Preventing a distributor from selling on Amazon is possible but only at certain conditions

First of all it is important to say that in Europe all the agreement limiting the free circulation of goods and, as a consequence, all the conditions limiting the territory or the clients to which a distributor can sell its own products are forbidden.

Therefore, if a producer contracts with a French or Spanish distributor, he will not be able to prevent them from selling the purchased goods even out of France or Spain since such a condition would be in disagreement with art. 10 of the TFEU (Treaty on the Functioning of the European Union).

With internet the situation does not change.

The Court of Justice has already expressed its opinion in occasion of the case Fabre Dermo-Cosmétique (C-439/09 judgement of October 13, 2011) saying that a producer cannot prohibit a distributor to sell its product on Internet.
That was the case of consumer goods and a contractual condition forbidding the online sale was objected, but such a condition was considered invalid and illicit.

Luxury products instead require a selective distribution network that does not relapse in the prohibition of art. 10 TFEU if the choice of the sellers is made with “objective criteria of qualitative purposes equally established for all” because it is the nature of the product that makes necessary the choice of the distribution channel aimed at preventing the object from losing its prestige.

The Court of Justice has recently expressed on the topic of online sales issuing a relevant decision (case C-230/15, judgement of December 6, 2017) which clarifies the limit of the prohibition.

In the last case submitted to the Court, a luxury cosmetics producer included in the contract of distribution a condition which did not totally prevent the sale of its product in Internet, but only the sale made “through third websites whose intervention is recognizable for the consumer”. Violating the prohibition, the distributor put on sale on Amazon.de. After the lawsuit took against him, the judge remitted the question to the Court to know if the contractual prohibition was licit or not.

The Court has considered this condition valid for two reasons:

  • the selective distribution for luxury products is compatible with the nature of the good to be put on the market;
  • that condition is not a total prohibition, but only the prohibition to use third websites not allowing agreeing upon any type of particular distribution therefore there is no way to respect the desired target of quality.

Since it is impossible to foresee a presentation of the product suitable for safeguarding its image of lux, putting a luxury product on sale through an online channel such as Amazon may damage its fame.

Even with its limits, the opening of the Court of Justice is very important because a similar principle could be also used for other products, which even not being classified as luxury products, may require a particular attention to the distribution channels because of their nature.

Leave a Reply

Your email address will not be published. Required fields are marked *