Keeping the luxury in brands?
22 February 2018
In Coty v Parfumerie Akzente (Case C-230/16) the CJEU has stated that luxury brand owners, can, in certain circumstances prohibit reselling of their products through some internet platforms
Coty sells luxury cosmetics in Germany. It uses a selective distribution network to sell the products and these resellers must comply with various contractual terms imposed by Coty with the aim of preserving the luxury of its brands. The contract requires the reseller to have a certain standard of décor and furnishing at its premises. The sale of products via the internet is permitted, but only through an “electronic shop window”, preserving the selective and luxurious natures of the products being sold.
One of Coty’s authorised resellers sought to challenge the lawfulness of these terms, which prevented it from selling products through websites such as amazon.de, on the basis that such restrictions amount to a restriction or distortion of competition and are in breach of competition law. The German court initially found that such restrictions were unlawful. Coty appealed and the German appellate court referred the matter to the CJEU for determination.
The CJEU’s judgment has come down in favour of Coty and luxury brand owners. The CJEU has held that selective distribution systems are lawful and not anti-competitive, providing that the primary purpose of such restrictions is to protect the luxury of the brand and the restrictions are imposed uniformly and in a non-discriminatory manner and do not go beyond what is necessary. The restrictions can include prohibiting the resale through some internet platforms. In this regard it is worth bearing in mind the previous case law of the CJEU which has held that blanket bans on internet resales of luxury products goes beyond what is necessary to protect the brand and will be unlawful.
This decision will be enthusiastically welcomed by luxury brand owners giving them greater control over authorised internet resellers of their products. Whilst it is clear that blanket bans will not be permissible, applying this decision, it is possible, in carefully drafted selective distribution agreements to prevent resale on platforms that do not protect the luxurious and selective quality of the products being sold, in a similar manner to that imposed by brand owners on traditional bricks and mortar outlets.