Luxury products: the online shop window must also be in order (Coty)

Suppliers of luxury products may ban accredited resellers from selling their products on third-party internet platforms like Amazon or Marktplaats. This was decided by the Court of Justice in the case of Coty Germany.

Luxury products are often marketed by means of a system of selective distribution. The manufacturer imposes quality requirements on the distributor and the method of distribution, allowing it to uphold the brand image. But online sales are difficult to monitor. A complete ban would be going too far: consumers buy a lot online nowadays, so that resellers also have to sell online. Competition cannot be restricted to that extent. Cosmetics group Coty (with fragrances such as Calvin Klein, Boss, Chloé and Jil Sander) found a solution. Its distributors may offer the products online, but this has to be done from an 'electronic shop window' of the recognised store. In other words, it has to have the same 'standing' as the conventional store.

Sales via third-party online platforms, such as Marktplaats or Amazon, are contractually banned. This is because Coty cannot monitor how those third parties set out their 'shop windows', so that the brand image can end up under pressure. The Court of Justice is allowing manufacturers like Coty to ban online sales of their luxury products via third-party platforms contractually if the ban serves the purpose of supporting the luxury brand's image. But if an internet user can't see that the sale is being undertaken by a third party (on the instructions of the recognised distributor), then the distributor has control over the online storefront and, indirectly, the manufacturer as well. In that case, the brand image is not under pressure. A distributor may leave the online sale to a third party behind the scenes. Such clear contractual provisions cause that Coty's luxury products are not placed side-by-side with everyday (or even second-hand!) commodity products on the online shelf. If the provision aims to conserve the luxury brand image and the restriction goes no further than necessary, Coty can make such agreements. A big win for luxury products.

Maarten Haak