Luxury brands vs Amazon

Luxury brands can now prevent merchants from selling their goods on online marketplaces such as Amazon and eBay, an EU court has found.

The Court of Justice of the EU (ECJ) ruled German retailer Parfumerie Akzente can no longer sell U.S. cosmetics maker Coty’s products on sites such as Amazon. Coty is the owner of more than 77 brands, including Calvin Klein, Covergirl and Marc Jacobs.

The ECJ said:

"A supplier of luxury goods can prohibit its authorized distributors from selling those goods on a third-party internet platform such as Amazon. Such a prohibition is appropriate and does not, in principle, go beyond what is necessary to preserve the luxury image of the goods.

“The quality of luxury goods is not simply the result of their material characteristics, but also of the allure and prestigious image which bestows on them an aura of luxury. That aura is an essential aspect of those goods.

“Any impairment to that aura of luxury is likely to affect the actual quality of those goods”

The victory is important for European luxury retailers, whose companies account for 70% of global luxury sales. They want to retain their exclusivity and maintain control over high-end pricing – something that is impossible on an online marketplace.

LVMH COO Jean-Jacques Guiony recently said:

"We believe the business of Amazon does not fit with LVMH, full stop, and it does not fit with our brands”

In 2010, EU courts ruled that brands with less than a 30% market share could block online retailers without physical stores from selling their goods. However, in Germany, the courts forced Adidas and Asics to remain on Amazon for the benefit of shoppers. This may change after the latest ruling, as it now applies to all EU member nations.

eShopWorld Insight:

Online marketplaces may seem like a fast and easy way to sell your products to more customers, however as luxury brands have learned, retailers can quickly lose control over their products and pricing. In an online world, brands need to have as much visibility over their products as possible in order to deliver the best shopper experience, from payments to delivery and returns – and that is something marketplaces cannot offer.