The long-awaited ruling of the ECJ (judgment of December 6, 2017, C-230/16) in the Coty matter is here: A supplier of luxury goods can prohibit its authorized dealers from selling the goods on the Internet via a third-party platform such as Amazon. Such a ban is suitable to ensure the luxury image of the goods and generally does not go beyond what is necessary for this purpose.
Coty Germany sells luxury cosmetics in Germany. In order to maintain their luxury image, it distributes some of its brands through a selective distribution network, ie through authorized dealers. Authorized dealers' sales locations must meet a number of requirements in terms of environment, equipment and furnishings. The authorized dealers can also sell the goods in question on the Internet, provided that they use their own electronic shop window or use unauthorized third-party platforms, although this must not be visible to the consumer. However, they are expressly prohibited by contract from selling the goods on the Internet via third-party platforms that are clearly visible to consumers. Coty Germany brought an action before the German courts against one of its authorized dealers and, citing the contractual prohibition, requested that this dealer be prohibited from selling its products via the “amazon.de” platform.
With its ruling, the ECJ, with reference to its established case law, first of all states that a selective distribution system for luxury goods, which primarily serves to ensure the luxury image of these goods, does not violate the ban on cartels under EU law2, provided that the following conditions are met: The selection of resellers must based on objective aspects of a qualitative nature
be set uniformly for all eligible resellers and applied without discrimination, and the criteria established must not go beyond what is necessary. This is nothing new. However, the ECJ also points out that the quality of luxury goods is not only based on their material properties, but also on their prestige character, which gives them a luxurious appearance. This appeal is an essential element of such goods as it allows consumers to distinguish them from other similar products. Therefore, damage to the luxurious appearance and quality of the goods is likely
to affect yourself.
The antitrust ban does not make a contractual clause inadmissible which, as here, prohibits authorized dealers of a selective distribution system for luxury goods, which is essentially aimed at ensuring the luxury image of these goods, from using externally visible third-party platforms when selling the goods in question on the Internet. However, the following conditions must be met: the clause is intended to ensure the luxury image of the goods in question, it is defined uniformly and applied without discrimination, and it is proportionate to the aim pursued. It is once again a matter for the courts to decide this in each individual case.
The following clarification from the ECJ is likely to be crucial: The ban on sales via third-party platforms should not go beyond what is necessary to ensure the luxury image of the goods. In particular, in the absence of a contractual relationship between the provider and the third-party platforms that would allow the provider to require the platforms to comply with the quality requirements that it has imposed on its authorized dealers, it cannot be considered as effective as the ban at issue, if these traders were allowed to use such platforms on the condition that they meet predefined quality requirements.
Even if these requirements are not met, an exception can still be considered for such clauses. The disputed ban on using externally visible third-party platforms for Internet sales is unlikely to represent either a restriction on the customer group or a restriction on passive sales to end consumers.
It is now clear to the manufacturers: If the luxury image can be proven, the path to banning sales via third-party platforms should be clear. A good day for manufacturers!
