Luxury goods retailers may choose their distributors

On 6 December 2017, the Court of Justice of the European Union issued a long-awaited judgement in the Coty case. The subject matter of the dispute between a supplier of luxury cosmetics, Coty Germany GmbH, and its authorized distributor, Parfümerie Akzente GmbH, was a contractual ban on using third-party services to sell the contracted products online. The court had to adjudicate whether such an established system of selective distribution breached in the specific instance the EU regulations protecting fair competition.

In this respect, the Court of Justice reacted in favour of the suppliers of luxury goods and decided that a system of selective distribution could be in line with the EU’s competition rules under specific conditions. However, there are certain restrictions. In its judgement, the Court of Justice set out three basic criteria for assessing when it is possible to establish a system of selective distribution:

1. It must be a system of selective distribution of luxury goods whose main objective is preserving the luxury image of the goods in question;
2. The specific distributors must be selected based on objective criteria of a qualitative manner that are laid down uniformly and not applied in a discriminatory fashion; and
3. The criteria must not go beyond what is necessary.

If these criteria are met, the distribution system should be in compliance with EU law. However, the Court of Justice based its decision on the circumstances of a specific dispute. Thus, when applying the conclusions, it is always necessary to correctly assess all the specifics of the case and ideally consult the entire matter with an expert.