Brussels, BELGIUM —  The Court of Justice of the EU (CJEU) delivered its judgment in the Coty Germany case (Case C-230/16). The case deals with contractual provisions a producer of luxury cosmetics imposed on his authorized retailer, prohibiting the latter the sale of products on open online marketplaces. The key question in this case is whether these distribution restrictions are compatible with EU competition law or not.

In today’s judgment, the CJEU states that a producer of luxury goods may, under certain conditions, prohibit his authorized retailers from selling his products on third-party online marketplaces. According to the Court, this prohibition cannot as such be considered illegal under competition rules because it aims to preserve the luxury image of products if it fulfills certain conditions, such as being proportionate to the objective pursued.

The Computer & Communications Industry Association has advocated for open and competitive markets since 1972. Online marketplace bans have long been a concern because they deprive European sellers of more opportunities and consumers of more choice and price competition. The following can be attributed to Jakob Kucharczyk, Vice-President for Competition and EU Regulatory Policy:

“This judgement is bad news for consumers who will face fewer choices and also less competition when they want to shop online. It’s also a major setback for small firms across Europe that are trying to develop their online business while protecting major mass market brands. Today’s verdict does nothing to help foster the digital single market and to help innovative small firms to create jobs, grow online and reach out across European borders. Online marketplaces make the digital single market a reality today by enabling sellers to reach consumers across the EU.”

“At the same time, the need to preserve a luxury image of products stood very much at the centre of this case. The majority of marketplace bans do not concern luxury products, but mass market products that can be found in just about any physical store. The judgment is definitely not a carte blanche for manufacturers to impose absolute marketplace bans for all goods. In fact, the Court explicitly states that marketplace bans are only legal if they aim to preserve luxury image in a proportionate way. That would not be the case for the majority of today’s marketplace bans.”

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