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European Court confirms certain restrictions on resale of luxury brands are justifiable

01 Aug 2018

Luxury brand owners are able to restrict their authorised retailers from selling their products on third party platforms, such as Amazon or eBay in order to protect the reputation of their goods. This was recently confirmed in a highly anticipated ruling by the Court of Justice of the European Union (CJEU) in the case of Coty Germany GmbH v Parfümerie Akzente GmbH.

Akzente had a distribution agreement with Coty, a German company which supplies luxury high-end cosmetics. Keen to preserve its luxury reputation, Coty imposed various contractual restrictions on the resale of its products; for example, all points of sale had to be approved by Coty. However in March 2012 Coty changed its selective distribution agreements to confirm that whilst Akzente was permitted to sell products online, they could only do so by agreed “electronic shopfronts”, and not via third party platforms such as Amazon or eBay.  Akzente refused to fall into line and a dispute arose over Akzente’s desire to sell Coty’s products on amazon.de.  

The case primarily turned upon whether a selective distribution system, such as that which Coty sought to impose, was contrary to Article 101 of the Treaty on the Functioning of the European Union, which prohibits as incompatible with the internal market any agreements which restrict or distort competition within the internal market. Initially the German court found that Coty’s selective distribution was contrary to Article 101; on appeal, however, the question was referred to the CJEU.

The CJEU confirmed that it is not contrary to Article 101 for luxury brand owners to restrict online sales via third-party platforms, providing that the restriction is laid down uniformly and not applied in a discriminatory manner. In addition, the objective of any restriction must be the preservation of the luxury image of the goods, and it must be proportionate to that objective.

Welcome news for luxury brand owners who wish to ensure that their goods are only sold via approved online platforms, but any brand owner attempting to restrict online re-sales must be careful not to offend EU competition laws. Legal advice should always be sought before imposing any resale restrictions.

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