For the first time, eBay has been held accountable for the counterfeit items sold on its Web sites. Convicted by a French court of selling counterfeit Hermes products, the online auction giant has been ordered to pay 20,000 euros ($30,000) to the French luxury goods designer.

In its many disputes with brand owners over counterfeit items that find their way to eBay, the online auctioneer has always maintained that it removes listings found to be fraudulent and that liability for those listings rests solely on the seller. Now, a French court has officially said non to this argument when a judge found eBay directly responsible for the sale of counterfeit Hermes handbags by one of its customers. eBay was ordered to pay a fine of $30,000 jointly with the seller who put the bags up for sale and to post the ruling on its French homepage for three months.

According to the ruling, which marks a first in France, “By selling Hermes bags and branded accessories on the eBay.fr site, and by failing to act within their powers to prevent reprehensible use of the site,” the seller and eBay “committed acts of counterfeiting and imitation of French brand names…to the detriment of Hermes International.”

This is not the first time that eBay has faced legal action. Other designer brands have cases pending against the online giant: Both the Louis Vuitton and Dior Couture fashion houses have accused eBay of collusion with counterfeiters by not imposing and controls over the transactions – and taken it before the Paris commercial court to demand 20 million and 17 million euros, respectively, in damages. Last September, cosmetics brand L’Oreal also started legal proceedings against eBay in five European countries over the sale of counterfeit perfumes. The company is already also being sued in the US by the jeweler, Tiffany, for selling faux Tiffany items on its Web site. 

eBay has always claimed that, because it never handles the goods placed for sale on its site, it is unable to determine whether a product is counterfeit or not. And once again, eBay has pointed to its Verified Rights Owner Program (VeRO) as proof that it is doing its best to enable intellectual property owners to easily report abuse. Indeed, the court has acknowledged that the auction house has closed some loopholes through this anti-counterfeit measure. According to Richard Ambrose, who heads eBay Trust & Safety, “…having counterfeits on the site…make us look bad.”  But he emphasized that eBay needs the cooperation of rights owners to weed the fakes out of the auction site.

Not enough, say some brand owners. Hermes lawyer Emmanuel Colomes countered that “eBay is an active player in the transaction,” offering services to improve the sale as well as intervention with clients. He added, “They are perfectly informed of the transactions since they take a percentage cut.”

What’s the word on the (virtual) street? Some bloggers say that since eBay does not warehouse any of the products but simply facilitates sales, prior courts have ruled in its favor. Others claim that just because eBay doesn’t stock the goods does not mean it should be absolved of liability – because they know the price being asked for the products (i.e., “if it’s too good to be true, it probably is”).

As a relatively new business model, eBay presents a lot of challenges. But the recent French court decision came solidly on the side of brand owners and may weaken the framework on which eBay’s billion-dollar business is built, forcing them to better vet the goods on which they’re profiting everyday.