Luxury brands lifted by European Union court backing for online sales ban

The European Court of Justice said a supplier could prohibit the selling of its goods on platforms such as Amazon to protect its luxury image.

Coty's case was unsuccessful initially - the trial court found that the contract terms conflicted with German or EU competition law - but the Higher Regional Court in Frankfurt sought guidance on appeal from the European Court of Justice.

The EU's top court was dealing with a case brought about by luxury cosmetics brand Coty in Germany.

The court said Coty's effort to limit distributors "is appropriate to preserve the luxury image of those goods", adding that it "does not appear to go beyond what is necessary".

One of those distributors, Parfümerie Akzente, sold Coty's goods through Amazon's German website.

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It is no secret that some luxury brands are not too keen on online sales.

After intense lobbying by LVMH, Richemont and other luxury goods companies, European Union antitrust regulators laid down rules in 2010 allowing brand owners with less than a 30 percent market share to block online retailers without a bricks-and-mortar shop from distributing their products. In two test cases in recent years, the German cartel office forced Adidas and Asics to drop such bans, saying online platforms are crucial for small- and medium-sized companies and consumers.

The ruling said luxury brands have no contractual relationship with online marketplaces, which in turn are not required to comply with brands' quality criteria.

Needless to say, this ruling has significant and broader competitive ramifications for the DF&TR industry. The ECJ clarifies that it did not intend to set out a general statement of principle on selective distribution systems in that earlier judgment.

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