A long-awaited ruling issued by the European Court of Justice (ECJ) in Luxembourg earlier this month in the case of a company selling luxury products may or may not support sports and outdoor brands that want to prevent unauthorized sales of their products on third-party online retailing platforms like Amazon or eBay.
The ECJ was asked for its opinion by a German court in the case of Coty Germany, a supplier of fragrances and cosmetics, against a German retailer, Parfümerie Akzente. It opined that a selective distribution system for luxury goods intended primarily to preserve the image of these goods complies with the European Union's competition rules – provided that resellers are chosen on the basis of objective criteria of a qualitative nature that apply in the same way for all potential resellers, and that these criteria do not go beyond what is necessary.
The Coty case will now return to the German court, which is almost certain to follow the ECJ's opinion, and it could be used as a reference with regard to selective distribution of luxury goods around the European Union.
The case has been followed closely by suppliers of sports and outdoor products that have been working on their own selective distribution policies. It was hoped that another case around Deuter Sport would provide more clarity on the issue of online marketplaces, but that didn't materialize: The case reached the German Supreme Court but earlier this year it emerged that the retailer involved, which had been backed up by Amazon, decided to withdraw the case.
Jochen Schäfer, a German lawyer who has established selective distribution systems for many customers in the sporting goods industry and beyond, says that the ECJ ruling could probably apply to quality branded products in other sectors – particularly if they involve consumer protection and safety, as may be the case for products such as bicycles or skis. Schäfer adds that the ECJ ruling makes it very unlikely that suppliers of quality branded sports and outdoor products will be exposed to the heaviest sanctions relating to selective distribution: While European courts and competition authorities may still question certain clauses, he said the ECJ ruling should exclude that, under ordinary circumstances, they would regard bans of unauthorized third-party resellers as a hardcore restriction, which may be paired with a fine of up to 10 percent of a company's global turnover.
The Federation of the European Sporting Goods Industry (FESI) said it welcomes the ECJ ruling on the Coty case. As the federation sees it, the court has confirmed that the current system of selective distribution remains unchanged, providing the necessary tools for sporting goods companies to preserve their brand image and to better serve consumers.
However, the reaction of the German federal anti-trust authority (BKA) was more circumspect. The organization said that it would have to study the ruling in more detail, but the Coty case clearly differed from the Adidas and Asics cases it previously studied. The Asics case in particular focused on price comparison engines. The BKA found in 2015 that clauses restricting the use of such engines inadmissibly restricted competition to the detriment of consumers, but the authority left open in its reasoning the issue of online marketplaces. The BKA's ruling in the Asics case was followed by the higher regional court in Düsseldorf, but Asics has appealed, meaning that the case headed to the federal court. In the meantime, Asics' distribution contracts were adjusted in 2015 to allow for price comparison engines.
Shortly after the ECJ ruling, Andreas Mundt, president of the BKA, was quoted as saying on Twitter that the court in Luxembourg had gone to great lengths to restrict the ruling to genuine luxury products. Suppliers of branded products still don't have carte blanche to issue blanket platform bans, he added, and his initial assessment of the ruling is that it will have a limited impact on the BKA's practice.
The German association of online trading (BVOH) laments that the definition of luxury products is left open to interpretation. The products defined by Coty as luxury items, such as Calvin Klein, Lacoste and Hugo Boss perfumes, are readily available in various forms of stationary retail trade, the association claims. More broadly, the BVOH argues that restrictions imposed on trading through online marketplaces are detrimental to consumer choice and to small and medium-sized retailers. It calls on the German court dealing with the Coty case to state the scope of the ruling more clearly.