Potential ban on sale of luxury goods unsettles online retail

Online marketplaces like Amazon and eBay, already having a tough time with the sale of luxury articles, could soon face a sales ban on these items within the EU, should a general ban on luxury goods on Amazon and Ebay suggested by attorney general Nils Wahl at the European Union's Court of Justice be granted.

The debate was triggered by a lawsuit between the German luxury cosmetics provider Coty and German perfumery Akzente. Already in 2012, Coty prohibited the perfumery from offering its goods on Amazon, which include brands like Marc Jacobs, Calvin Klein and Chloe. Akzente did not accept the new distribution agreement so that Coty was forced to sue. Now the European Court of Justice is expected to come out with a verdict in about six months time, which could set a precedent for the entire industry.

In the meantime, online retailers are feeling quite unsettled, as the fight over luxury goods has been going on for a decade. Plus, many luxury companies are skeptical about online sales in general or the sale of their products via online marketplaces. They fear losing control over pricing and, in case of low prices, loss of brand image. There is also the fear of counterfeiting, especially on the customer side, which is why many luxury customers prefer a store visit before making their decision.

Nils Wahl, attorney general to the European Court of Justice, is on the side of the luxury retailers, and said in the statement read on Wednesday that the sale of luxury goods via online service providers would only be permitted if manufacturers and brands were restricted by a so-called selective distribution system to safeguard their luxury image. This means that vendors can sell products only to dealers who meet certain previously defined criteria.

While marketing via "electronic shop windows" is permitted, selling via so-called mass trade platforms such as Ebay and Amazon is not. According to Wahl, luxury companies are "guarding against parasitism" and can prevent third parties from benefiting from the heavy investments made by luxury goods companies into the quality and reputation of their products. "A supplier of luxury goods may prohibit its authorized retailers from selling its products on third-party platforms such as Amazon or eBay," he stated.

Should the judges share the views of the prosecutor's office, a general ban on the sale of luxury goods on online platforms like Amazon and Ebay could be the result. The German Federation for Online Retail (BVOH) fights against Wahl's appeal, pointing to the devastating effects for European online traders, should it be granted: "The statement is the proverbial slap in the face for free and fair trade and would come as a death sentence to thousands of small and medium-sized traders in Europe."

Whether a general ban on the of sale luxury items on online marketplaces would be meaningful at this point in time when even those luxury brands that until now had mainly banked on brick and mortal stores, finally come around to e-commerce - be it via their own website or third party online marketplaces- is questionable. Rather, better conditions should be negotiated for suppliers and customers in order to ensure optimal use of all distribution channels available.

Photo: Amazon UK