Case law: Luxury goods brands can lawfully restrict sale of goods on third party online platforms
Owners of luxury brands will welcome a European ruling that they can lawfully stop distributors from selling their goods on third party online platforms, including websites such as Amazon, as this may affect the status of their brand.
This update was published in Legal Alert - January 2018
Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.
A luxury cosmetic company appointed a distributor to distribute its products in physical shops and online. The distributor made sales through its own website, and on Amazon.
The contract between them required the distributor to comply with certain standards designed to protect the luxury status of the company's products. In 2012, the company proposed an amendment to the contract prohibiting the distributor from selling the company's products on any third-party online platform, such as Amazon. The distributor objected and, ultimately, the domestic court asked the Court of Justice of the European Community (CJEU) for an opinion on whether such a restriction on a distributor was against EU law.
The CJEU's opinion was that a luxury image for luxury goods is important to consumers, so it is in consumers' interests that such goods 'are appropriately presented in retail outlets and that their luxury image is preserved in that way'. A power for a luxury brand to impose a selective distribution systems can be enough to preserve a luxury image.
It said that the criteria used for assessing whether a selective distribution arrangement is lawful are that it must be necessary (ie. to preserve the product's quality and/or ensure its proper use), it must be applied uniformly and be non-discriminatory, and not go beyond what is necessary.
- Owners of luxury brands should review contracts with distributors to consider whether they can now stop their distributors from selling their goods on third party online platforms, including websites such as Amazon, to maintain the status of their brand
Case ref: Coty v Parfümerie Akzente  ECLI:EU:C:2017:941
Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.