On Monday, June 30, eBay was ordered to pay a record fine. The on-line auction site will have to pay almost 40 million ($60 million) in damages to 6 brands in the LVMH luxury group Louis Vuitton, Christian Dior Couture and 4 fragrance brands: Christian Dior, Kenzo, Givenchy and Guerlain, for violating their excusive distribution network. Even if eBay decides to appeal, many analysts believe that the decision will mark a turning point for on-line sales of fragrance and luxury items, and that eBay will undoubtedly have to rethink its economic model. This is not the first suit against eBay, nor, undoubtedly, will it be the last. Numerous luxury brands, like Rolex, Tiffany and Hermès have already sued the site. Other convictions may well follow, especially for counterfeit fragrance bottles for brands in the LOreal group. Earlier fines were less harsh (Hermès was awarded twenty thousands Euros ($30,000) in damages for counterfeiting), but if this 40-million fine is confirmed in appeal it could be extremely dissuasive. Now that sales of decanted fragrances on eBay have been stopped (see our August 27, 2007 report), we may be witnessing the end of fragrance sales on eBay period. Indeed, more and more brands are taking control of on-line sales of their fragrances by creating their own on-line sales site or e-corners on the sites of fragrance chains like Sephora and Marionnaud. As for decanters, brands havent gone after them yet.
