Luxury brands fear regulation favouring online sellers

Another phase has opened in the struggle over online marketing of luxury products. The European Commission has started work on a new regulation to be brought into operation in 2010 that would allow online commercial enterprises such as eBay to have a status comparable to that of boutiques. eBay has started lobbying in Brussels but is being countered in a new offensive launched by the major French luxury products groups to protect their market and their position.

Last July a Paris tribunal found for the LVMH group in a case involving the sale of allegedly counterfeit cosmetic products. LVMH is now leading the counter-offensive in Brussels and has been joined by Chanel, Hermes and others with the support of the so-called Colbert Committee, a grouping of the major French luxury brands. Their argument is that if Europe does not act to protect the sale of cosmetics from online marketing, their retail networks will be under threat. They also argue that if the Commission were to liberalise the market, it would open the door to the expansion of counterfeiting. Counterfeit sales of cosmetics and other luxury goods are already estimated to be worth around €200bn annually, or nearly as much as the total value of the world luxury products market.

LVMH has said that 90% of the perfumes and other luxury products sold on the internet under the Louis Vuitton brand are counterfeit copies. eBay's case is that consumers are entitled to free access to its products at favourable prices. A spokesman for the group said there was no conflict with the luxury products sector and they are not calling for the end of selective distribution. eBay was forced to pay €40m in damages to the selective distribution system of LVMH last year and was barred from selling Guerlain, Dior, Kenzo and Givenchy branded perfumes through its French site.

The current legal position dating to 1999 and reaffirmed in 2004 is that top-of-the-range perfumes and cosmetics can only be marketed by resellers who own at least one physical retail outlet. Pierre Gode, an adviser to LVMH, said that a luxury product was a product apart, sold in a particular context with specific services which required substantial investment to set up.