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Digital Business Lawyer

AG hands down decision in Coty case

dvocate General (‘AG’) Wahl’s Opinion of 26 July 2017 in the case currently before the CJEU Coty Germany GmbH v. Parfümerie Akzente GmbH, finding that Coty’s attempts to ban its authorised retailers from using third party sales platforms to sell its luxury goods online does not contradict Article 101(1) TFEU, “takes a rather absolutist position,” said Becket McGrath, Partner at Cooley LLP, “by emphasising the different levels of control over product presentation on a marketplace, compared with a retailer’s own website. As a result, [Wahl] appears to accept that any use of marketplaces can be banned outright.”

The AG notes in his Opinion that, “in making use of third-party platforms in the context of the distribution of the products, the authorised distributors - and, what is more, the network head - in particular no longer have control over the presentation and image of the products, since, inter alia, those platforms frequently display their logos very prominently at all stages of the purchase of the contract goods.” McGrath, however, notes that the AG’s position does not seem to take into account the alternative options available to a brand owner to control how its products are presented online, “for example by agreeing particular display standards with marketplace operators or contractually mandating minimum quality standards to be met by resellers, which would apply regardless of whether sales are made on the reseller’s website or a third party platform. Since such options would be a more proportionate approach for a brand than banning any use of any platform on a ‘per se’ basis, accepting the legitimacy of per se platform bans as a matter of principle is questionable,” states McGrath.

The AG Opinion follows a request for a preliminary ruling from the Higher Regional Court, Frankfurt am Main, after Coty challenged Parfümerie Akzente, an authorised retailer, for selling its products through the amazon.de marketplace. The Higher Regional Court requested answers to questions regarding Coty’s actions being in potential violation of Article 101(1) TFEU, which prohibits contractual agreements which are anti-competitive. In addition to finding that selective distribution systems contracts based on ‘luxury image’ requirements do not breach Article 101(1) TFEU, the AG also concluded that the legitimacy of imposing a prohibition on resellers using third party platforms should be determined on a case-by-case basis by the referring court. It would therefore, according to the AG, be the role of the court to establish whether such a restriction is justified in the context of a specific selective distribution system. To make such a decision, the court would consider the following criteria: the nature of the product in question, whether the distributors were chosen in a manner than is non-discriminatory, and whether the criteria under which they were chosen did not go beyond what was necessary.

Simon Barnes, Partner at Shoosmiths LLP, notes that “even if the CJEU does follow the AG’s Opinion, this will not mean carte blanche for third party platform restrictions - rather, the lawfulness of any given restriction will depend on the precise facts of the case.” Barnes believes however that the AG’s finding that restrictions on third party platform sales of luxury goods may well be legitimate will still be welcomed by brands. “For suppliers, this is a far more favourable view than that taken by the Federal German Competition Authority, which has previously held such restrictions to be unlawful,” said Barnes. “If the CJEU does follow the AG’s approach, that would give suppliers greater comfort regarding the extent to which they can legitimately protect how their products are sold online.”

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