Luxury Brands Cleared to Block E-tailers

When people in France don't like what their government's doing, they take to the streets and protest. LVMH, the French owner of such luxury brands as Christian Dior, Givenchy, and Louis Vuitton, symbolically launched its own public protest by lobbying the EU to protect brands from unsavory online sellers.

The strategy worked. Under new rules issued yesterday by the European Commission, "makers of goods that have less than a 30 percent share of the market would essentially have a free hand to decide how to distribute and sell their wares," reports the New York Times.

The Europe-wide protection, which goes into effect in June and will last for 12 years, gives retail brands the authority to designate online distributors and the legal means to pursue e-tailers who are illegally selling their goods—or just their good name.

Guy Salter, a spokesperson for European Alliance, which represents more than 75 percent of the world's luxury marketers, applauded the ruling and commented that it will protect the "quality, service and authenticity" of luxury goods.

The ruling effectively blocks online sellers in Europe from selling a luxury brand if the brand owner doesn't authorize it. It also comes on the heels of a heated dispute between LVMH and Google, as reported in brandchannel.

That case involved LVMH's claim that, by selling the Louis Vuitton brand name to anyone as a search term, Google was infringing on its trademark and promoting the online sale of counterfeit products.

The case was decided in Google's favor, shielding the search engine from trademark infringement claims since it is simply a host for ads. This latest ruling doesn't overturn that decision, but it certainly puts more control in the hands of brand owners to select distributors for their products.

The sad reality is there would be no need for these disputes or rulings if it weren't for Web retailers who aggressively advertise luxury brand names. They then sell cheap counterfeits, or drastically undercut prices on brand name products that may have been obtained illegally. There is a huge black market in such knock-offs, which were typically sold on on the street and in markets until the Web came along.

Europe's luxury brands are scrambling to find ways to deter illicit sales so the practice doesn't dilute their brands' perceived value. That is the underlying reason they want tighter controls on product distribution. An EU competition commissioner said "he would remain vigilant to prevent manufacturers from abusive practices." Clearly the European Commission understands the influence of companies like LVMH.