Recent developments (including the Court of Justice of the European Union’s judgment in C-230/16, Coty) have provided welcome guidance to brand owners on: - when a selective distribution network can be justified by the need to protect a brand’s image - what retail channel restraints can legitimately be placed on authorised distributors; and - which unauthorised aftermarket uses of trade marks have to be tolerated and which don’t. In this webinar we considered what these developments mean in practice for brands owners.

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Protecting the
“Allure of Luxury”

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Protecting the
“Allure of Luxury”
Connect with Bonita Trimmer
Bonita.Trimmer@brownejacobson.com
+44 (0)121 296 0675

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Developments in 2017 relating to:
• when a selective distribution network can be justified by the need to
protect a brand’s image
• what online sales restraints can be placed on authorised distributors;
and
• which unauthorised aftermarket uses of trade marks have to be
tolerated and which don’t.
Topics for consideration

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• cosmetics (Coty)
• corsetry (Dior)
• cars (BMW)
Luxury goods

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CJEU in C-230/16,
Coty
Coty Germany - sells its upmarket
cosmetics via a selective
distribution network designed to
support the “prestigious image”
V
Parfümerie Akzente (“Akzente”) –
authorised distributor of Coty,
selling through its high street stores,
its own website and amazon.de

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CJEU in C-230/16,
Coty (1)
• Coty revised its contractual
agreements after Regulation
No 330/2010
• authorised distributors could still
sell through an “Electronic shop
window” (subject to quality
requirements)

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CJEU in C-230/16,
Coty (2)
• but they were prevented from:
“Collaborating with third parties if
such collaboration is…effected in a
manner that is discernible to the
public”
• Akzente refused & Coty applied
for an order

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CJEU in C-230/16,
Coty
Four questions referred to the CJEU
which can be split in two:
• can protecting the “prestigious
image” of goods justify the use of a
selective distribution network?
• can brands contractually prevent
their distributors from making online
sales via discernible third party
platforms without breaching
competition law?

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Pierre Fabre Dermo-
Cosmétique, C-439/09
• absolute ban on internet sales =
hard-core restriction
“The aim of maintaining a prestigious
image is not a legitimate aim for
restricting competition and cannot
therefore justify a finding that a
contractual clause pursuing such an aim
does not fall within Article 101(1) TFEU”
(para 46)

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CJEU in C-230/16,
Coty
• problem paragraph in Pierre Fabre is
not “a statement of principle”
• a selective distribution agreement
needed to preserve a prestigious
image can comply with TFEU 101(1)
subject to fulfilment of the pre-
established conditions

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CJEU in C-230/16,
Coty (1)
• resellers must be chosen on the basis
of objective criteria of a qualitative
nature
• criteria must be laid down uniformly
for all potential resellers and not
applied in a discriminatory fashion

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CJEU in C-230/16,
Coty (2)
• characteristics of the products must
necessitate such a network in order
to preserve their quality and ensure
proper use
• criteria laid down must not go
beyond what is “necessary”

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CJEU in C-230/16,
Coty
• re the 3rd bullet but a trade mark
infringement case
• Dior branded corsetry sold in breach
of licence term banning sales to
discount outlets
• CJEU explained that an “aura of
luxury” is as much a part of the
quality of the goods as the materials
they are made of

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CJEU in C-230/16,
Coty
• remember – the characteristics of the
products must necessitate a selective
distribution network in order to preserve
their quality and ensure proper use
• Copad = harm to the contract goods’
“aura of luxury” is harm to their
qualities/characteristics. Therefore it is
possible for selective distribution
networks designed to protect this
aura/image to fulfil the conditions
required

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Are these luxury goods:
• personal hygiene products / upmarket cosmetics?
Are the criteria truly qualitative in nature?
• importance of the Block Exemption* (market share <30%) and the safe
harbor it provides
*EU Reg 330/2010 of 20 April 2010 on the application of Article 101(3) TFEU to categories
of vertical agreements and concerted practices (VBER)
CJEU in C-230/16, Coty

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CJEU in C-230/16,
Coty
Hardcore restrictions include those
which have “as their object”:
• the restriction of the territory into
which, or of the customers to whom, a
buyer party to the agreement… may sell
the contract goods or services...
• the restriction of active or passive sales
to end users by members of a selective
distribution system operating at the retail
level of trade…

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CJEU in C-230/16,
Coty
• De facto internet ban in Pierre Fabre
Dermo-Cosmétique, C-439/09 “has
as its object the restriction of
passive sales to end users wishing to
purchase online…”
• CJEU in Coty indicated a ban on sales
via “discernible” online sales
platforms was not a hardcore
restriction

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CJEU in C-230/16,
Coty
Why not a hardcore restriction?
• authorised distributors can advertise
via the internet on third-party
platforms and make use of search
engine facilities
• authorised distributors can sell via
their own websites (NB EU
Commission’s 2017 report on the e-
commerce sector)
• customers are usually able to find the
online offer of authorised distributors

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Something a bit
different…

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• BMW has a network of authorised
dealerships licensed to use its
prestigious brand for the repair and
maintenance of BMW vehicles
• BMW owns registered EU trade marks
for the word “BMW” and its roundel
logo
• both are registered in respect of
“maintenance and repair of cars,
motors, engines and parts of these
goods…” in class 37
BMW v Technosport

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• Uses of a TM which can’t be
prevented include:
• as indications “concerning the kind,
quality… or other characteristics of
the goods or service”
• which are “necessary to indicate the
intended purpose of a product or
service, in particular as accessories
or spare parts”
• provided such uses are “in
accordance with honest practices in
industrial or commercial matters”
BMW v Technosport

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IPEC Judge found Technosport’s use of:
• the roundel - infringed
• “BMW” in its trading style - did not
infringe
• BMW appealed the non-infringement
finding
BMW v Technosport

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BMW v Technosport
Court of Appeal (Floyd LJ) – June 2017
‘Informative use’
“My business provides a service which repairs BMWs and/or uses genuine
BMW spare parts”
V
‘Misleading use’
“My repairing service is commercially connected with BMW”

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Cartier, Montblanc, Richemont v BSB & other ISPs
(ISP blocking order re websites selling counterfeit goods)
• 1 Jan 2017 – Supreme Court granted permission to appeal but only on the
issue of the costs burden; i.e. whether the Court of Appeal “was wrong to
hold that the [ISPs] as innocent parties, should be required to bear the costs
of the blocking injunctions …or… should [the ISPS] be indemnified against all
costs, expenses and liabilities”
• 30 Jan 2018 – The Supreme Court hearing begins
Luxury brands in 2018

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Connect with Bonita Trimmer
Bonita.Trimmer@brownejacobson.com
+44 (0)121 296 0675
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