In a decision opposing Coty France to the online sales platform Showroomprive.com, the Paris Court of Appeal followed in the footsteps of the Court of Justice’s eponymous preliminary ruling and validated the restrictions imposed by the luxury brand. It thus contradicted the previous decisions of the same Court of Appeal of May and June 2016 which had on the contrary invalidated Coty’s selective distribution network.
The Coty group holds a portfolio of luxury fragrance brands which it distributes through a network of selective distributors in the European Economic Area. Coty’s selective distribution agreement notably provides that its products cannot be distributed by pure players and therefore imposes on distributors wishing to market the products online to have a physical point of sale. Showroomprive.com is an online sales platform which, by nature, cannot be authorized by Coty since it does not have any physical point of sale. Incidentally, the platform had asked for Coty’s approval, which it had naturally refused. On two occasions, Coty was informed that Showroomprive.com had marketed some of its luxury fragrances in its private sales without authorization. Coty thus summoned the platform for unfair competition to obtain compensation for its prejudice resulting from the breach of its selective distribution network and the end of the practices. As the Marseille Commercial Court accepted Coty’s claims, Showroomprive.com appealed this judgement and argued that Coty’s selective network was unlawful due to the existence of several hardcore restrictions.
The Court of Appeal first recalled that using a selective network for luxury products such as high quality fragrances is lawful, provided distributors are selected on the basis of objective qualitative criteria, fixed uniformly and applied without discrimination. Then, it analyzed the lawfulness of each clause challenged by the platform.
One of the most eagerly awaited answers from the Court of Appeal concerned the prohibition for distributors to use online marketplaces or platforms. In this respect, the Court pointed out that the French Competition Authority’s position does not contradict that of the courts of the European Union and that these clauses do not constitute hardcore restrictions. It specified that the French Competition Authority has always accepted the prohibition of sales to platforms in the absence of guarantees as to the identity of the sellers.
One of the clauses of the Coty agreement challenged by the platform required consumers to come in person to collect their products for orders placed through communities or works councils. The Court considered that simply arranging sales by mail order, which is a method of selling likely to damage the image of the luxury products, is not a hardcore restriction.
Showroomprive.com also contested the generality of the clause prohibiting the resale to non-approved distributors in that it was not expressly limited to territories where the selective distribution was implemented. The Court noted that, in practice, Coty’s selective network covers all the Member States, so that this clause cannot be sanctioned.
After the concerns raised by this Court’s previous decisions which undermined otherwise widely accepted restrictions, this decision is reassuring for luxury brands sold through approved distributors. However, we look forward to the French Supreme Court’s ruling on the appeals lodged in the previous Coty cases.