“Luxury” brands now able to prevent sales on Amazon and other online market places
22 December 2017
On 6 December 2017, the Court of Justice of the European Union rendered its long awaited judgment in the Coty Germany GmbH (Coty) v Parfümerie Akzente GMBh case. This case focused on antitrust issues concerning third-party platform bans for luxury goods, and now puts an end to the ambiguous case law by national competition authorities in the European Union as to whether or not a supplier of luxury goods is allowed to prohibit authorised retailers from selling its products on third-party platforms.
The court held that a supplier of luxury goods can prohibit its authorised distributors from selling those goods on a third-party internet platform, such as Amazon.
Coty is one of Germany’s leading suppliers of luxury cosmetics. To preserve its luxury image, it prohibits the use of online third-party branded platforms aimed at consumers. Parfümerie Akzente, one of Coty’s authorised distributors for many years, sold its products both instore and online. Coty brought proceedings against Parfümerie Akzente with a view to prohibiting it, in accordance with its contract terms, from distributing via 'amazon.de'. The German Courts referred the issue to the Court of Justice, as it was unclear whether the clause infringed EU competition law.
Ruling in favour of Coty, the main findings were that:
A selective distribution system for luxury products, which has been primarily designed to preserve the luxury image of those products, does not fall under the prohibition of anti-competitive agreements. However, the following conditions must be met:
- Resellers are chosen on the basis of objective criteria of a qualitative nature, laid down uniformly for all potential resellers and not applied in a discriminatory fashion.
- That the criteria laid down do not go beyond what is necessary.
The courts also found that the prohibition of anti-competitive agreements does not preclude a contractual clause which prohibits authorised distributors from using, in a discernible manner, third-party platforms for internet sales of goods, provided that the following conditions are met:
- That clause has the objective of preserving the luxury image of the goods in question;
- It is laid down uniformly and not applied in a discriminatory fashion; and
- It is proportionate in the light of the objective pursued.
This judgment has important implications for online commerce and the luxury industry, on the one hand, and major internet platforms, on the other. It is to be welcomed by owners of luxury brands as enhancing the degree of control that suppliers have over their distributors in Europe. The Court has acknowledged that under certain conditions the aims of preserving the brand image in the selective distribution can justify a sales ban through third-party internet platforms. In terms of major internet platforms, the outcome is undoubtedly disappointing, as it will restrict their presence in the luxury market.
A significant point that remains outstanding however is what may qualify as a “luxury” product and fall under the permissible restriction. The definition of “luxury products” and just what is meant by an “aura of luxury” will no doubt be a matter of debate by the national competition authorities and courts over the coming months.