PARIS — EBay was fined 1.7 million euros, or $2.6 million at current exchange rates, by a court here for failing to prevent the trade of LVMH Moët Hennessy Louis Vuitton SA’s fragrances and cosmetics on its French Web site.

This story first appeared in the November 19, 2009 issue of WWD. Subscribe Today.

The online auction giant was found to have violated an injunction issued in June 2008, requiring eBay to stop French users from buying or selling LVMH fragrance products on any eBay site in the world, even if the products are genuine and unused.

To comply with the injunction, eBay introduced filtering software to check millions of daily listings and make them inaccessible to French users.

LVMH argued that more than 1,300 listings for fragrances and cosmetics still managed to appear on eBay’s French site, while eBay said the listings were posted by users who deliberately circumvented the systems that were put in place after last year’s injunction.

Users of the auction site in France have been blocked from selling or buying LVMH fragrances and cosmetics because their distribution is allowed through authorized specialist dealers.

“This decision constitutes an important step in the fight against unlawful practices,” LVMH said in a statement.

Alex von Schirmeister, general manager of eBay in France, instead called the fine “disproportionate” and the injunction “an abuse of selective distribution” that hurts consumers.

“It effectively enforces restrictive distribution contracts, which is anticompetitive,” he stated.

Appeal hearings in relation to this injunction and two related LVMH cases are scheduled for May.

The maker of Christian Dior, Guerlain, Givenchy and Kenzo perfumes previously accused eBay of counterfeiting and of using some of the key words of LVMH brands in its advertisements.

In September, eBay was ordered to pay 80,000 euros, or $117,820, after LVMH complained key-word searches on the site for its branded fragrances provided links to unauthorized sites selling these products.

EBay is also appealing another court decision that in June awarded LVMH 38 million euros, or $55.7 million, in damages over the sale of fake LVMH merchandise on the auction site.

The online auction company is also locked in a dispute with L’Oréal.

The French beauty giant is appealing a ruling that eBay is not accountable for the sale of counterfeit products on its French Web site. A French court ruled in May that eBay has taken steps to fight the sale of L’Oréal knockoffs.

Pam Withers, a partner at U.K.-based intellectual property firm Marks & Clerk, said the ruling and the attempts by eBay to comply with the injunction prove just how difficult it is to police brands online. “The French courts have also tended to look more favorably on brand owners than most other jurisdictions, which explains the tough stance taken today,” she said. “Undeniably, the French authorities are the most unwavering when it comes to championing the luxury goods trade, yet today’s ruling will not necessarily result in similar decisions elsewhere in Europe.”

Withers noted other online sites appear to be winning the battle over how far any abuse of intellectual property can be blamed upon them directly.

In September, the Advocate General at the European Court of Justice gave a nonbinding opinion in Google Inc.’s favor in a battle with LVMH over whether paid-for key words constitute trademark infringement.