ECJ blocks general prohibition of use of online platforms – National courts to decide on the permissibility of clauses that prohibit sales through online platforms in individual cases

06.12.2017

[Luxembourg, ] The European Court of Justice (ECJ) issued a far-reaching judgment on 6 December 2017 in connection with a dispute regarding online sales of luxury cosmetics that addresses questions remanded by the Frankfurt a. M. Higher Regional Court for the purposes of deciding an appeal (file ref. C-230/16). The case at issue involves a clause that prohibits parfumdreams.de (Parfümerie Akzente GmbH), an online perfume shop, from marketing name-brand cosmetics of Coty Germany GmbH through platforms such as Amazon. Europe’s highest court sided with parfumdreams.de in respect of significant aspects of the legal dispute, which has been going on since 2012. Coty may no longer peremptorily prohibit sales through online platforms, but must comply with certain conditions if it decides to restrict online sales.

According to GÖRG partner Dr. Oliver Spieker, the judgment sends a positive signal as regards online sales, an area in which platforms such as Amazon and eBay figure prominently. Spieker points out that the use of such platforms may not be prohibited arbitrarily and that any restrictions on such sales intended to preserve the luxury images of products must be necessary and reasonable, adding that compliance with this standard will be decided in the individual case by proceeding through the domestic courts to the respective country’s highest judicial tribunal (e.g., Germany’s Federal Court of Justice). Spieker, who advises manufacturers of name-brand products on selective distribution issues and sees the ECJ judgment as one that impacts manu-facturers and retailers differently, also mentioned that the question of course also arises as to which goods actually have a “luxury” image to defend, which can be a matter of intense dispute.

For Kai Renchen, managing director of parfumdreams.de, the ECJ judgment represents a significant success for his company and other online retailers since the court has clearly prohibited any general prohibition of the use of specific platforms. According to Renchen, “Authorized dealers like us can sell name-brand products through what are readily recognizable as third-party platforms if we meet the conditions that may be necessary to preserve the luxury image of such product and are also not unreasonable.”

It will now be up to the Frankfurt a. Main Higher Regional Court to decide whether the clause in the agreement with Coty that prohibits sales through online platforms such as Amazon entails application of objective criteria in terms of quality or is arbitrary and whether it is necessary and appropriate in order to preserve the present luxury image of the Coty perfume. “In a given case, such assessment will be the responsibility of the German courts, including the Federal Court of Justice”, according to Spieker, who also added that “the ECJ did ad-vance an opinion in the Coty case, but at the same time expressly stated that it’s opinion was subject to review of the issues involved by the Higher Regional Court, which shows that the ECJ acknowledges the jurisdictional competency of the Frankfurt a. M. Higher Regional Court.”

Background information on the ECJ proceedings: parfumdreams.de (Parfümerie Akzente GmbH) is an author-ized dealer of Coty Deutschland GmbH. parfumdreams.de and Coty Deutschland are party to an agreement that calls for selective distribution of Coty products. In 2012, the agreement was amended to prohibit sales through online platforms. parfumdreams.de refused to accept this clause, which caused Coty to bring an action before the Frankfurt Regional Court. The court of first instance, the Frankfurt Regional Court (file ref. 3 O 128/13), ruled that the clause constituted an improper restriction and was in violation of cartel law, which prohibits contractual arrangements that restrict competition. Coty appealed the judgment. The Higher Regional Court Frankfurt (file ref. 11 U 96/14) then referred several questions regarding cartel law to the ECJ for review in order to be able to take the opinions of the ECJ into consideration in its decision in the pending matter.

Over the years, many clients – retailers as well as manufacturers – have regularly turned to GÖRG for advice and legal representation before the courts in connection with disputes involving selective distribution agree-ments and distribution systems. Dr. Oliver Spieker and Michael Alber are two GÖRG lawyers specialized in advising companies on the legal fine points involved in the design of selective distribution systems.

With its 28 bricks-and-mortar locations, Parfümerie Akzente GmbH operates one of Germany’s largest chains of perfume shops. The company also markets its products – including the Coty products – online through its parfumdreams.de webshop. In addition to the company’s own webshop, it also sells its wares through its own Amazon webstore.