In conclusions returned on Wednesday 26 July to the Court of Justice of the EU (case C-230/16), Advocate General Nils Wahl found that the prohibition imposed by a supplier of luxury products on its accredited retailers on selling its products on third-party platforms did not, under certain conditions, constitute an unlawful cartel.
Coty Germany is a German supplier of luxury cosmetic products, which it sells through accredited retailers that are required to comply with certain qualitative requirements. Since 2012, the company has required vendors to sell the products on their own websites and to not visibly use unaccredited third-party companies. However, Parfümerie Akzente sells some of its products on Amazon.be. Coty Germany therefore took action to have these withdrawn from the site.
The Higher Regional Court of Frankfurt am Main Tribunal asked the Court of Justice for a preliminary ruling to determine whether the clause was compatible with EU antitrust law.
First of all, the Advocate General points out that the CJEU has already recognised that a selective distribution system for luxury goods may be created in order to preserve their quality and ensure their correct usage. According to settled case-law, selective distribution systems of luxury products aiming to preserve their luxury image do not immediately fall under the scope of the ban on cartels as long as they respect three conditions: - resellers must be selected on the basis of objective qualitative criteria, uniformly and without discrimination; - the nature of the product must require this type of distribution in order to preserve its quality and ensure its correct usage; - the criteria set out must respect the principle of proportionality. It will be for the Frankfurt-based court to assess whether these criteria have been met.
According to Wahl, in this specific case, the prohibition clause does not appear to be incompatible with EU law. Indeed, he argues, it preserves the luxury image of the products, as it ensures that they are sold in an environment that respects specific quality requirements. He then notes that the clause does not place an absolute ban on distributors from selling products online; nor does it forbid the invisible use of third-party platforms.
He also finds that the clause does not appear to be disproportionate with regard to the objective pursued, as the requirements imposed by Coty Germany are more likely to be respected if the products are sold by an accredited distributor.
Finally, Advocate General Wahl considers that although the clause should be considered a cartel, it does not constitute a “characterised restriction” of competition and may therefore be exempted under Regulation 330/2010.
Online trade players dissatisfied. Reacting to the conclusions of the Advocate General, Oliver Prothmann, the chair of the online trade association Bundesverband Onlinehandel (BVOH), said that these conclusions spell the “death sentence for many thousands of small and medium-sized retailers in Europe”. He goes on to argue that if the Court should go along with these conclusions, it would “produce a consumer-unfriendly monopolistic trade culture dominated by manufacturers and a few individual giants”. “Diversity and competition will then be dead”, he added. (Original version in French by Lucas Tripoteau)