EBay won a closely watched court battle against luxury jeweler Tiffany, easing Wall Street’s fears that the online auctioneer might face a costly revamp of its business model to police counterfeit goods.
US District Judge Richard Sullivan ruled that Tiffany – which called eBay a “rat’s nest” of fake merchandise – has lone responsibility for monitoring eBay’s site for knockoffs of Tiffany jewelry.
The long-awaited decision is a reversal of fortune for eBay. Last week, a French court ordered the online auctioneer to pay LVMH $63.2 million, and barred it from selling the Paris-based firm’s cosmetics and fragrances under brands including Christian Dior and Givenchy.
In April, a German court ordered eBay to actively prevent the sale of counterfeit Rolex watches.
EBay, which derives nearly half its revenue from auctions within the US, argued that the luxe labels were suing partly to quash competition from upstart online sellers and called the court ruling “a victory for consumers.”
Tiffany countered the decision by saying the ruling, “allows sellers of counterfeit goods on eBay to victimize consumers,” saying the Web giant ought to screen for fakes the same way it does for drugs, guns or pornography.
“We’d be very surprised if [the ruling] wasn’t appealed,” said James Swire, a lawyer for Tiffany.
Judge Sullivan didn’t buy testimony from Tiffany CEO Mike Kowalski, who said items sold in lots of five or more should be banned from eBay’s site on the grounds they were probably counterfeit.
“Policy makers may yet decide that the law as it stands is inadequate” to police fake goods as e-commerce grows, Judge Sullivan wrote. But “when eBay possessed the requisite knowledge, it took the appropriate steps to remove listings and suspend service.”
Legal experts said it’s possible eBay lost the cases in Europe partly because the courts were more sympathetic to the luxury industry, which is especially important to the French economy.