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European Court confirms that luxury brands may be able to restrict sales through Amazon and eBay

6 December 2017

Today (6 December), the highly anticipated decision in the case, (C 230/16) Coty Germany GmbH v Parfümerie Akzente GmbH will be welcomed by many luxury brands. This is because the Court of Justice of the European Union (CJEU) confirmed that luxury brands can restrict sales through online marketplaces like eBay and Amazon subject to specified conditions.

The CJEU indicated proportionate restrictions of online sales can be justified within the context of a selective distribution network in order to protect the ‘aura of luxury’ of up market goods.

This case concerned the selective distribution network put in place by Coty, one of the world’s leading beauty companies. Its brands include Calvin Klein, Chloe, Davidoff and Marc Jacobs.

Bonita Trimmer, a trade mark law expert at law firm Browne Jacobson LLP, commented on the decision:

“Today’s judgment is great news for luxury brands. The European Court of Justice has recognised that the aura of luxury of prestigious goods can be legitimately protected. This aura can be just as much a part of the ‘quality’ of upmarket products as the materials they are produced from. This is consistent with reasoning in earlier cases relating to trade mark infringement.

This decision clears up a question left by an earlier judgment. Can a selective distribution system for luxury products, designed primarily to preserve their exclusive image comply with competition law? The answer is yes. It also allows brands to enforce restrictions on their authorised resellers from selling via online third party marketplaces, if those restrictions are necessary to protect products’ aura of luxury.

However, brand owners still need to be careful; restrictions are only permitted if they are proportionate, and the assessment will differ depending on the individual facts of every case.

This is a limited exception. It is not carte blanche for those wanting to restrict the retail channels of their goods. Selective distribution networks are unlikely to be compliant with competition rules unless the nature of the products concerned means they are necessary. In other words, these types of networks must be justified on the basis of being needed to preserve the quality of the products and/or to ensure that they are correctly used. Additionally, the resellers must be chosen on the basis of uniform, non-discriminatory and objective criteria.

Furthermore any restrictions placed on resellers’ online sales must not be too wide. This was demonstrated by an earlier CJEU decision (Pierre Fabre Dermo-Cosmétique) which found unlawful a restriction which, in effect, prevented all internet sales by authorised distributors.”

Coty’s distribution agreements did not ban internet sales outright. They allowed their authorised resellers to sell through an “electronic shop window” provided that ensured the luxury character of the products was preserved. However, the agreements did prohibit Coty’s authorised resellers “from collaborating with third parties if such collaboration is directed at the operation of the website and is effected in a manner that is discernible to the public”.

As consumers purchasing from Coty’s authorised resellers via amazon.de would be aware, these sales were being made through this third party platform, Coty’s view was that such sales would be in breach of the agreement. The CJEU guidance suggests Coty will be able to enforce this restriction when the case returns to the German court.

The decision supports the Advocate General Nils Wahl opinion issued in July 2017.

Watch our video for more information on this judgment.


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