On 6 December, the European Court of Justice (ECJ) delivered a judgment on the Coty Germany vs. Parfümerie Akzente stating that a supplier of luxury goods such as US beauty group Coty could prohibit its authorized distributors from selling its products on a third-party internet platform, in order to preserve the “luxury image” of the products.
The case was initially brought to the ECJ by a German Court which has sought guidance on whether preventing distributors from selling products on third-party sites was against EU competition law. In this case, Coty Germany had set up a selective distribution network through authorized distributors required to accept a contractual clause forbidding them to sell via third-party platforms in a “discernible manner towards the consumer”.
In its judgement, the Court considered that since the prestigious image and the “aura” were an essential aspect of the luxury goods sold by Coty, and that the selective distribution network aimed specifically at preserving the prestige of the brand, then prohibiting its authorized retailers from selling products on third-party online marketplaces was appropriate and therefore authorized under EU competition law.
The ECJ also specifies the conditions under which contractual clauses prohibiting authorized distributors from using third-party platforms, would be lawful. The following conditions should be met:
- the clause has the objective of preserving the luxury image of the goods in question;
- it is laid down uniformly and not applied in a discriminatory fashion; and
- it is proportionate in the light of the objective pursued.
While the German Court that requested the preliminary ruling is competent to determine if Coty Germany’s contractual clauses meet the criteria laid down in the ECJ’s judgement, the European Court of Justice already declared that they appear to be lawful.