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A French court said today that eBay (NASDAQ: EBAY) cannot be held liable for the sale of counterfeit perfumes on its website. The court found that eBay had fulfilled its duty to make a reasonable effort to prevent sales of counterfeits, and could not be held responsible beyond that.In a press release, eBay said that "This is a clear legal victory for eBay and important victory for French consumers. We are delighted that eBay's meaningful efforts to fight counterfeits online have been recognized by the court, as has our status as an internet-hosting provider. Today, 99% of all items listed on eBay have no suspicion of counterfeits."
Shares of eBay aren't reacting strongly to the ruling because it only effects the company's operations in France, which are a small part of its overall revenue base. A number of luxury goods manufacturers have sued eBay, arguing that the site hasn't done enough to prevent the sale of counterfeit items -- eBay says it does what it can and then as a third-party provider of services, it can't be held responsible for everything its sellers do: It's like suing a grocery store because you were scammed by something advertised on a bulletin board in the lobby.
eBay will continue to fight these legal battles, and winning them is crucial to the company's future: If eBay can be held liable for the products sold on its site, the whole business model will fall apart and eBay could be restricted from taking listings in a number of product categories.
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