(CN) – European competition law cannot stop a luxury retailer that does not want its wares being trafficked via the online retail giant Amazon, the EU’s highest court ruled Wednesday.
The decision out of Luxembourg comes in response to contractual proceedings that the luxury retailer Coty Prestige initiated in Germany against one of its authorized retailers.
Coty allows its products to be sold by authorized dealers but puts a number of restrictions on how such sales are carried out, finding such terms necessary to preserve its branding image.
As quoted in Wednesday’s ruling, Coty’s contracts make specific reference to “the façade, interior decor, floor coverings, type of walls, ceilings and furniture, sales space and lighting, as well as an overall clean and orderly appearance” of the brick-and-mortar locations maintained by its partners.
Other contract terms forbid gauche signage, saying any slogans or other materials “must not give the impression of a limited selection of goods, low-quality outfitting or inferior advice,” among other things.
Though the contracts allow authorized dealers to sell Coty goods over the internet through their own web-shop channels, they expressly forbid the utilization of third-party online retailers like Amazon.
Parfumerie Akzente refused to sign a revised contract with the Amazon ban, however, leading Coty to sue it in Germany.
Coty’s case was unsuccessful initially — the trial court found that the contract terms conflicted with German or EU competition law — but the Higher Regional Court in Frankfurt sought guidance on appeal from the European Court of Justice.
A five-judge panel sided Wednesday with Coty.
“The prohibition at issue in the main proceedings enables the supplier of luxury goods to check that the goods will be sold online in an environment that corresponds to the qualitative conditions that it has agreed with its authorized distributors,” the ruling states.
The judges added: “The internet sale of luxury goods via platforms which do not belong to the selective distribution system for those goods, in the context of which the supplier is unable to check the conditions in which those goods are sold, involves a risk of deterioration of the online presentation of those goods which is liable to harm their luxury image and thus their very character.”