The European Court of Justice (“ECJ”) delivered its long-expected preliminary ruling in case C-230/16 Coty Germany on December 6, 2017, (available in English here, and in Spanish here).
The origin of the case relates to the proceedings between Coty Germany GmbH (“Coty”), a manufacturer and wholesaler of luxury cosmetics, and Parfümarie Akzente GmbH, a reseller of Coty’s products within a selective distribution system. In particular, following a review of the distribution system in 2012, Coty allowed its authorized resellers to sell the products online as long as their luxury character was protected, whereas it prohibited online sales through unauthorized platforms if its logo was visible externally.
Parfümarie Akzente refused this prohibition and Coty filed a lawsuit, where the Oberlandesgericht Frankfurt am Main ultimately referred several questions to the ECJ concerning the compatibility of such prohibition with applicable competition rules.
Following the Advocate General’s view on the case (which we reported here), the ECJ has ruled that, under certain conditions, article 101.1 of the Treaty on the Functioning of the European Union (“TFEU”) does not preclude a contractual clause prohibiting authorized distributors in a selective distribution system to sell luxury or prestige goods through third-party platforms that may affect the products’ luxury or exclusivity image or reputation. In this regard, the compatibility of such prohibition with article 101.1 TFEU requires that (i) it is aimed at preserving the luxury image of such goods, (ii) it is laid down uniformly and not applied in a discriminatory way, and (iii) it is proportionate to the objective pursued.
In addition, and in accordance with the questions referred by the national court, the EUCJ also refers to the compatibility of such prohibition with Regulation (EU) 330/2010 (the Vertical Block Exemption Regulation, or VBER). In particular, the ECJ considers that a prohibition meeting the previous requirements does not constitute a restriction of costumers or of passive sales to end users, which would otherwise fall under articles 4(b) and 4(c) of the VBER.
The preliminary ruling in this case is consistent with and consolidates the ECJ’s case law on selective distribution systems, while the Court has also taken the chance to clarify the scope of previous judgments, particularly in case C-439/09 Pierre Fabre. As a result, manufacturers of luxury or prestige goods are now better placed to organize online sales of their products and enhance their control over it in compliance with competition law.
