Luxury brands win European Union court ruling on online distribution

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The European Court of Justice stated that the decision has been taken to protect and maintain the luxury image of the products.

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.

In order to preserve the "luxury image" of its products, Coty markets certain of its brands via a selective distribution network, that is to say, through authorised distributors.

Online platforms argue that such curbs are anti-competitive and will hurt small businesses.

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The issue is significant in Europe, whose companies account for 70% of global luxury good sales.

Makers of luxury goods can block retailers from selling them online, Europe's top court has ruled.

The case was bought by beauty giant Coty, which owns brands such as Marc Jacobs and Calvin Klein, but is expected to set a precedent.

A German court had sought guidance on whether banning online sales on third-party sites restricted competition. Therefore, luxury goods manufacturers will be able to prevent their products from being sold on third party websites by distributors.

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The issue has split European Union countries, with Germany more eager to promote e-commerce.

In two test cases in recent years, the German cartel office forced adidas and Asics to drop such bans, saying online platforms were crucial for small- and medium-sized companies and consumers.

"Our preliminary view is that such manufacturers have not received carte blanche to impose blanket bans on selling via platforms", he said.

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.

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