Coty and other luxury brands win against online retailers in EU court decision

07-Dec-2017 - Last updated on 07-Dec-2017 at 09:47 GMT

Related tags European union Luxury good

Along with other luxury brands, Coty celebrated a landmark court win against retailers selling their products on digital retail platforms, meaning companies like Amazon and Ebay will no longer be able to sell relevant products if the brands have chosen not to.

It comes as a decision from the Court of Justice of the European Union, which considered a case brought by Coty Germany relating to the retail of its luxury cosmetics goods in Germany.

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.

It brought proceedings to stop these distributors selling its products on e-marketplace platforms, specifically Amazon.de, and the European Court has agreed that it is within the rights of luxury goods brands to stipulate which retail channels their products are sold through.

Court response

The court statement on its findings explains that it considers the retail platform of luxury goods as having an impact on the public perception of brands.

“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,” it says.

“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.”

As long as luxury goods brands apply any ban on specific retail platforms uniformly in a contractual clause across its authorised distributors, the court finds such a clause is reasonable.

“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.”

As noted in a Reuters report on the court decision, “the issue is significant in Europe, whose companies account for 70% of global luxury goods sales.”