Can brand owners distance their products from the likes of mass retailers?

Posted by Chris Williams on
The method by which products are sold can matter greatly to luxury brand owners. Many aim to create a high-end overall customer experience or lifestyle to reinforce the differentiation (perceived or otherwise) between their products and lower cost and potentially mass produced alternatives.  

The marketplace is easier to manage in bricks and mortar stores or even on retailers' own websites, which can be purposefully designed to foster an image of luxury and exclusivity.

A number of brand owners do not consider some online platforms to be appropriate marketplaces for their products - they consider them to be entirely misaligned with their product positioning.

The issue of how much control a brand owner can exert over a retailer with regard to how it chooses to sell the products is currently before the Court of Justice of the European Union (ECJ) based in Luxembourg.  The case before the ECJ concerns the German subsidiary of Coty Inc which has an extensive brand portfolio across fragrances, haircare and skincare.   Coty argues that it is within its rights to prohibit retailers, and for the purpose of this case Parfumerie Akzente, from selling specific product ranges (Davidoff, Jil Sander and Calvin Klein) via third parties.

Coty initially brought proceedings before the German court and lost.  The court found that the clauses which purported to prohibit sales via third parties were simply unenforceable.  This was seen by some as a victory for the consumer as brands invariably face greater price scrutiny when their products appear alongside lower cost alternatives.  Coty has appealed the first instance decision and the German court has called upon the ECJ to make a determination.

If Coty is successful, other luxury brands are likely to consider the judgment to be an endorsement of their ability to distance their products, which encourage sellers to offer lower prices and, the luxury brands will argue, lower quality alternatives.  Should Coty lose, the days of brand owners seeking to maintain the distinction may be over.

The ECJ is likely to hand down its judgment towards the end of this year.

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Chris has specific expertise in advising clients in IP and IT disputes, with particular emphasis in the internet field of technology cases.

Chris Williams
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