LVMH and eBay end knockoff goods battle

American auction site eBay and French luxury goods maker LVMH have struck an agreement that ends a years-long court battle over the online sales of knockoff products. However, the details of the deal are sparse for the moment.

The French luxury goods conglomerate LVMH and Internet auction site eBay on Thursday said they had reached an agreement to end a years-long legal battle over the sale of counterfeit goods.

A cryptic joint statement gave no details of the deal but simply said it was aimed "at protecting intellectual property rights and fighting the sale of counterfeits online."

The agreement meant that "the two firms have put an end to ongoing legal proceedings," it added.

A host of perfume and cosmetic brands under the LVMH umbrella, including Christian Dior, Givenchy and Guerlain, had sued eBay for allegedly allowing online trade in counterfeits.

In 2008, a French court ordered eBay to pay nearly €40 million ($54 million) in damages to LVMH for selling Vuitton and Dior fakes as well as counterfeit Dior, Guerlain, Givenchy and Kenzo perfumes.

The auctioning site appealed, but in September 2010, another court confirmed the sentence, while lowering the fine to €5.7 million.

France's highest appeals court partially overturned that ruling in 2012, however.

The Cassation Court said the lower court that had issued the sentence did not have jurisdiction over eBay's US website but only on its French and British sites, and ordered the case be rejudged.

According to the Comite Colbert, which groups 75 French luxury brands, the sale of counterfeits represents a loss in earnings equivalent to about 10 percent of the companies' total turnover.

Many online distribution platforms have signed a charter launched in 2009 that pledges to fight against counterfeits, but eBay has not yet done so.

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Hermès vs LVMH: Battle of brands ends in truce

A four-year war between two titans on the global luxury products battlefield, Hermès and LVMH, ended with a truce on Wednesday, driving down Hermès shares and leaving LVMH with a big profit.

Hermès vs LVMH: Battle of brands ends in truce
The battle between French brands LVMH and Hermes has ended in a truce. Photo: Shutterstock

The agreement ends for five years at least any ambition by LVMH, with vast interests from champagne to luggage, to embrace Hermès, known for silk scarves and high-fashion handbags.

LVMH, a leader in the global luxury business, had built up a holding of slightly more than 23.0 percent in smaller rival Hermès, opening hostilities by first acquiring 14.2 percent discreetly in 2010 by means of complex financial instruments.

This holding is now worth about €6.8 billion ($8.9 billion).

The Hermès family, shocked at this initial incursion into their share capital, closed ranks and grouped most of their shares in a holding company.

This had the effect of ring-fencing control in the boardroom and closing the door to any takeover by LVMH.

Litigation followed, largely over the legal and financial techniques used by either side, to gain the upper hand.

Under the deal announced by LVMH on Wednesday, and brokered by the president of the Paris commercial court, LVMH is to distribute all of its shares in Hermès among its own shareholders, and undertakes not to buy any Hermès shares for five years.

The immediate effect of this end to prospects of a bidding war for Hermès, pushed down Hermes shares by 9.38 percent to €238.10.

Sources close to the matter said that the agreement would generate a capital gain of about €2.8 billion for LVMH, and LVMH shares rose by 2.10 percent to €135.85.

Since LVMH revealed in October 2010 that it had secretly built up a holding, shares in Hermes had risen by 64 percent to €262.75 late on Tuesday.

LVMH would therefore have made a profit from the Hermes shares given the sharp rise in the stocks' value.

The agreement was structured so as to limit the damage to Hermès shares, since an outright sale of the holding could have hit the price far harder.

LVMH was founded by French business tycoon Bernard Arnault, and his own holding company Groupe Arnault, as a shareholder in LVMH and in another Hermès shareholder Dior, will end up with 8.5 percent of Hermès once the shares have been distributed, an operation to be completed by December 20th.

At brokers Barclays Bourse in Paris, director Franklin Pichard said: "The speculative premium for Hermès shares has disappeared, hence the plunge in the price this morning. However, investors welcome the distribution to come for shareholders in LVMH and Dior."