The decision gives luxury companies a powerful tool in Europe to safeguard their exclusivity, which has become a key concern as the sector expands online sales.

In its judgment, the European Court of Justice said companies are allowed to impose certain conditions in their contracts with retailers if the goal is to preserve a brand’s luxury image and as long as the company doesn’t discriminate among retailers.

The case stems from a dispute between U.S.-based cosmetics manufacturer Coty Inc. and German retailer Parfümerie Akzente GmbH, which sells Coty’s products on Amazon. Coty, whose brands include the cosmetics lines of Calvin Klein, Marc Jacobs and Chloe, objected to the practice, citing contractual clauses that prevented the sale of its goods through third parties.

A German court referred the case to the ECJ.

“The quality of luxury goods is not simply the result of their material characteristics, but also of the allure and prestigious image which bestows on them an aura of luxury,” the ECJ said. “That aura is an essential aspect of those goods in that it thus enables consumers to distinguish them from other similar goods.”

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