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Expanded Version: Luxury Brands Can't Ban Online Sales, Says ECJ Advocate General

Luxury brands, such as designer handbags and high-end cosmetics, often depend on exclusivity to maintain their image. Making these products difficult to come by - by way of price or location - is integral to the idea being sold. Some manufacturers fear that making these products available on the Internet will dilute the brand they've worked so hard to cultivate.

In Europe, home of well-known luxury brands such as Louis Vuitton, however, distributors of some products want to increase sales by offering the products online, and in June 2010, the European Commission issued guidelines essentially forbidding manufacturers from banning online sales of their products. A March 3 opinion from European Court of Justice (ECJ) Advocate General Jan Maz?k reinforces this reality, particularly for cosmetics and personal care product manufacturers.

Restriction Requirements

In European anti-trust law, a key distinction is made between a restriction by object and a restriction by effect. Restriction by object, which would apply to price fixing and cartel behavior, is comparable to a per se violation of antitrust laws, meaning the behavior is determined unlawful without any required analysis of its effect on the market. If a ban is found to be anti-competitive by object, the authorities investigating the conduct aren't required to show that the agreement or practice has harmed competition.

For this reason experts in Europe say that the Advocate General's opinion in the Pierre Fabre case only reinforces the current anti-competition law.

"Basically, all it does is reiterate the current state of the law," Carlin says. "The European Commission last June adopted a block exemption regulation and guidelines, which governs the dos and don'ts of distribution agreements in Europe. The Advocate General's opinion basically just says the commission was essentially right."

Kayleigh Roberts

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