German Court sends online sales bans to ECJ
On 25 April, the German Higher Regional Court in Frankfurt filed a request for a preliminary ruling with the European Court of Justice (“ECJ”) in a case that turns on the ability of branded goods manufacturers to protect the reputation of their brands by controlling online trade.
Coty is suing one of its authorised distributors, Parfümerie Akzente, claiming that, by selling perfumes on Amazon Marketplace, Akzente infringed the condition of Coty’s selective distribution system that prohibited sales on open online platforms (the marketplace ban). The German Court referred four questions to the ECJ, most relevantly including:
Whether, in a selective distribution system, a supplier can prevent its distributors from selling the supplier’s products via third party online platforms, regardless of whether the online platform fulfils the selective criteria;
Whether a sales ban on third party online platforms amounts to a restriction of ‘passive sales’.
This case follows a number of earlier cases regarding online trade restrictions, particularly restrictions on sales on third party platforms, such as eBay or Amazon. For example, the German Federal Cartel Office (“FCO”) has considered Asics’ andAdidas’ selective distribution systems, which restricted sales on online marketplaces on their retailers. While Adidas removed the problematic provisions from its distribution agreements, in February 2016, Asics appealed the FCO’s finding that its restrictions were anti-competitive (the appeal is pending). Other recent investigations involve headphones and headset manufacturer Sennheiser and backpack maker Deuter in Germany, Adidas and Samsung in France and Hewlett-Packard in Austria.
Many branded goods suppliers also use their trademark rights to protect the value of their brands against the perceived reputational damage of supply on online marketplaces. In certain circumstances a licensee may have breached the terms of its licence in a manner that means that the rights holder has not “consented” to the marked goods being put on the market in the EEA. The ECJ has found, in relation to breaches relating to the quality of the goods, that trademarks are not “exhausted” in these circumstances. (Case C-59/08, Copad SA v Christian Dior SA). This exception to the exhaustion doctrine is not being reconsidered by the ECJ in the present case.