CJEU rules that platform bans may not violate competition law

On 6 December 2017 in its judgement on the Coty Germany GmbH (“Coty”) case, the Court of Justice of the European Union (“CJEU”) ruled that suppliers of luxury goods may be able to prohibit the sale of their premium-branded products on third-party online platforms such as eBay and Amazon.

Coty owns leading cosmetic brands and markets its products through a “selective distribution network” of authorised retailers and distributors that are permitted to make online sales of Coty’s products through their own websites, but are prevented from selling on certain third-party marketplace sites. Coty’s justification for this distribution system is that it is necessary to “support the luxury image” of its brands.

The CJEU decided that such restrictions may not violate competition law. The judgement concluded that Article 101 (prohibiting anti-competitive agreements) does not prevent  a third party platform ban provided that the criteria for a legitimate selective distribution network are fulfilled.  Broadly that selective distribution is justified having regard to the nature of the goods, that distributors are chosen on the basis of objective criteria of a qualitative nature that are laid down uniformly and applied in a non-discriminatory fashion; and that the criteria laid down do not go beyond what is necessary.

It is now for domestic court to decide what the outcome will be in the Coty case but clearly this ruling will be of comfort to retailers who have or intend to have platform bans in their contractual arrangements.

Although this will be of comfort to manufacturers and distributors with platform bans it is not a surprising result.  It would be inconsistent on the one hand to allow strict resale criteria in bricks and mortar stores, while preventing the application of strict criteria seeking to meet the same ends in an online environment.  It is another example of the willingness of regulators and courts to translate traditional competition law concepts into the new(ish) digital environment.