The EU Court of Justice (CJEU) has ruled that a supplier of luxury goods can, by contract, prohibit its authorised distributors from selling those goods on third-party internet platforms such as Amazon. The CJEU held that such a prohibition is appropriate; does not in principle go beyond what is necessary to preserve the luxury image of the goods; and is not necessarily an unlawful restriction of competition (Coty Germany GmbH v Parfümerie Akzente GmbH (Case C-230/16)).
Coty Germany sells luxury cosmetic goods in Germany. To preserve their luxury image, Coty markets certain brands via a selective distribution network. Authorised distributors may sell Coty goods at their brick-and-motor locations, and online provided they use their own “electronic shop window”. Authorised distributors are contractually prohibited from selling Coty goods via third party platforms which are externally visible to consumers. Coty Germany brought proceedings before the German courts against one of its authorised distributors with a view to prohibiting it, in accordance with a contractual clause, from distributing Coty goods via the platform ‘amazon.de’. The German Court was uncertain whether the clause was lawful under EU competition law, and therefore requested the CJEU to rule on the matter.
The CJEU held that the prohibition of agreements, decisions and concerted practices, laid down in EU law, does not preclude a contractual clause prohibiting authorised distributors of luxury goods to preserve the luxury image of those goods from using, in a discernible manner, third-party platforms for internet sales of the goods in question, provided the following conditions are 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 light of the objective pursued.
The CJEU concluded that, subject to the German Court’s determination that the above conditions are met, the contractual clause at issue appeared to be lawful.
This is an important decision for suppliers of luxury brands, distributors, and internet platform providers such as Amazon or eBay, as it clarifies that suppliers of luxury brands can, by contract, lawfully ban sales via third party internet platforms, in circumstances where the three conditions set out above are met.