No luxury on online sales platforms

On 12 July, the Higher Regional Court of Frankfurt issued the final judgment (11 U 96/14 (Kart)) in the dispute between the perfume manufacturer Coty and its authorized retailer Akzente: In a selective distribution system, a manufacturer of luxury products may prevent its retailers from marketing its products through third party online sales platforms.

The decision implements the principles of the European Court of Justice’s landmark decision of December 2017, according to which the intangible brand image justifies restricting the sale of luxury goods in a selective distribution system by retailers in order to ensure a high-quality sales environment. According to the Higher Regional Court of Frankfurt, this does not depend on individual products and their pricing, but rather on the entire product range. The decisive factor is how the manufacturer puts its products on the market.

Yet, the manufacturer itself must adhere to the rules it has established. If, however, the manufacturer excludes platforms such as Amazon and Ebay or discounters from the intended distribution channels, its customers – such as Akzente in the present case – have to accept such restrictions. This is irrespective of offers of grey market products that may be available on these distribution channels. As the taking of evidence carried out with regard to Coty’s internal practices in this respect undoubtedly showed that Coty adheres to the self-imposed rules, the contractual sales restrictions in Coty’s distribution system are unobjectionable under antitrust law and, thus, enforceable.

The same applies to sales via travel retail stores at airports or direct airline sales, which do not call into question the luxury character of the products. Nor could Coty be accused of tolerating the sale of its products via retail stores in large shopping centers (shopping malls), because these are not comparable to platforms since every such retailer is perceived as independent by the consumer.

The Higher Regional Court of Frankfurt showed that these aspects do not necessarily exclude all sales on online platforms since the manufacturer’s quality specifications can also be met by specific platform clauses. This may be particularly important in Germany, where platforms have a much larger market share of internet trade than in other EU countries. However, the Court felt obliged to adhere to the principles established by the European Court of Justice, which – at least in the field of luxury products – had expressly considered an exclusion of third-party platforms per se to be permissible.

In this case, Coty relied on the proven cooperation with the law firm Lubberger Lehment, which has already won many landmark decisions for Coty before the highest courts.