Further legal setbacks could shave the profit margins for eBay, the online auctioneer.
In the near term, the biggest damage could be to the eBay brand, which promises shoppers the widest range of goods in a marketplace that connects millions of buyers and sellers.
A French court ordered eBay on Monday to pay $61 million to LVMH, parent of the Louis Vuitton and Dior brands, for failing to properly monitor auctions.
In the United States, a federal judge is due to rule on whether it is the responsibility of eBay or of the plaintiff, Tiffany, to police the site for fake Tiffany diamonds.
EBay has already increased its spending on people and technology to try to keep counterfeit items off its site, and further investments prompted by unfavorable court rulings would be mostly incremental at this point, analysts say.
“Does that destroy the business model or fundamentally change it?” the Global Crown Capital analyst Martin Pyykkonen asked. “No, not really.”
Such rulings would incrementally put pressure on profit margins, requiring constant vigilance for fakes and more employees in the trust division, he said.
Legal experts were not predicting the outcome of the eBay-Tiffany case, which would decide the ground rules of doing business in cyberspace and whether traditional notions of trademark and copyright protections deserve greater protection on the Web.
Although the lawsuits are a distraction for eBay, the bigger issue for investors is how the company, based in San Jose, California, can revive its stalled growth. Adjusted operating margins have stabilized around 35 percent because of cost controls, Pyykkonen said, but expansion would depend on growth in sales.
“Unless they can accelerate the growth in their core business, all this other stuff is minor,” Steve Weinstein, an analyst for Pacific Crest, said. The Tiffany lawsuit “is not what’s going to drive the stock,” he said.
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