On Dec. 6, 2017, the CJEU ruled that a seller of luxury goods may prohibit its authorized distributors from selling those goods on third-party platforms (C-230/16 – Coty). The CJEU hereby confirmed the Advocate Generals’ Opinion, according to which a luxury image is a product-characteristic which justifies selective distribution systems under Art. 101 para. 1 TFEU.
In its ruling, the CJEU reconfirms and clarifies its settled case law (C-439/09 – Pierre Fabre). The court recalled the two main criteria from the Pierre Fabre decision under which selective distribution systems are compatible with Article 101 para 1 TFEU: (i) the resellers are selected “on the basis of objective criteria of a qualitative nature, laid down uniformly for all potential resellers” and (ii) the criteria do “not go beyond what is necessary” and are not “applied in a discriminatory fashion”.
Against this background, the CJEU then analyses the contractual clause at issue, prohibiting sales of luxury goods on third-party online platforms. The court confirms that the operator of a selective distribution model may rightfully restrict sales via third party platforms under EU competition law, if the following criteria are fulfilled: (i) necessity of the selective distribution system to safeguard the product’s luxury image, (ii) restrictions do not go beyond what is indispensable to achieve the protection, (iii) selection of resellers on the basis of uniformly applicable and objective criteria and (iv) restrictions do not entail a de facto prohibition of online sales.
The CJEU’s decision primarily concerns manufacturers of luxury goods that are planning to or already established a selective distribution system. Although the ruling shows that the (national) courts will still assess on a case by case basis, the CJEU provided a good framework for companies as to what is legally enforceable under EU competition law. At the same time the CJEU resolved the uncertainties regarding its ruling in the Pierre Fabre decision and took the opportunity to clarify that the decision never intended to prohibit the use of selective distribution systems in the first place.