The European Court of Justice ruled owners of luxury brands may decide on which sites their brands are sold – and on which not.

They have a right to preserve and protect the luxury images of their brands, and may, therefore, keep their brands off sites which, in their opinion, may damage those images, the court said. (First reported here.)

Luxury brand images are, usually, built over many years by investing many millions in advertising and marketing. Brand owners may defend their investments by, for instance, prescribing to retailers (in retailer contracts) which sites their products may not be listed on.

One good ground would be, for instance, if a site is known to be slow at removing fraudulent (counterfeit) products.

The court added a precondition: brand owners may not discriminate between retailers. (We assume that means, brand owners must prohibit the same sites to all retailers it contracts for the distribution of its products – editor.)

This may turn out to be a watershed decision for major marketplaces, such as Amazon, EBay – and their luxury goods offers (of watches, cosmetics, shoes, handbags, autos, clothes etc.)

Both sites are known for their low prices; EBay is especially known for its bargain buys. These may be environments the owners of Prada and Cartier don’t like – for those very reasons.

(Look at just one section which might get headwind on Amazon here.)

On the other hand, sites narrowly focused on luxury brands, such as Yoox.com, will be heartened by the court decision.

We haven’t studied the motivation of the court yet, and a few “uncertainties” remain, such as:

+ When is a brand a luxury brand in the eyes of this court? For instance, are Adidas, and Nike luxury brands? Who will decide when a brand is a luxury brand?

+ Will a brand owner’s right to defend the image of his luxury product extend to used items? In other words, will Prada be able to keep it’s used Prada handbags off EBay?

We doubt it. This court ruling is probably only relevant to new products. Otherwise, popular initiatives, such as the recently-announced, luxury vintage handbags (here) initiative of EBay might be in jeopardy. Think of the pressure on luxury-brand competitors to follow suit, should, for instance, Gucci officially announce Amazon and EBay as no-go zones.

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