Luxury brands can ban online sellers

Coty allows its products to be sold by authorized dealers but puts a number of restrictions on how such sales are carried out, finding such terms necessary to preserve its branding image.

Online retailers are breaking the law if they sell luxury products without permission from the owners of the brands, the European Union's highest court has ruled.

In a move that could have far-reaching consequences, the Court of Justice backed the case brought by U.S. cosmetics giant Coty - which makes Rimmel and CoverGirl brands, among others.

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.

Brand owners have previously argued that they should have the right to choose their distributors to protect their image and exclusivity.

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The outcome of the ongoing court case regarding the sale of luxury beauty products sold on sites such as eBay and Amazon will set a standard for companies being able to monitor and prohibit the sale of their prestige goods online.

Manufacturers of goods that aren't luxury brands "still have no carte blanche to sweepingly limit their distributors' use of sales platforms, according to our assessment", Mundt added.

However, e-tailers such as Amazon and eBay have countered that the ruling to curb online sales will be harmful to small businesses while being anti-competitive.

Germany will now have to fall in line though, said a competition lawyer, who declined to be named. 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).

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