Online auction site eBay has been fined £30.6m (€38.8m) after luxury goods firm LVMH sued in a French court.
The case could be the first of many as other firms line up, including L'Oreal and Tiffany's, around the world to launch their own legal cases.
LVMH, which owns luxury goods brands such as Louis Vuitton and Christian Dior, launched the case after 90% of items from the brands found on eBay were found to be fake.
Fake goods found on eBay included perfumes carrying the brands Christian Dior, Guerlain, Givenchy and Kenzo.
The court ordered eBay to pay €16.4m to Louis Vuitton Malletier, €19.28m to Christian Dior, and €3.2m to the perfume brands.
LVMH said the verdict represented an important step in the protection of brands and designs against parasitic practices.
LVMH said in a statement: "The court brings an important contribution to the protection of creative works which make up an important part of our national heritage and generate many jobs in France."
*Shares in eBay fell last night and similar court room losses could badly damage the online firm, which in January reported full year revenues of $7.67bn and net income of $2.11bn.
The court has ruled that, by allowing the sale of counterfeit goods on its website to the detriment of Louis Vuitton Malletier and Christian Dior Couture, eBay was guilty of gross misconduct. It said that eBay had not taken the necessary measures to prevent the sale of the counterfeit goods on its site.
LVMH is not the first to complain, others have done so in the past over the issue of fake goods, but LVMH is the first to launch major legal action.
The company used online investigators to comb the site who brought in a huge haul of fake goods.
Ebay says it will appeal, but it will find itself fighting costly legal battles on all fronts. The ruling by the Paris court follows an earlier one whereby the auction site was fined €30,000 for selling fake Hermes bags.
*The auciton site also hit back at LVMH and accused it of an ulterior motive in launching its legal action.
*"If Counterfeits appear on our sites we take them down swiftly, but today's ruling is not about our fight against counterfeit; today's ruling is about an attempt by LVMH to protect uncompetitive commercial practices at the expense of consumer choice and the livelihood of law-abiding sellers that eBay empowers everyday.
*"We believe that this ruling represents a loss not only for us but for consumers and small businesses selling online, therefore we will appeal. It is clear that eBay has become a focal point for certain brand owners' desire to exact ever greater control over e-commerce. We view these decisions as a step backwards for the consumers and businesses whom we empower everyday", eBay said in a statement.
*Ebay also said that the ruling also sought to impact the sale of second-hand goods as well as new genuine products, effectively reaching into homes and rolling back the clock on the internet and liberty it has created.
*"The attempt to use the ruling to confuse the separate issues of counterfeit and restrictive sales suggests that counterfeit suits are being used by certain brand owners as a stalking-horse issue to reinforce their control over the market."
It also says that it takes down fake listings quickly, but with such a high proportion of Louis Vuitton and Christian Dior fakes available this is likely to be questioned.
Ebay claims that it does a great deal to combat counterfeit goods on its site and said it invested more than $20m each year to ensure counterfeit goods are found and removed.
"We partner with over 18,000 brand owners around the world to identify and successfully remove counterfeit goods and employ over 2,000 people to carry out this fight on a daily basis. When we find counterfeit goods on our sites we take it down," eBay said.
The first round success of LVMH might now tempt luxury goods brands in the UK such as Burberry.
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