As advocates for choice, competition and innovation on the Net, we’re troubled to read about a ludicrous court ruling against online commerce. The French Tribunal de Commerce in Paris ordered eBay to pay 39 million Euros to French luxury goods maker LVMH. Mike Masnick of Techdirt shares our outrage here.

Judging by media coverage of this ruling, one would think it’s all about preventing sales of counterfeit goods. But it’s actually much farther-reaching than that, in a way that’s incredibly damaging to the growth of e-commerce, small business and consumer choice in Europe. The French Court ruled that eBay must halt the sale of legitimate, genuine LVMH perfumes on the eBay site. Essentially, the Court held that a big business like LVMH could stop customers and owners of its products from re-selling them to someone else. This is blatant discrimination by French authorities against the e-commerce channel. eBay is appealing the ruling (read their take on the ruling on their company blog, eBay Ink). The outcome of this appeal could impact the future of e-commerce around the world.

Imagine if efficient online marketplaces like eBay, Overstock, Amazon and others had to pull the plug on entire categories of items, preventing perfectly legal sales of authentic items. Millions of shoppers use these sites to find great deals on things they want or need. During tough economic times, many people look to the web to help stretch a household budget. And millions of people around the world use the web as a tool for running their small businesses. And if you think that this is just another example of “France being France,” think again. This backward, anti-competitive perspective may be coming to a court near you. Any day now, the Federal District Court in New York will rule on Tiffany’s lawsuit against eBay. Again, Tiffany is crying counterfeits, and trotting out dubious data on online sales. But we believe Tiffany’s real interest here is to shut down any distribution of Tiffany products that isn’t completely controlled by Tiffany. Got a gift of earrings that just aren’t your style? If the New York court rules the wrong way, you may no longer have the option of selling them online.

Of course, counterfeits are a scourge to any marketplace. They undermine brand integrity and cheat buyers. And counterfeits have been a problem long before the Internet existed. eBay and others have worked hard to stem the sale of fake items. But go to any urban sidewalk, bazaar or back alley, and you’ll likely find the counterfeit trade still thriving. So when manufacturers and retailers cry “counterfeit” and point fingers at the e-commerce channel, their true motives are exposed. They’re calling for competition prevention—not consumer protection. And when courts agree with them, we all lose.

Steve DelBianco is executive director of NetChoice.

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Amazon says it is advertising when it compensates New York-based websites for posting links that refer customers to Amazon.com. New York says it’s soliciting business. The distinction means all the difference in the world for sales taxes, for Amazon, and possibly even print media, television and radio.

Amazon.com sued New York State earlier this month, challenging a newly enacted law that has serious implications for online advertisements. In April, the New York legislature passed a law designed to increase sales tax revenue from Internet sales. The law is known as the “Amazon tax” because of the way it broadens the sales tax law to apply to Amazon’s Associates Program, thereby achieving the necessary legal nexus for New York to force Amazon (and other Internet retailers) to collect and remit taxes on all sales to N.Y. residents.

A little bit of history helps put this law into context. The Supreme Court has held that a state can only impose sales or use tax-collection obligations on an out-of-state retailer if the retailer has a “substantial nexus” with the state (the Quill decision). Nexus occurs from a sufficient physical presence, which can be an office or warehouse, but physical presence can also derive from soliciting a state’s consumers via sales representatives located in the state. However, it can’t be just any sales rep, according to another Supreme Court case—in-state representatives must be “significantly associated with the taxpayer’s ability to establish and maintain a market in the state,” according to Tyler Pipe v. Wash. Dept. of Rev.

Amazon doesn’t have an office, warehouse or other physical presence in New York, but it has thousands of New York-based members of its Advertising Associates program. Per the Quill decision, advertising alone is insufficient to establish a substantial nexus. So New York has changed the definition of what it means to be a sales representative to capture these in-state associates that Amazon says merely hosts its ads. Under the new law, New York has changed the presumption of what it means to be “soliciting business” in the state. (more…)

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