By  on April 21, 2010

PARIS — Luxury groups and online retailers both said Tuesday that they were satisfied with new European Union rules on selective distribution, after the two sides lobbied heavily for the amended regulation to lean in their favor.

The European Commission stated that makers of branded goods remain free to decide how their products are distributed and may opt to sell only to dealers that have a brick-and-mortar presence, as opposed to pure-play online retailers.

“However, in this regard, the commission will be particularly attentive to concentrated markets to which price-discounters either online only or traditional may not have access,” it noted.

The luxury industry had contended the selective distribution of its products, as set out under the old rules set to expire in May, should continue beyond 2010, saying widespread distribution of luxury products on the Internet would ruin their exclusive image and boost the counterfeit trade.

Karl Lagerfeld, Chanel’s artistic director, traveled to Brussels last year for a meeting with European commissioner for competition Neelie Kroes in which he argued for maintaining the status quo.

Online retailers including Amazon EU, eBay France, Price Minister and Rue du Commerce, on the other hand, said in a joint letter earlier this month that brands should no longer be allowed to require that online distributors also have a showroom or store.

Retail-to-luxury group PPR, whose assets range from book and music chain Fnac to luxury division Gucci Group, applauded Tuesday’s decision.

“The luxury industry emerges strengthened by this decision, which confirms its right to control the quality of its physical and online distribution systems,” PPR stated.

LVMH Moët Hennessy Louis Vuitton also welcomed the new rules, which will begin to be enforced in June and will be valid until 2022, with a one-year transitional phase.

“This framework will allow the luxury goods industry to continue to meet the expectations of consumers, to encourage the development of the digital economy, and to sustain our industry growth, which is based on culture and innovation providing over 800,000 jobs in Europe,” said Pierre Godé, adviser to LVMH chief Bernard Arnault.

Elisabeth Ponsolle des Portes, president of Comité Colbert, France’s main luxury goods association, said the new regulation clarified the legal context for luxury brands to develop e-commerce, noting luxury players were already present on some pure-play online retail sites such as Net-a-porter.

“The text has reached a balance that ensures that the rules for the distribution of our products are the same online and offline,” she said.

EBay said that by giving equal weight to e-commerce and offline sales, the rules reflected the realities of the 21st century marketplace.

“Our campaign for safeguards against the abuse of selective distribution for the online sale of everyday consumer goods has been successful,” it said. “The commission recognizes that many products need not be sold in brick-and-mortar stores and has introduced important tests that will prevent potential new abuses by suppliers who may attempt to unjustifiably exclude online-only distributors.”

Greg Greeley, vice president of European retail at Amazon, said the online retailer would continue to work with all manufacturers to make sure customers have access to the widest selection of products online.

“We welcome the clarification that online sales will be provided a level playing field with brick-and-mortar shops,” he said.

The commission said the so-called block exemption regulation applied only to manufacturers and distributors with a market share of less than 30 percent. Previously, that threshold applied only to manufacturers, but the new rules take into account that some buyers may also have the power to stifle competition.

It also emphasized that distribution or supply agreements must not contain any significant restrictions of competition, such as fixing a resale price or blocking customers outside the area to which an exclusive distributor has been assigned from contacting that distributor and making a purchase.

The commission said it would make sure price discounters or cheaper online-only distributors were not excluded from certain markets — suggesting scope for continued litigation between online retailers and luxury brands.

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