Coty fights to restrict Amazon sales of prestige brands

By Lucy Tandon Copp 30-Mar-2017

European Court to hear arguments concerning whether German retailer Parfumerie Akzente should be allowed to sell prestige Coty brands through its Amazon webstore or if the cosmetics giant should have the right to selective distribution and the restriction of online sales

Today, Coty Deutschland is putting forward its case to prohibit one of its distributors from selling prestige brands including Davidoff, Jil Sander and Calvin Klein, on Amazon.

Coty currently partners with retailers and wholesalers, including German retailer Akzente, via a selective distribution system whereby these partners must comply with detailed conditions set by Coty on where they can sell certain brands.

For the three luxury Coty fragrance brands, sales via online marketplaces such as eBay and Amazon are prohibited under these conditions.

Coty states that the purpose of this is to avoid the negative impact to brand image of being associated with mass marketplaces.

However law firm GÖRG, representing Akzente, noted: “It would seem more likely that Coty Deutschland GmbH is concerned with avoiding the intense price competition for which the Internet and especially eBay and Amazon are known.”

Industry-wide implications

The court’s decision could have serious implications for other cosmetics companies that sell products through distributors with an online presence, but have their own 'controls'.

The case stems from an initial lawsuit brought against German retailer Parfumerie Akzente by Coty in 2014.

In the initial judgment – whereby Coty sought to prevent Akzente from selling the brands through its Amazon webstore – the outcome was in Akzente’s favour.

The Frankfurt am Main Regional Court dismissed Coty’s argument stating that the clause prohibiting the sale of Coty brand products through third party operated marketplaces was in violation of § 1 of the Act against Restraints on Competition (Kartellgesetz – GWB) and Art. 101 of the Treaty on the Functioning of the European Union (TFEU) – and therefore void.

Coty appeals

This would have serious repercussions for the sale of consumer products in many different segments

However, Coty has since appealed the decision, and the Frankfurt am Main Higher Regional Court has requested a preliminary ruling from the European Court of Justice (ECJ).

Dr Oliver Spieker, the lead attorney of the GÖRG team, said: “If the ECJ should conclude that such prohibition of the use of online marketplaces is inconsistent with the provisions of European cartel law, this would have serious repercussions for the sale of consumer products in many different segments.

“Precisely in the areas of perfumes and cosmetics, consumer electronics, jewellery or clothing, a significant number of manufacturers still employ similar restrictions on sales, and it would no longer be possible to retain these restrictions in the wake of such a decision by the highest European court, at least not in their current form.”

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Meanwhile, Akzente MD Kai Renchen, said: “We don’t tell consumers where to go to find products – they should be able to find them wherever they look for them. The time has also come to make clear what options are available to online retailers in this context."