Coty ruling: One year later

Last year, the emotions in the e-commerce scene were pretty high: with the Coty ruling of the ECJ on St. Nicholas Day, luxury brands were suddenly able to prohibit online sales via third-party platforms without hesitation. Is this what happened in practice?

Absolutely. Individual manufacturers had even anticipated the ruling. In distribution contracts, requirements for Internet sales were adjusted and platform bans were added. This was based on the indications given prior to the ruling by the European Commission in its sector inquiry on E-Commerce and by the ECJ Attorney General, who at the time spoke out in favour of platform bans. Others followed this example in 2018. At the same time, however, complaints were also received by the German Federal Cartel Office (Bundeskartellamt) that the sales specifications were reaching too far.

In a nutshell: What are the main points of the Coty ruling?

In one sentence: Suppliers of luxury goods can prohibit their dealers from selling the goods on the Internet via third-party platforms.

Is the ruling still relevant?

Yes, because now courts various EU Member States are implementing the Coty ruling, e.g. the Higher Regional Courts in Frankfurt, Düsseldorf and Hamburg.

The question arises as to what "luxury goods" are - is the term defined clearly?

The issue is still unresolved. In the Coty ruling, the ECJ merely gives some clues.

Can any brand manufacturer now prohibit sales via third party platforms?

The German Federal Cartel Office (Bundeskartellamt) and the European Commission disagree.

What should you do as an affected person?

Ideally, we discuss the situation with the manufacturers on a case-by-case basis in order to identify all opportunities and risks (e.g. fines).

There are, of course, alternatives to a general platform ban: manufacturers can switch to direct sales (with their own personnel, commercial agents, commission agents) or otherwise implement creative solutions, e.g. bans that only allow sales via platforms for luxury goods, set out requirements for the design of the platforms or switch to omni-channel sales in which the dealers are directly involved (e.g. via a joint marketing fund, a joint website with links to the dealers, proposals for the design of the dealers' websites, inclusion in special platforms, etc.).

For further reading:

On the latest German case law:

Rohrßen, Digital Retail – Restricting online sales, in: Franchise & Distribution Networks Newsletter N°17 - 4th Quarter 2018 (p. 4)

Rohrßen, Internetvertrieb nach Coty – Von Markenware, Beauty und Luxus: Plattformverbote, Preisvergleichsmaschinen und Geoblocking, in: ZVertriebsR 2018, 277 ff.

Online distribution: Coty continues – Current desicions on platform bans