Coty allows its products to be sold by authorized dealers but puts a number of restrictions on how such sales are carried out, finding such terms necessary to preserve its branding image.
Luxury owners have long waged a battle against what they say are free riders cashing in on their exclusivity and branding.
Online platforms argue that such curbs are anti-competitive and will hurt small businesses.
"The prohibition at issue in the main proceedings enables the supplier of luxury goods to check that the goods will be sold online in an environment that corresponds to the qualitative conditions that it has agreed with its authorized distributors", the ruling states.
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In a move that could have far-reaching consequences, the Court of Justice backed the case brought by USA cosmetics giant Coty - which makes Rimmel and CoverGirl brands, among others.
Coty's German subsidiary and retailer, Parfumerie Akzente, had been selling Coty cosmetics on Amazon and other online sites, despite its parent asking it to stop.
Third party platform bans may be justified in the selective distribution of luxury goods. The German Competition Authority, the Bundeskartellamt, has already said that it considers the CJEU's decision to be limited to genuinely prestigious products. In their ruling, judges confirmed that luxury brands could restrict sales through online marketplaces without breaching European competition rules.
Germany will now have to fall in line though, said a competition lawyer, who declined to be named.
The case is C-230/15 Coty Germany.
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