Supreme Court: Chanel can choose its distributors

By a lawsuit, Chanel demanded that Notino disclose information about where they had obtained goods bearing the Chanel trademark, including the names of their suppliers and the quantities of goods sold. Chanel also claimed that Notino had infringed on their trademark rights by selling Chanel products without their consent: in the European Economic Area, Chanel products are sold exclusively through a selective distribution system which sets strict criteria for distributors, such as the operation of at least three brick-and-mortar stores and a proven history of non-infringement on trademark rights. The first-degree court ruled in favour of Chanel and ordered Notino to provide Chanel with information on the origin of the goods.

 

Notino appealed the decision, arguing that Chanel was abusing their dominant position and that their conditions prevented online retailers from accessing the market. Notino further argued that the goods sold were obtained legally, for example through parallel imports, and that the right to information sought by Chanel was statute-barred. However, the appellate court did not accept these objections. Notino then filed an extraordinary appeal with the Supreme Court.

 

The Supreme Court mainly dealt with the question whether Chanel's selective distribution system was compatible with EU law, as it obliged interested parties (including its members) to operate brick-and-mortar shops apart from an e-shop.

 

Under EU law, in a selective distribution system, a supplier undertakes to sell goods or services only to distributors selected based on certain criteria. On the other hand, these distributors undertake not to sell goods or services to unauthorised distributors in the territory where the system is operated.

 

According to the CJEU case law referred to by the Supreme Court, a selective distribution system is compatible with EU law if:

As for the obligation to sell in brick-and-mortar shops, the CJEU held that a selective distribution system may include the presentation of products at the point of sale in such a way as to maintain the image of luxury which they convey.

 

The Supreme Court thus agreed that Chanel's selective distribution system is legitimate, does not constitute an unlawful restriction of competition, and is compatible with EU law. The criteria for selecting members of the system aim to ensure the protection of the Chanel brand, the protection and correct use of the products of that brand, and the protection of reputation and prestige of the products. Moreover, criteria are set uniformly for all participants and potential participants in the system.

 

Finally, the Supreme Court pointed out that Chanel had originally sought primarily to protect their trademark rights, to the effect that no one (not even Notino) could market products bearing the Chanel trademark without their consent.

 

The Supreme Court's decision thus implies that subject to stipulated conditions, a selective distribution system is compatible with EU law and that the right to information on the origin of the goods sold and the distribution networks of third parties infringing trademark rights is an absolute right and cannot be statute-barred. Notino therefore must disclose information about its suppliers to Chanel.