French auction sites hit by court ruling

French buyers in online auctions will have to pay value-added tax, a Paris court has ruled.

In the future, French auction sites will need to be state-approved before they can sell online.

The decision is a setback for the fast growing Internet auctions industry.

The court ruling follows legal action by the association of Paris auctioneers against Nart.com, an online auctioneer of expensive artworks, which exempted buyers from commissions and French value added tax by running its auctions through a subsidiary incorporated in New York.

But the court agreed with lawyers acting for the association that because Nart's offices were in Paris, the art works were displayed in France, could be bought by French residents and were advertised in the French media, the auctions were effectively taking place in France, and were therefore subject to the state-controlled monopoly of the auctioning profession.

The ruling means French consumers would be discriminated against because they would incur higher costs than other online bidders.

In any event the decision may have a brief reign. The monopoly of the commissaire priseurs – members of the 400-year-old monopoly of state-approved auctioneers – is expected to be scrapped in the autumn when a European directive liberalising the auctioneering business is made French law.