ECJ allows restriction of online sales of luxury items via Amazon and Ebay

Stefano Viani

Management

10 Jan 2018 Law Digital Agency

"Marketplaces and platforms represent important components of online commerce",says theFocus Group ChairmanDr. OliverBohl (KfW Banking Group). In early December, the European Court of Justice (ECJ) ruled on whow much freedom traders have in choosingof the individual sales channels haveand what legal principles apply.

Decideden waswhether and under what conditions a brand manufacturer may prohibit its customers at the retail level from selling its products via online marketplaces as part of a selective distribution system.from selling its products via online marketplaces as part of a selectivemarketplaces.Dhe debatebroughtthe companyCoty Germanyinto the roll,when itsGermanrdistribution partner Parfümerie Akzentesold its productsalso sold its products on online marketplaces such as Amazon and Ebay.Since it was contractually prohibited from doing so, Coty Germany sued the retailer in fear of losing the luxuryimage of the brands.

Luxury goods on online marketplaces such as Amazon and Ebay

Forluxury productsreachnot only the materialpropertiesfromto grant the quality. Also the prestige character plays an importantrole. It serves to create aluxuriousaura and to stand out from other products on the market. That is whyCotyGermanydistributes its brands through a selective distribution network. The authorized dealers have to meet various requirements. These relate to the environment, theequipmentand thefurnishingsin their sales outlets. The criteria form the prerequisites for maintaining the prestigious character and luxury image. In this way, the luxury goods can be sold to the customers in the best possible way. The authorized dealers are allowed to sell the goodsalthoughe-commerce, but the set requirements must be met online as well. Thus, the retailer can offer the luxury goodsin their own online store. Provided that theasserves as its own electronic shop window. Orviaunauthorized marketplaceswhich are not recognizable as such for the buyer.. Contractually prohibited is the sale through online marketplaces that are recognizable to the consumer in appearance.

The German distribution partner Parfümerie Akzente resistedthiscontractual conditions and discontinued the productsauch asfor sale on online marketplaces such as Amazon and Ebay. As a result, the company Coty Germany filed a lawsuit, they demanded the prohibition of the products via these platforms toto customers via these platformsto be allowed. Dhe Frankfurt am Main Higher Regional Court had doubts as to whether selective distribution systems to ensure a luxury image and the associated contractual clause were compatible with EU competition law. It therefore referred the matter to the Court of Justice.

On December 6, the judgment was finallyil(C-230/16)was handed down. The Court found that selective distribution systems for luxury goods do not violate competition law. Under the conditions that they primarily serve to ensure the luxury image of the goods and:

  • the selection of resellers must be made on the basis of objective criteria of a qualitative nature,
  • these criteria must be established for all eligible resellers,
  • and be applied without discrimination,
  • the criteria established must not go beyond what is necessary.

Platform bans allowed only in rare exceptional cases

What remainsunclearis the definition of "luxury" and how these criteria are established. This leaves a lot of room for interpretation."There is no clear definition of luxury and this opens the door to possible abuse. Because what the brand defines as luxury and what not - is at its discretion. Clarity in this case is unfortunately missing the ECJ," said Oliver Prothmann, President of the Association Online Handel e.V.. The Federal Agency also fears that the ban would restrict the diversity of offers. This would then be to the disadvantage of all customers. If other manufacturers were still concerned about the image of their brands and defined themselves as luxury, they could also be led by the ruling to stop selling products via the marketplaces Amazon and Ebay.If the sale of mass products in e-commerce were also to be restricted in the future with these arguments, this would not only have consequences for customers, but much more for retailers."Especially for smaller retailers or thosewho primarily offer their products in stationaryretail stores, the sales channels via the marketplaces such as Amazon orEbayareindispensable and usually have no alternative.", saysDr. Oliver Bohl.However, it is clear from the ECJ's landmark decision that ablanket restriction on also offering certain goods via marketplaces and platformsisinadmissible and that an exception can only be made for luxury goods with objective and verifiable criteria. "With this ruling, the ECJ is sending an important signal for online commerce," says Dr. Oliver Bohl.

About the Author

As Executive Director of Blackbit digital Commerce GmbH, Stefano Viani manages all areas of the agency in the offices in Göttingen, Hamburg, Berlin and Kiev. His passion is the development of marketing strategies and their implementation in concrete measures.

In his free time, Stefano is passionate about riding his motorbike or working out in the gym.