Thursday, 7 December 2017

Prohibiting online platforms from reselling luxury goods - CJEU in Coty Germany (C-230/16)

The CJEU gave its judgment (C-230/16) yesterday in a competition law case that may impact how luxury goods are sold to consumers online in the future. Coty Germany - a supplier of luxury cosmetics in Germany - brought a case against one of its authorised distributors, Parfumerie Akzente for using online third-party platforms (amazon.de) to resell their products. Coty set up a selective distribution network in order to protect the luxurious image of the brands it represents (eg Marc Jacobs, Calvin Klein). Their claim was that if their distributors use then online third-party platforms to resell their products, the objective of brand image protection is undermined. The distribution agreement allowed for the online sale of products supplied by Coty but only through the online webstore of the authorised distributor, whilst ensuring that the luxury character of the cosmetics was maintained. German courts brought the case the the CJEU as there was doubt whether the express prohibition in the distribution agreements of re-selling products through online stores of third-parties could restrict competition under art. 101(1) TFEU.

The CJEU has no doubts that maintaining a prestigious, luxurious image of the brand may justify the introduction of the selective distribution system (paras 28-29). Can such a distribution agreement prevent the distributor from re-selling the goods on an online website of a third-party? The CJEU determines that such a limitation could be justified, provided that it would apply in a non-discriminatory fashion, uniformly to all distributors, and was proportionate. From the Court's observations it seems that in this case the restriction was justified and proportionate (paras 44-53). As Coty does not have a contractual relationship with an online third-party platform reselling its goods, it would be difficult for it to ensure that they are being sold in a way guaranteeing to show off their luxurious character (paras 48-49). Moreover, distributors are allowed to sell these goods online - just on their own websites, which makes the restriction proportionate.

This judgment may mean that the offer for certain luxury goods on online platforms such as Amazon or eBay will be more limited in the future. Unless, suppliers of these goods will create their own webstores on these platforms.

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