Luxury brands are celebrating a landmark judgment of the European Court given last week.

In a case concerning Coty, the court ruled that a clause in the company’s selective distribution agreement prohibiting authorised distributors from using Amazon to sell its cosmetics was lawful.

At the heart of the court’s decision was the principle that discernible third party platforms (such as Amazon and eBay) detract from the luxury image of luxury goods. In contrast, non-distinct third party platforms do not.

The court pointed out that luxury brands have no contractual relationship with, for example, Amazon. As such, Amazon is not required to comply with Coty’s quality criteria which it has imposed on all its authorised distributors under the terms of its selective distribution agreement.

Solicitor Stephen Sidkin, a partner at Fox Williams LLP, comments…

In view of the court’s decision, a luxury brand will be able to enforce a provision in its selective distribution agreement restricting the use by authorised distributors of discernible third party platforms for the resale of its luxury goods where:

  • the provision has the objective of preserving the luxury image of the goods in question;
  • the provision is laid down uniformly and not applied in a discriminatory fashion; and
  • the provision is proportionate in the light of the objective pursued.

In my opinion, the court’s decision can be expected to result in:

  1. luxury brands which have suitable provisions in their selective distribution agreement enforcing those provisions in order to clamp down on authorised distributors using Amazon, eBay, and other discernible third party platforms.
  2. Luxury brands which do not have such provisions in their selective distribution agreements looking to include such provisions as soon as possible!
  3. Amazon, eBay, and other discernible third party platforms looking to have direct contractual relationships with luxury brands in order to be able to continue to offer such brands on their platforms.
  4. In the near future, an increase in the price of grey market* products of luxury brands as grey marketers look to fill the void which has been left on discernible third party platforms.

*A grey market is an unofficial market in goods that have not been obtained from an official supplier.

This article was originally published on The Equestrian Trade News website.

Stephen’s original article can be found be here.


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