Once more the Coty decision of the ECJ – what does it say?
In general, manufacturers of branded goods can prohibit online sales via third party platforms. This, at least for luxury goods in a selective distribution system, has been confirmed by the European Court of Justice (ECJ) in its judgment of 6 December 2017 in the Coty case (C-230/16 – Coty Germany GmbH v Parfümerie Akzente GmbH). The ECJ clarified that a contractual clause which prohibits authorised dealers of a selective distribution system for luxury goods from using third party platforms when selling the contract goods on the internet is admissible under EU competition law. With this, the ECJ clarified some legal questions for this special case, but at the same time raised some new ones.
Content of the Coty judgement
At least four conclusions can be drawn from the Coty decision for online sales:
- For selective distribution systems, the Metro criteria still apply.
- For luxury goods the protection of a brand image can sufficiently require a selective distribution system.
- Pierre Fabre has been confirmed – by qualifying a general prohibition of online sales by an authorized dealer as a hardcore restriction.
- A third-party platform prohibition is not considered a hardcore restriction, neither within the meaning of Art. 4 lit. b (restriction of the customer group) nor of Art. 4 lit. c (restriction of passive distribution) of the VBER.
The Coty decision, however, does especially not cover the questions of the admissibility of a third-party platform prohibition
- in case of a selective distribution system for non-luxury goods; and
- outside a selective distribution system.
In the post-Coty period, there have been several court judgments and announcements by competition authorities which interpret the decision itself or which deal with the open issues.
Transferability of Coty decision to other products
Although Coty does explicitly refer only to luxury goods, the EU Commission considers that the possibility of a platform ban is not limited to such goods. The ECJ had recognised that selective distribution systems are also permitted for other products (e.g. for high-value and high-tech products). Coty only clarifies that for the Metro criteria the protection of the brand image for luxury goods may be relevant.
In the meantime, the Higher Regional Court Hamburg has also considered the prohibition of sales via eBay beyond luxury goods for other products – in this case food supplements and cosmetics – to be admissible with explicit reference to Coty.
Even before the Coty judgment was delivered, but based on the Opinion of AG Wahl in Coty, the Dutch Rechtbank Amsterdam had considered a platform ban in Nike’s distribution conditions for online trade to be admissible for reasons of trademark protection.
The French competition authority has also recognised a platform ban in the context of a selective distribution system for non-luxury products as long as there was a need to ensure the quality of the products or their intended use. The present case concerned Stihl’s „dangerous“ gardening tools and the necessary advice on their safe use, which was not guaranteed in the case of sales via platforms.
In the view of the German Bundeskartellamt (BKartA), however, the statements of the ECJ should relate only to luxury goods and therefore not be readily transferable to other branded products. A blanket ban was not justified here. The brand image could also be protected by concrete quality requirements for the marketplace distribution (e.g. own online shop on marketplace). The background to the BKartA’s restrictive view is the fact that in Germany the proportion of online sales via platforms is relatively high compared to other EU Member States – as found in the EU Commission’s e-commerce sector inquiry in 2017 (see already Hartmann-Rüppel/Schrader). Ultimately, the BKartA seems to focus on the degree to which the dealers’ offers can be found online even without using a platform. This criterion is also be used in the case of a price comparative engines ban (see ASICS decision of the Federal Court of Justice).
However, in the interest of legal certainty and a uniform application of the law in the EU, this must not change the qualification of a platform prohibition by the ECJ: it is no hardcore restriction in the sense of Art. 4 VBER. This, however, means that a platform prohibition also for non-luxury goods within a selective distribution system is exempted from the cartel prohibition, if the VBER applies (in particular, in the case of market shares of the parties of ≤ 30%) – even if the Metro criteria are not fulfilled and even in Germany.
Admissibility outside a selective distribution system
The systematics of the EU competition law also results in an exemption of a prohibition to sell products online via third-party platforms outside a selective distribution system if the VBER is applicable. Even then, such prohibition is no hardcore restriction. However, in many cases such prohibition is useless. A brand manufacturer may not oblige its distributor to also impose a platform prohibition on its customer. The latter, however, may decide to resell via online platforms. Without any contractual relationship with this reseller, the brand manufacturer can also not defend itself against this by invoking its trademark rights as they are generally exhausted by the fact that they have been put on the EU market with his consent.
Importance of legal certainty
Several questions regarding online sales and the possibility of a prohibition of sales via third-party platforms are still not finally decided. In the interest of legal certainty, the EU Commission should take the opportunity to clarify at least some of these issues within the current evaluation of the VBER and the Vertical Guidelines.