Luxury Brands Win a Crucial Victory in Battle Against Amazon Distribution

December 6, 2017, 11:11 AM UTC

Many luxury brands have taken a dim view of Amazon for a long time—they want to be able to maintain their luxury image by only selling their products through high-end channels, and Amazon isn’t that.

Those brands received cheering news on Wednesday: the Court of Justice of the European Union (CJEU) ruled that luxury brands are perfectly entitled to forbid their distributors from selling through third-party online platforms such as Amazon and eBay.

The EU’s top court was dealing with a case brought about by luxury cosmetics brand Coty in Germany. Coty tells its distributors that they can only sell its makeup through their own “electronic shop windows,” and can only use a third-party platform if the consumers can’t tell that this is happening.

One of those distributors, Parfümerie Akzente, sold Coty’s goods through Amazon’s German website. Coty sued it, and a regional court in Frankfurt threw the case up to the CJEU for advice, because it wasn’t sure whether Coty’s restriction on sales channels was legitimate under EU competition law.

The CJEU said Wednesday that Coty’s clause was fine. “A selective distribution system for luxury goods, designed primarily to preserve the luxury image of those goods, does not breach the prohibition of agreements, decisions and concerted practices laid down in EU law,” it said, adding that the system must not discriminate against particular resellers.

Luxury brands aren’t just skeptical of Amazon because of its image; they also want to be able to maintain control over their high-end pricing. Amazon caused consternation last month when news emerged that the company was discounting items sold by some third-party sellers without first informing those sellers—a move that could get them into trouble if their suppliers don’t want their products to be discounted.