Friday 15 May 2009

Luxury Briefing: eBay vs LVMH

eBay vs. LVMH, by Alexander Gallé, is a column published originally in Luxury Briefing's June 2009 edition.

This column may not be the most popular one I've ever written. Still, the court case between eBay and LVMH needs to be addressed by anyone who cares about the future of luxury as well as of the internet.

My argument, as a web designer for luxury brands, but also as an economist, is that the current legal route taken by LVMH is one of unsustainable laziness which will eventually lead to its own destruction.

The legal approach is very lazy indeed. First of all, the message it sends to the public is this: "The alternatives to buying LVMH's authentic products are so good that we now have to resort to legal ways to stop them from existing. There is no economic reason why someone would buy our products when the alternatives are just as good at a lower price".

Secondly, it seems LVMH is simply barking at the wrong tree because it's easier to pursue eBay than the counterfeiters. Getting eBay into trouble will not discourage the counterfeiters any more than closing your town's market square. The market, both buyers and sellers, will just move as far under the radar as it has to. Unfortunately for lawyers, the laws of the market are closer to the laws of nature than they are to anything they could draft up.

Finally, eBay is a platform for a free market. In fact, it represents a form of free market which the Western world has all but forgotten, to its detriment. When we argue against free markets, we argue against prosperity. Can you imagine the prosperity the world would experience if, say, farmers in Bolivia could trade their products directly on eBay, offering their products directly to the highest bidders worldwide? Such a system would create infinitely more wealth around the world than anything Fairtrade or CaféDirect could imagine in their wildest dreams...

More importantly for the luxury sector, these conditions eBay creates are the very same conditions that enabled luxury brands to start in the first place. The liberalism it stands for is the very same liberalism Europe saw in the 18th and 19th century, when many of our leading luxury brands started out. Free market liberalism is the very environment that enabled 19th century luxury brands to start out on the simple promise of unrivalled quality. Unrestricted worldwide trade is the very condition that enabled merchants and businessmen to offer great new products from around the world at prices reasonable enough to sustain a steady public.

eBay's liberal market model has enabled countless craftsmen, industrialists and artisans to find a niche in the world market for the products they create. Finding a sustainable niche is a conditio sine qua non for a sector driven by market-reducing values rather than lowest price. Values such as craftsmanship and excellence, for example, the very core of what the luxury industry is about. If we care about these values, we must ensure the free market continues to enable future generations of Louis Vuittons to say "I can do better than everyone of you and beat you on the price, too, and I'll prove it".

Only by addressing the economic methods that make counterfeiters so successful (i.e. they provide very good products at lower prices) will we ensure a healthy evolution of the industry's products, to produce even better products than we do today. That is why anyone who cares about luxury should support eBay.