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Wednesday, 1 June 2016

Court of Justice to consider online sales ban in selective distribution

The whole idea of selective distribution is that the manufacturer is allowed to decide how its goods will reach the market - through a certain type of reseller, which in the motor sector means a dealer who meets a raft of standards imposed by the manufacturer. Luxury goods might be limited to shops with a certain ambience, and in only the best locations. In Case C-439/09, Pierre Fabre, the Court of Justice ruled that absolute bans on online sales were prohibited, in selective distribution agreements and elsewhere. But can selected retailers be prevented just from selling the goods using online platforms like eBay and Amazon?

That's the topic of a reference from the Oberlandesgericht Frankfurt am Main to the Court of Justice (Case C-230/16, Coty Germany). The courts in Germany have taken a different view from that of the competition authorities there, which is a bit of a problem: the competition authorities have struck down online sales bans, while the courts (or at least the OLG Frankfurt am Main, here) have been upholding them. That court applied something very like the traditional justification for selective distribution, that a manufacturer has a legitimate interest in ensuring that its branded products are perceived as high-quality products, and that customers receive the right sales advice, so the manufacturer is free in principle to dictate the conditions under which its products are sold provided that they are necessary to meet its quality standards. Note that the court was there concerned with branded goods: it looks as if the fact that the new reference to Luxembourg concerns luxury products is significant, as the headings of the court documents suggest. The earlier case concerned "The question of the admissibility of the prohibition of Internet sales of brand-name items and their setting in the price search engines" and the new one is headed "Decision on the admissibility of selective distribution systems, which are directed on distribution of luxury and prestige goods" (thanks, Yandex Translate).

The motor industry is still quite a long way from having a big problem with online sales, with new car transactions still being showroom-based - but that isn't going to remain the case for ever. Depending on what the Court of Justice says, it might be a long, long time before online sales become significant. But we'll have to wait a while just to know that - about 15 months, according to one commentator.

[Hat tip to Isabelle Rahman, a partner in Sheppard Mullin's Brussels office, on the firm's Fashion Apparel Law blog - the commentator cited above.]

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