Short Reads

EU Court of Justice: Suppliers of luxury goods may prohibit their authorised distributors from selling on third party internet platforms

EU Court of Justice: Suppliers of luxury goods may prohibit their auth

EU Court of Justice: Suppliers of luxury goods may prohibit their authorised distributors from selling on third party internet platforms

06.12.2017 NL law

Today the ECJ rendered its much anticipated judgment in a dispute between a supplier of luxury cosmetics (Coty) and one of its authorised resellers. The central question was whether Coty is allowed under the competition rules to forbid its resellers to sell Coty products over third party internet platforms with visible logos (like eBay or Amazon).

The ECJ ruled that such an “online platform ban” is not incompatible with EU competition law. The Court ruled that online platforms bans can be appropriate in the context of a selective distribution system provided such bans do not go beyond what is necessary to preserve the luxury image of products.

Judgment

This ruling will be welcomed by luxury brand owners. The ECJ confirms that suppliers have considerable freedom under EU competition rules to design their (selective) distribution networks as they see fit. The ECJ’s judgment largely follows previous case law indicating that selective distribution systems which are mainly intended to preserve the ‘luxury image’ of products are not necessarily caught by the cartel prohibition. This is the case where such selective distribution systems meet two criteria: (1) the resellers are chosen on the basis of objective criteria of a qualitative nature which are determined and applied uniformly and (2) the criteria established do not go beyond what is necessary for the preservation of the special character of the products supplied within the selective distribution system (e.g. their luxury image).

In its judgment of today, the ECJ ruled that online platform bans in such selective distribution networks can be an appropriate and necessary means to preserve the luxury image of products sold. Such bans allow brand owners to ensure that the goods are sold in an online environment that corresponds to the brand owner’s qualitative standards. Consequently, an online platform ban within a selective distribution network, in principle, does not restrict competition. By contrast, the ECJ reiterates that an absolute online sales ban imposed on retailers (which for example also prohibits retailers from selling via their own online shops) will not be legal unless objectively justified (see the ECJ judgment in Pierre Fabre).

Implications

The Coty-judgment ends a period of uncertainty over the legality of online platform bans under EU law, which has been the subject of divergent interpretations by the national competition authorities and courts. In Germany, the national competition authority had ruled that online platform bans tend to restrict competition (see our February 2016 Newsletter). Conversely, a Dutch court had recently ruled that a brand owner was allowed to impose an online platform ban on its authorised distributors (see our November 2017 Newsletter). Following the ECJ’s ruling, a remaining point of uncertainty arguably lies in what may qualify as a ‘luxurious’ good.

In any event, today’s ruling in Coty should make it easier for luxury brand owners to create pan-European selective distribution systems, with without worrying too much about divergent interpretations of the competition rules by national courts and authorities in different EU Member States. Online platforms like eBay or Amazon, however, will not be pleased with the outcome of this case. They may see more brand-owners prohibiting their authorised retailers to sell via third party online platforms.

If you have any questions on the above, please contact Rein Wesseling, Christof Swaak or Floris ten Have

Team

Related news

03.10.2019 NL law
It's in the details: HSBC fine quashed for insufficient reasoning

Short Reads - The General Court annulled the EUR 33.6 million fine imposed on banking group HSBC for its participation in the euro interest rates derivatives cartel. Full annulment was granted based on the Commission's failure to provide sufficiently detailed reasoning for the first step of the fine calculation, establishing the value of sales. As the value of sales could not be established in a straightforward way, the Commission used a proxy. When doing so, the Commission needs to properly explain its reasoning to allow the companies fined to understand how it arrived at the proxy. 

Read more

03.10.2019 NL law
The postman will no longer ring twice: Minister unblocks postal merger

Short Reads - The Dutch Authority for Consumers and Markets (ACM) recently blocked postal operator PostNL's acquisition of its only national competitor, Sandd, because this would create "a monopolist on the postal delivery market". However, the Dutch Minister of Economic Affairs and Climate Policy has overruled the ACM's decision on grounds of public interest. Invoking industrial policy or public interest reasons for merger clearance seems to be catching on.

Read more

03.10.2019 NL law
The ACM has to pay: moral damages awarded to real estate traders

Short Reads - The Dutch Authority for Consumers and Markets (ACM) needs to cough up a total of EUR 120,000 in moral damages to three real estate traders. The Dutch Trade and Industry Appeal Tribunal (CBb) agreed with the real estate traders that the annulment of the ACM's cartel decisions against them was insufficient compensation for the harm they suffered as a result of the length of the procedure and the press coverage of their cases.

Read more

02.10.2019 NL law
Politie aansprakelijk voor schietpartij Alphen aan den Rijn

Short Reads - De politie is aansprakelijk voor de schietpartij in een winkelcentrum Alphen aan den Rijn in 2011. Dat oordeelt de Hoge Raad in zijn arrest van 20 september 2019 (ECLI:NL:HR:2019:1409). Bij deze schietpartij vonden zes mensen de dood en raakten zestien mensen gewond. De dader doodde ook zichzelf. Nabestaanden van dodelijke slachtoffers, slachtoffers die gewond raakten en winkeliers spreken de politie aan tot schadevergoeding. Zij voeren aan dat de politie de vergunning voor de wapens die de man gebruikte, niet had mogen verlenen.

Read more

03.10.2019 NL law
Margrethe Vestager to play matchmaker between enforcement and regulation

Short Reads - Current Competition Commissioner Margrethe Vestager may face even greater challenges in the next European Commission. President-elect Ursula von der Leyen has not only nominated Vestager for a second term as Commissioner for Competition, but has also asked her to coordinate the European Commission's digital agenda. As a result, Vestager may soon be tackling digital issues through competition enforcement whilst also proposing additional regulation to deal with these (and related) issues pre-emptively.

Read more

02.10.2019 NL law
Dutch national police service liable for unlawful granting of firearms permit

Short Reads - In a recent decision (ECLI:NL:HR:2019:1409), the Supreme Court has decided that the Dutch national police force is liable for damage suffered by victims of a shooting which took place in a shopping centre in 2011; an event that shocked the Netherlands. The Supreme Court held that the police had unlawfully granted a permit for the firearms used in the shooting.

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring