On Wednesday the 6th December 2017, the European Court of Justice ("the Court") delivered its long-awaited Coty judgment on the ability of brand-owners to restrict dealers selling on market places. The judgment will be welcomed by luxury brand-owners. The Court concluded as follows:
This is an important judgment which will be warmly welcomed by owners of luxury brands. What some may consider disappointing is that the Court chose not to adopt the broader stance of the Advocate General ("AG") who had recognised the importance of brands more generally, not just luxury brands. Instead, the court strictly limited the entirety of its judgment to the distribution of luxury brands in a selective system, leaving residual uncertainty for other brand owners. Particularly in the context of the block exemption further analysis is needed whether the judgment and its reasoning is linked in substance to the selective distribution of luxury products or may be applied also to other goods and/or distribution systems. It is also worth noting that the discussion on the definition of "luxury product" remains wide open. That means we can expect further cases in this area going forward.
The background to the Coty case and the precedent cases in Germany
In the context of a dispute between Coty Germany GmbH ("Coty") and its distributor, Parfümerie Akzente GmbH ("Akzente"), the higher regional court in Frankfurt am Main (Oberlandesgericht Frankfurt am Main) referred a series of questions to the Court for a preliminary ruling (Case C-230/16). Coty had tried to impose on Akzente a restriction which required it to sell only via Akzente's own physical stores and website, meaning it could not sell on third party platforms. Akzente refused, arguing that the restriction was anti-competitive, and the dispute ended up in court in Frankfurt am Main.
The referring court asked several questions relating to selective distribution, including on general prohibitions preventing authorised resellers selling on third party platforms.
Those questions arose after a string of high profile cases regarding online platform bans, in which the German competition authority ("BKartA") condemned inter alia online platform bans in the selective distribution networks of well-known brands such as Asics and adidas. In those cases, the BKartA proposed a simple "either-or" solution:
Advocate General WAHL's opinion
Back in July, AG Wahl's opinion suggested that this either-or approach is too restrictive and took the view that (1) the Metro criteria, which establish when a selective distribution system is justified, should not be limited to luxury products and (2) restrictions of online platform sales may be justified and cannot be considered as a hardcore restriction.
AG Wahl recommended that the Court put an end to the strong tendencies amongst national competition authorities (most notably in Germany) to unduly broaden the reach of hardcore restrictions of competition. He also highlighted the importance of brands generally, and that new forms of internet sales should not necessarily take precedence over brand protection – a position that had become prevalent in Germany particularly. You can read our team's full analysis of the opinion here.
Conclusion
Whilst the Court has followed the AG opinion on the specific questions referred, it did not adopt the same broad stance that AG Wahl had taken on brand protection more generally. The AG opinion and the Commission's e-commerce sector inquiry report do still provide some comfort for those including third party platform restrictions for non-luxury products and products outside selective distribution networks. However, it is likely that this case will not be the final word and that further cases will follow in this area.
Bird & Bird's worldwide competition team is renowned for its work advising on the competition law rules around the international distribution of products. If you have any questions on what the Coty judgment means for you please contact one of the authors below, or your usual Bird & Bird competition team contact.