The European Court of Justice confirmed today that luxury brands can prevent retailers in a selective distribution network from using 'discernible' third party platforms to sell products.
Today’s landmark ruling, handed down by the highest European Court, is largely good news for high-end luxury brands as it will enable tighter control of the online channels through which their products are sold, preserving an ‘aura of luxury’. However, it may make it more difficult for some retailers to reach consumers online.
Ultimately, it is for the Frankfurt appeal court to decide whether an absolute ban on using online marketplaces is a proportionate means of preserving the luxury image of the goods, though the European Court has made clear its view that such restriction is appropriate and goes no further than is necessary to achieve its objective.
The big question now is whether online platform bans may be permissible other than for the really prestigious luxury brands. The European Court has not yet addressed this issue. The answer may depend on how tightly the brand controls offline ‘brick and mortar’ sales and whether any platform ban can be regarded as equivalent to offline standards. It may also depend on the importance of online marketplaces in facilitating retailers’ online sales.
Currently, most retailers operate their own websites, with around a third also using online market places, whilst only around 1 in 20 solely use online marketplaces. However, use of online marketplaces is increasing and the law may need to evolve to keep pace with e-commerce developments.