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

07.02.2020 BE law
Het finale Belgische ‘nationaal energie- en klimaatplan’ en de Belgische langetermijnstrategie: het geduld van de Commissie op de proef gesteld?

Articles - Op 31 december 2019 diende België, nog net op tijd, zijn definitieve nationaal energie- en klimaatplan (NEKP) in bij de Commissie. Het staat nu al vast dat het Belgische NEKP niet op applaus zal worden onthaald door de Commissie. Verder laat ook de Belgische langetermijnstrategie op zich wachten. Wat zijn de gevolgen?

Read more

06.02.2020 NL law
CDC/Kemira: Amsterdam Court of Appeal applies European principle of effectiveness to limitation periods

Short Reads - In a private enforcement case brought by CDC against Kemira, the Amsterdam Court of Appeal applies the European principle of effectiveness and rules that claims are not time-barred under Spanish, Finnish and Swedish law. With reference to the Cogeco judgment of the ECJ, the Court considers that claimants must be able to await the outcome of any administrative appeal against an infringement decision, even in relation to respondents who themselves have not filed appeals against the infringement decision.

Read more

06.02.2020 NL law
Pay-for-delay: brightened lines between object and effect restrictions

Short Reads - In its first pay-for-delay case, the ECJ has clarified the criteria determining whether settlement agreements between a patent holder of a pharmaceutical product and a generic manufacturer may have as their object or effect to restrict EU competition law. The judgment confirms the General Court’s earlier rulings in Lundbeck and Servier (see our October 2016 and December 2018 newsletters) in which it was held that pay-for-delay agreements (in these cases) constituted a restriction ‘by object’.

Read more

06.02.2020 NL law
Consumers and Sustainability: 2020 competition enforcement buzzwords

Short Reads - The ACM will include the effects of mergers on labour conditions in its review. It will also investigate excessive pricing of prescription drugs. As well as these topics, the ACM has designated the digital economy and energy transition as its 2020 focus areas. Companies can therefore expect increased enforcement to protect online consumers, and active probing of algorithms.

Read more

06.02.2020 NL law
The ACM may cast the net wide in cartel investigations

Short Reads - Companies beware: the ACM may not need to specify the scope of its investigation into suspected cartel infringements in as much detail as expected. On 14 January 2020, the Dutch Trade and Industry Appeals Tribunal upheld the ACM’s appeal against judgments of the Rotterdam District Court, which had quashed cartel fines imposed on cold storage operators. The operators had argued that the ACM was time-barred from pursuing a case against them, because the ACM had not suspended the prescription period by beginning investigative actions specifically related to the alleged infringements.

Read more

06.02.2020 NL law
Den Bosch Court of Appeal revives damages claims in Dutch prestressing steel litigation

Short Reads - On 28 January 2020, the Court of Appeal of Den Bosch issued a ruling in the Dutch prestressing steel litigation. In its ruling, the Court of Appeal overturned a 2016 judgment of the District Court of Limburg, in which it was held that civil damages claims brought by Deutsche Bahn were time-barred under German law (see our January 2017 newsletter).

Read more

This website uses cookies. Some of these cookies are essential for the technical functioning of our website and you cannot disable these cookies if you want to read our website. We also use functional cookies to ensure the website functions properly and analytical cookies to personalise content and to analyse our traffic. You can either accept or refuse these functional and analytical cookies.

Privacy – en cookieverklaring