The Court of Justice of the European Union (‘CJEU’) has today ruled that third-party platform bans may be justified in the selective distribution of luxury goods. The CJEU’s decision in the Coty Germany reference proceedings broadly follows the opinion of Advocate General Wahl which was handed down earlier this year (see here, and further background here).
The Court makes a number of rulings which will be of interest to brand owners:
- Selective distribution may be justified for luxury goods to protect the ‘allure and prestige’.This clears up the uncertainty which arose following the Pierre Fabre judgment which seemed to suggest that the preservation of a luxury image could not justify a restriction of competition. The CJEU has confirmed that the judgment in that case should be confined to the particular facts at issue.
- Third party platform bans may be justified in the selective distribution of luxury goods. The CJEU has ruled that, in the context of selective distribution, a supplier of luxury goods can, in principle, prohibit authorised distributors from using ‘in a discernible manner’ third-party platforms such as Amazon. Any third-party platform ban must have the objective of preserving the luxury image of the goods, be applied uniformly and not in a discriminatory fashion, and be proportionate to the objective pursued.
This ruling certainly gives some more leeway for brand owners of luxury goods, but should not be seen as an absolute green light for third-party platform bans. In particular, such restrictions must be justified by the goods in question (i.e. they must have a genuine ‘aura of luxury’) and must be a proportionate means of preserving the luxury image. This will be for national courts and authorities to interpret, and we can expect a fairly high threshold. The German Competition Authority, the Bundeskartellamt, has already said that it considers the CJEU’s decision to be limited to genuinely prestigious products. That said, the ruling does make clear that third-party platform bans do not amount to a hardcore restriction of competition, and thus it will be open to brand owners to seek to justify their use on a case-by-case basis.