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FILE - In this Feb. 19, 2013 file photo, the internet trader Amazon logo is seen behind barbed wire at the company's logistic center in Rheinberg,Germany. The European Union is telling member state Luxembourg to get $295 million in back taxes from Amazon in Brussels’ latest regulatory move targeting U.S. tech companies accused of tax avoidance, it was reported on Wednesday, Oct. 4, 2017. (AP Photo/Frank Augstein, File)
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Keep out, Coty says.
BLOCKED

Luxury goods that Europeans buy on Amazon may soon vanish from the site

By Marc Bain

If you’ve been buying your Coty makeup on Amazon’s European marketplaces, expect your options to shrink.

The European Union’s top court has ruled (pdf) that luxury brands can prohibit even their authorized distributors from selling on third-party marketplaces, such as Amazon, eBay, and others.

The Court of Justice of the European Union sided with Coty in a case the high-end makeup brand originally brought in Germany against one of its retailers, Parfümerie Akzente. Coty, which has rules on where and how its partners sell its products, wanted to block Parfümerie Akzente from offering its products without permission on Amazon’s German marketplace.

The court found Coty was within its rights to stop those sales, a decision that could have wider implications for all luxury labels and marketplace sellers. Right now, small retailers may use marketplaces such as Amazon to reach much larger audiences than they could with conventional brick-and-mortar stores and e-commerce sites. The brands they sell, however, don’t always want their products retailed on huge, mass-market sites like Amazon. Luxury brands in particular rely on exclusivity and the image they project to keep their brand values high.

According to the court, luxury brands are able to protect that image by limiting where their goods are sold. “The Court notes in this context that the quality of luxury goods is not simply the result of their material characteristics, but also of the allure and prestigious image which bestows on them an aura of luxury,” it said. “Therefore, any impairment to that aura of luxury is likely to affect the actual quality of those goods.”

Coty applauded the ruling. “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,” it said in a statement.

Amazon has not commented publicly on the ruling, but the Computer & Communications Industry Association—a lobbying group representing Amazon, eBay, Rakuten, and other marketplaces—strongly opposed the decision. “This judgement is bad news for consumers, who will face fewer choices and also less competition when they want to shop online,” said Jakob Kucharczyk, the group’s vice president for competition and EU regulatory policy. “It’s also a major setback for small firms across Europe that are trying to develop their online business while protecting major mass market brands.”

While the decision could have some impact beyond luxury goods, the high-end arena is where its affects will be felt most. Kucharczyk, for instance, notes that the court explicitly says these marketplace bans are only legal if they aim to preserve a luxury image, which necessarily isn’t the case for many products.

Still, don’t expect high-end products to disappear entirely from Europe’s digital marketplaces—even if brands don’t want them there. Many marketplace sellers peddling luxury goods on Amazon aren’t authorized by the brands at all. And Amazon has reportedly dragged its feet on shutting them down. That’s one reason Swatch, which owns Omega and Longine, is said to have walked away from talks (paywall) to sell its pricey watches on Amazon earlier this year.