Coty wins ECJ approval in landmark online luxury sales ban

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The CJEU ruled on Wednesday that European Union competition law does not stop luxury goods manufacturers from banning retailers that are part of their selective distribution network from using third-party online marketplaces to sell their goods to the public where that ban is aimed at preserving the brand's luxury image. A clause as used by Coty, that prohibits authorised distributors from selling through third-party online platforms, is similarly allowed when it has the objective of preserving the luxury image of the goods in question, is laid down uniformly and not applied in a discriminatory manner; and is proportionate in the light of the pursued objective.

Coty, owner of brands such as Marc Jacobs and Calvin Klein raise a case on this issue.

Brand owners have previously argued that they should have the right to choose their distributors to protect their image and exclusivity.

Welcoming the decision, Coty said: "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 defence of our teams' work and the protection of consumers' rights and information'. However, e-tailers such as Amazon and eBay have countered that the ruling to curb online sales will be harmful to small businesses while being anti-competitive.

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In order to preserve the "luxury image" of its products, Coty markets certain of its brands via a selective distribution network, that is to say, through authorised distributors. But luxury fashion brands are seem to be unhappy with its distributors selling the brand items online without the permission.

The ruling said luxury brands have no contractual relationship with online marketplaces, which in turn are not required to comply with brands' quality criteria. The court further said that it would not breach the rules of competition.

Germany will now have to fall in line though, said a competition lawyer, who declined to be named.

The case is C-230/15 Coty Germany.

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