EBay, the online auctioneer, is likely to face a barrage of lawsuits after it was ordered yesterday to pay €40 million (£31.5 million) in damages to LVMH, the French luxury goods group, for selling fake handbags, perfumes and haute couture.

The Paris Commercial Court said that eBay had committed “serious faults” through its failure to keep counterfeit goods off its site.

The American internet auction giant said that it would appeal against the judgment, which sources within the group suggested could threaten its business model. “We will fight in the name of eBay's users and we have decided to appeal,” a spokeswoman said. She claimed that LVMH was seeking to protect its “commercial practices, which exclude all competition”.

After a two-year legal battle, the court told eBay to pay €19.28 million in damages to Louis Vuitton, the leather goods division of LVMH, the luxury retail group owned by Bernard Arnault, the French billionaire.

EBay was further ordered to pay €17.3 million to Christian Dior Couture, which is also controlled by Mr Arnault, and €3.25million to four of LVMH's perfume brands: Christian Dior, Givenchy, Kenzo and Guerlain. The court said that eBay would be fined €50,000 a day if it failed to stop its members from advertising the four perfume brands on its sites. The auctioneer, which is based in San Jose, California, was told to post the ruling in French and English on all its sites for the next three weeks.

In evidence, LVMH said 90 per cent of 300,000 products labelled Dior and 150,000 handbags purporting to be Louis Vuitton sold on eBay in the second quarter of 2006 had been fake.

The judges ruled that eBay had damaged the reputations of Louis Vuitton and Christian Dior Couture by selling counterfeit products.

The dispute over the perfumes was different, with the brands saying that eBay had no right to sell even authentic goods online because it infringed exclusive contracts with specialist dealers. The argument was upheld.

Louis Vuitton was seeking damages of €20 million, Christian Dior Couture €17 million and the perfume brands a total of €14 million.

The ruling comes amid a flurry of court cases against eBay brought by French groups that dominate much of the world's luxury goods industry. In another case this month, the auctioneer was ordered to pay damages of €20,000 to Hermès. Last year L'Oréal, the cosmetics group, began legal action against eBay in five European countries, including Britain and France, over the sale of counterfeit perfume.

Moreover, other companies may now follow with their own lawsuits. About £30 billion of goods were sold on eBay last year and the company claims that it does as much as possible to weed out fake products. Sources said that the site could become inoperable if it is asked to do more. “If counterfeit goods are put up for sale on our site, we scrap them as soon as possible,” eBay's spokeswoman said.

The big sell

— EBay was founded in San Jose, California, in 1995, when Pierre Omidyar, a computer programmer, wrote the code for an auction website that he ran from his home computer

— After an initial public offering in September 1998, shares rose 163 per cent on the first day of trading to close at $47.37

— It acquired PayPal in 2002 and Skype in 2005

— There are about 84 million active eBay users.

— An estimated 1.3 million people make a living selling goods or services on eBay

— The first item sold on eBay was a broken laser pointer for $14.83

Explore Law

• Columnists

• Law Panel

• Law Reports

• Student Law

Times Recommends

• The best legal yarns this Christmas
• Legal school 'earned £1m by exploiting bar course'
• Axe may fall on 5,000 more City lawyers