EU court sides with brands over retailers in marketplace case

Internet Retailing

7th Dec 2017

Europe’s top court has sided with brands in a legal battle over companies’ right to stop retailers from selling their products on online platforms, such as Ebay and Amazon, without permission.

The case pitched luxury brand owner, Coty, which manages a range of popular brands, including CoverGirl, Max Factor, Rimmel, Adidas, Calvin Klein, Hugo Boss, Gucci and Burberry, among others, against German retailer, Parfumerie Akzente, which sells Coty’s goods on sites, including Amazon, against the company’s wishes.

Luxury owners like Coty have long fought for the right to restrict third-party sales in order to defend their exclusivity and branding, while online platforms, such as Ebay and Amazon, have argued that any sales curbs are anti-competitive. 

The recent ruling by the ECJ is a significant victory for luxury brands, especially as the number and size of online marketplaces grow.

“A supplier of luxury goods can prohibit its authorized distributors from selling those goods on a third-party internet platform such as Amazon,” the ECJ said.

“Such a prohibition is appropriate and does not, in principle, go beyond what is necessary to preserve the luxury image of the goods.”

Coty welcomed the ruling, which will apply across the 28-nation EU.

“After years of uncertainty, this means luxury brands can determine how they are placed on digital platforms and it is a clear ruling for the protection of luxury brands’ image, the defense of our teams’ work and the protection of consumers’ rights and information,” the company said.

However, Kai Renchen, chief executive of Parfumerie Akzente, said the business meets the terms for online sales set by luxury owners.

“Authorized merchants such as us may sell brand-name products on outward-visible third-party platforms, provided that we meet the conditions that are necessary and reasonable for preserving the luxury image,” he said in a statement.

Amazon declined to comment to Reuters, which reported the story.

The ruling will primarily impact brands and retailers in the German market, which has proved reluctant to adhere to a 2010 move by EU antitrust regulators to allow brand owners with less than a 30 per cent market share to block online retailers without a bricks-and-mortar shop from distributing their products.

In two test cases in recent years, the German cartel office forced Adidas and Asics to drop such bans, saying online platforms are crucial for small- and medium-sized companies and consumers.

The German cartel office told Reuters it didn’t expect the court’s ruling to affect its policy, but a competition lawyer, who declined to be named, said the country will have to fall in line.