By Foo Yun Chee
LUXEMBOURG (Reuters) - Coty and other luxury brands scored a landmark victory on Wednesday in their bid to stop retailers selling their products on online platforms such as Amazon (O:AMZN) and eBay (O:EBAY) when Europe's top court backed their right to protect their image.
The issue is significant in Europe, whose companies account for 70 percent of global luxury goods sales. Luxury owners have long waged a battle against what they see as free riders cashing in on their exclusivity and branding.
Online platforms such as Amazon and eBay, in turn, say online sales curbs are anti-competitive and hurt small businesses.
The Court of Justice of the EU (ECJ) ruling came in a case involving U.S. cosmetics maker Coty's (N:COTY) German subsidiary and German retailer Parfumerie Akzente, which sells Coty's goods on sites including Amazon against the company's wishes.
A German court had sought guidance on whether banning online sales on third-party sites restricted competition.
"A supplier of luxury goods can prohibit its authorized distributors from selling those goods on a third-party internet platform such as Amazon," the ECJ said.
"Such a prohibition is appropriate and does not, in principle, go beyond what is necessary to preserve the luxury image of the goods."
Coty, whose brands include Marc Jacobs, Calvin Klein and Chloe, welcomed the ruling, which carries legal weight across the 28-nation EU.
"After years of uncertainty, this means luxury brands can determine how they are placed on digital platforms and it is a clear ruling for the protection of luxury brands' image, the defense of our teams' work and the protection of consumers' rights and information," the company said.
Parfumerie Akzente said it meets the terms for online sales set by luxury owners.
"Authorized merchants such as us may sell brand-name products on outward-visible third-party platforms, provided that we meet the conditions that are necessary and reasonable for preserving the luxury image," Chief Executive Kai Renchen said in a statement.
Amazon declined to comment.
After intense lobbying by LVMH (PA:LVMH), Richemont (S:CFR) and other luxury goods companies, EU antitrust regulators laid down rules in 2010 allowing brand owners with less than a 30 percent market share to block online retailers without a bricks-and-mortar shop from distributing their products.
The issue has split EU countries, with Germany more eager to promote e-commerce. In two test cases in recent years, the German cartel office forced Adidas (DE:ADSGn) and Asics (T:7936) to drop such bans, saying online platforms are crucial for small- and medium-sized companies and consumers.
The German cartel office said it expected the court's ruling to have a limited effect on its policy, noting that its decisions had involved brand manufacturers from outside the luxury industries.
"Our preliminary view is that such manufacturers have not received carte blanche to impose blanket bans on selling via platforms," the office's president, Andreas Mundt, said in a statement.
Germany will now have to fall in line though, said a competition lawyer, who declined to be named.
"This judgment sets the principles for the EU as a whole. Germany will have to align with European case law and accept this kind of restrictions unless it contradicts some conditions in competition law," he said.
The case is C-230/15 Coty Germany.