because it infringed exclusive contracts with specialist dealers. The argument was upheld.

€17.3 million was ordered to be paid to Christian Dior Couture, which is also controlled by French billionaire Mr Arnault. The court said that eBay would be fined €50,000 a day if it failed to stop its members from advertising the four perfume brands on its sites.

EBay has been ordered to post the ruling in French and English on all its sites for the next three weeks.(A quick check 1/7/08 on the .co.uk, .fr and .com websites and no ruling was obvito be seen. Only one LVMH hand bag was for sale.)

EBay  founded in San Jose, California, in 1995 immediately appealed the decision.
A statement released by te company read as follows.

"We will fight all these decisions in the name of eBay users, and we have decided to appeal," eBay said in a statement.

"If counterfeit goods are put up for sale on our site, we scrap them as soon as possible," it said.

EBay accused LVMH of having a hidden agenda.

"Today's decisions are not about fighting counterfeiting. It's about LVMH's desire to protect commercial practices that exclude all competition," it said.

A flurry of other claims by 'luxury goods' manufacturers are now expected to be launched.

In another case this month, the auctioneer was ordered to pay damages of €20,000 to Hermès. Last year L'Oréal, the cosmetics group, began legal action against eBay in five European countries, including Britain and France, over the sale of counterfeit perfume.