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

Luxury beauty giant Coty wins ECJ ruling against online sellers

The Court of Justice of the EU (ECJ) ruling came in a case involving US cosmetics maker Coty's German subsidiary and German retailer Parfumerie Akzente, which sells Coty's goods on sites including Amazon against the company's wishes. "It is less good news for the online platforms and also for small businesses that rely on those platforms for their route to market", he said.

The decision out of Luxembourg comes in response to contractual proceedings that the luxury retailer Coty Prestige initiated in Germany against one of its authorized retailers.

Coty said in a statement: "Coty welcomes this decision which confirms that the character of luxury brands necessitates and justifies selective distribution, whatever the distribution channel".

"According to the court, the prohibition, imposed by a supplier of luxury goods on its authorised distributors, of the use, in a discernible manner, of third-party platforms for internet sales of those goods is appropriate to preserve the luxury image of those goods".

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.

In addition, the CJEU suggests that the Coty clause - even if it violates Article 101 (1) TFEU - may benefit from the block exemption for vertical agreements of EU Regulation 330/2010, as it does not have the object to restrict competition.

It will ultimately be up to the Frankfurt court to resolve the dispute between Coty and Parfümerie Akzente based on the CJEU's interpretations. In yesterday's judgment, the Court repeats it earlier case law that selective distribution systems are compatible with the European Union cartel prohibition if resellers are chosen on the basis of objective criteria of a qualitative nature that are laid down uniformly and not applied in a discriminatory fashion and that do not go beyond what is necessary.

A German court had sought guidance on whether banning online sales on third-party sites restricted competition.

The president of the German cartel office, Andrea Mundt, suggested the ruling's focus on luxury goods meant it would have a limited impact.

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