Restricting Internet Sales of Luxury Goods

In Case C-230/16 Coty
Germany GmbH v Parfümerie Akzente GmbH, the CJEU had to consider
whether a supplier of luxury goods can prohibit its authorised distributors
from selling those goods on a third-party Internet platform such as Amazon. It
determined that such a prohibition may be appropriate and does not, in
principle, go beyond what is necessary to preserve the luxury image of the
goods.

Facts

Coty Germany sells luxury cosmetic goods in Germany. In
order to preserve their luxury image, Coty markets certain of its brands via a
selective distribution network. The sales locations of authorised distributors
must comply with a number of requirements relating to their environment, décor
and furnishing. Furthermore, authorised distributors are allowed to sell the
goods in question online, provided that they use their own electronic shop
window or non-authorised third-party platforms, only on condition that the use
of such platforms is not discernible to the consumer. They are expressly
prohibited from selling the goods online via third-party platforms which
operate in a discernible manner towards consumers.

Coty Germany brought proceedings before the German courts
against one of its authorised distributors, Parfümerie Akzente, with a view to
prohibiting it, in accordance with the contractual clause at issue, from
distributing Coty goods via the platform ‘amazon.de’. The Oberlandesgericht
Frankfurt am Main (Higher Regional Court, Frankfurt am Main, Germany) asked the
CJEU to rule on the lawfulness of the clause under EU competition law.

Judgment

The Court, referring to its settled case-law,[1]
 stated that a selective distribution
system for luxury goods, designed primarily to preserve the luxury image of
those goods, does not breach the prohibition of agreements, decisions and
concerted practices laid down in EU law,[2]
provided that the following conditions are met: (i) resellers are chosen on the
basis of objective criteria of a qualitative nature, laid down uniformly for
all potential resellers and not applied in a discriminatory fashion; and (ii)
the criteria laid down do not go beyond what is necessary.

The Court notes in this context that the quality of luxury
goods is not simply the result of their material characteristics, but also of
the allure and prestigious image which bestows on them an aura of luxury. That
aura is an essential aspect of those goods in that it thus enables consumers to
distinguish them from other similar goods. Therefore, any impairment to that
aura of luxury is likely to affect the actual quality of those goods.

The CJEU went on to find that the prohibition of agreements,
decisions and concerted practices, laid down in EU law, does not preclude a
contractual clause, such as that at issue, which prohibits authorised
distributors of a selective distribution network of luxury goods designed,
primarily, to preserve the luxury image of those goods from using, in a
discernible manner, third-party platforms for Internet sales of the goods in
question, provided that the following conditions are met: (i) that clause has
the objective of preserving the luxury image of the goods in question; (ii) it
is laid down uniformly and not applied in a discriminatory fashion; and (iii)
it is proportionate in the light of the objective pursued. It will be for the
Oberlandesgericht to determine whether those conditions are met but then went
on to make it very clear that the CJEU itself considers that the conditions are
met.

The Court observes in this respect that, subject to the
Oberlandesgericht’s inquiries, the clause at issue appears to be lawful.

It is common ground that the contractual clause at issue has
the objective of preserving the image of luxury and prestige of Coty goods.
Furthermore, it follows from the documents submitted to the Court that the
Oberlandesgericht considers that that clause is objective and uniform and that
it applies without discrimination to all authorised distributors. Furthermore,
according to the Court, the prohibition, imposed by a supplier of luxury goods
on its authorised distributors, of the use, in a discernible manner, of
third-party platforms for Internet sales of those goods is appropriate to
preserve the luxury image of those goods. That prohibition also does not appear
to go beyond what is necessary to preserve the luxury image of those goods. In
particular, given the absence of any contractual relationship between the
supplier and the third-party party platforms enabling that supplier to require
those platforms to comply with the quality criteria which it has imposed on its
authorised distributors, an authorisation for those distributors to use such
platforms subject to their compliance with pre-defined quality conditions
cannot be regarded as being as effective as the prohibition at issue.

Finally, in the event that the Oberlandesgericht should
conclude that the clause at issue is caught, in principle, by the prohibition
of agreements, decisions and concerted practices laid down in EU law, the Court
points out that it is possible that that clause might benefit from a block
exemption.[3]

In circumstances such as those of the main proceedings, the
prohibition at issue on the use, in a discernible manner, of third-party
undertakings for Internet sales does not constitute a restriction of customers
nor a restriction of passive sales to end-users, restrictions which are
automatically excluded from the benefit of a block exemption because they are
liable to have severely anti-competitive effects.