Lubberger Lehment Strengthens Selective Distribution

In a landmark judgment The ECJ has confirmed the rights of trademark owners in defending selective distribution systems. It ruled that a manufacturer of luxury perfumes such as the plaintiff Coty could impose far-reaching requirements on its authorised dealers for their internet sales and could also largely restrict sales via online platforms. The lawsuit was filed by an authorized dealer who was prevented from selling Coty perfumes on major online platforms by Coty’s terms and conditions.

»This brings the Court back to its early decisions, reconciling the free movement of goods with the protection of intellectual property.« Dr. Andreas Lubberger

He claimed that the relevant contractual clauses were contrary to antitrust law. The Higher Regional Court of Frankfurt had submitted fundamental questions to the European Court of Justice. This happened against the background of a very controversial discussion of these issues, especially in Germany. The ECJ has now ruled all these questions to Coty’s advantage.

Strengthening the Rights of the Manufacturer

The ECJ strengthens the trademark rights of the distributor. It confirms the previous case law, according to which the rights of luxury trademark owners include securing an appropriate sales environment. Anyone who fails to comply with such requirements is committing a trademark infringement. Like the Advocate General, the ECJ considers that the distributor should be given the possibility of denying authorised dealers the right to sell through externally identifiable third parties. Because such a prohibition could ensure the fulfilment of the guarantees of quality, safety and origin marking of the goods. This possibility no longer exists in the case of unauthorized distribution via third-party platforms and, in contrast to the “Pierre Fabre” constellation, does not constitute an absolute ban on online distribution.

Anti-Trust Prohibition and Block Exemption

As a result, the general ban on cartels in Article 101(1) TFEU no longer applies and Coty no longer faces the question of (group or individual) exemption.

However, the Court also answers the questions referred by the Higher Regional Court of Frankfurt on block exemption: Coty’s quality requirements did not violate the black clauses of the vertical block exemption regulation (BER). Firstly, it does not restrict access to a specific customer group. The users of the third-party platforms are not a demarcable customer group. Secondly, the clause does not constitute an inadmissible restriction on passive sales to final consumers within the meaning of Article 4(c) of the vertical BER, since the authorised distributor can still reach consumers via his authorised website.

Legal Certainty for Luxury Goods

Andreas Lubberger on this subject: »We welcome the fact that there is finally legal certainty. Unfortunately, the Commission’s previous block exemptions did not contain any statements on online commerce. It is even better that the ECJ has not only assessed the case in line with its previous antitrust criteria, but has also taken trademark law into account. This brings the Court back to its early decisions reconciling the freedom of movement of goods with the protection of intellectual property.«