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Retailers are no longer allowed to offer high-end brands via online platforms

Publication date: 11 December 2017
Manufacturers of luxury goods are allowed to prohibit retailers from offering the products for sale on websites such as amazon and eBay.

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The European Court of Justice so ruled in a case in Germany last week. Coty Germany sells high-end cosmetics in Germany. They market the luxury goods via authorised resellers. These resellers have to fulfil a number of requirements regarding setting, services and store design. Said requirements are set to guarantee the luxury image of the products.

Coty Germany sued one of its authorised vendors. The vendor sold Coty products via ‘amazon.de’. The contract included that the retailer was allowed to sell products via his own website but not via a third-party e-commerce platform such as amazon or eBay.

Contrary to competition law?

The question is whether such contractual terms are contrary to competition law. The European Court of Justice ruled that a system of selective distribution for luxury products meant to retain their luxury image is not contrary to competition law.

The fact is that the quality of luxury goods does not just arise from the tangible characteristics of the product but also from the image that provides a luxurious appearance. This particular appearance is an essential characteristic of these products. Resale of the products via e-commerce platforms to third parties may harm the luxury image. A contractual provision where the manufacturer prohibits the retailer from selling the products via online platforms of third parties is therefore legal when it is meant to retain the luxury image of the products.

Consequences for the parties

The ruling is a setback for eBay, amazon and other e-commerce platforms. Manufacturers of high-end brands may from now on intervene when their authorised vendors offer the products on online platforms too. Hence, the resellers will have to create their own websites if they intend to sell products online and cannot take advantage of the name of larger online platforms. The judgement of the European Court of Justice is in line with previous Dutch decisions.

More information

Do you need help drafting these or other terms in a distribution agreement or would you like to modify contractual terms? Please contact us:

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