Fashion house Chanel claims the discount resale of its luxury products tarnishes its brand. FlaviaȘtefura of MPR Partners examines whether its case stands up.

The French fashion powerhouse Chanel is famous not only for its brand, but also for its efforts indefending it against misuse and infringement.

While Chanel's legal battles with retailers who sell allegedly counterfeit goods are ongoing, the brandhas also started a lawsuit in England against an online retailer—Kensulate, owner of the Crepslockeronline store—that sells authentic Chanel goods.

Chanel accuses Crepslocker's owner of infringing Chanel's trademark by tarnishing its positioning asa luxury fashion brand.

Chanel's main arguments consist in the facts that Crepslocker:

  • uses the 'Chanel' trademark to describe the goods it sells in the product captions in its onlinestore and in a store on eBay;
  • sells the 'Chanel'-branded goods alongside goods from other brands which do not have thesame note of luxury. The Crepslocker website offers pages dedicated to various brands, wherebranded products are sold; there used to be such a page for Chanel products, which hascurrently been disabled;
  • offers the trademarked goods online, which Chanel's policies do not allow ( per the officialChanel website, there are no authorised sellers of Chanel leather goods, fashion items andwatches on the internet, only fragrance and beauty and eyewear products); and
  • does not offer the luxury experience to customers (Chanel claims that in a test shop the itempurchased came crumpled and not in the original packaging).
  • does not offer the luxury experience to customers (Chanel claims that in a test shop the itempurchased came crumpled and not in the original packaging).

Crepslocker defends itself by invoking the exhaustion of Chanel's rights to the sold products. Thetrademark exhaustion rule means that after the first sale of a trademarked product by or with theconsent of the trademark holder, the trademark owner can no longer control the subsequent sale(s)of the product.

The exception is that the trademark owner can oppose subsequent sales for legitimate reasons,especially when the condition of the products has been materially changed or impaired.

Crepslocker claims that Chanel makes an artificial distinction between the goods it sells online andthe ones it does not. Also, according to Crepslocker, mixing the Chanel products with sportswear isnot tarnishing Chanel's reputation, which itself has collaborated with sports apparel manufacturers forits products.


Until the UK's departure from the EU, courts in the UK were bound by guidance from the Court ofJustice of the European Union (CJEU). Now that the UK is no longer part of the EU, the dispute willinstead be subject only to national British legislation. However, courts in the UK are still free to referto CJEU decisions in their own rulings.

The UK's Trade Marks Act 1994 is harmonised with EU legislation on the issue of rights exhaustion.The Trade Marks Act and the Directive (EU) 2015/2436 treat the principle of trademark exhaustion inthe same manner, providing the same exceptions.

CJEU precedents so far seem to indicate that the EU's highest court is protective of trademarkowners. Analysing the matter from a competition law perspective, in the Coty Germany v ParfümerieAkzente (C 230/16) case , the CJEU ruled that luxury brand owners were entitled to implementselective distribution systems.

"Crepslocker claims that Chanel makes an artificial distinction between the goods it sells online andthe ones it does not."

This allows brands to establish systems where they control the distribution chain, in order to preservethe luxury image of their respective goods, on condition that the selection of the resellers was basedon: "objective criteria of a qualitative nature that are laid down uniformly for all potential resellers andapplied in a non-discriminatory fashion and that the criteria laid down do not go beyond what isnecessary".

Moreover, the ruling allowed brand owners to exclude online sale of their goods through contractualclauses.

In Copad v Christian Dior (C 59/08) , the CJEU held that when a trademark licensee sells goods in adiscount store in spite of the contractual provisions of the licence which do not allow the sale of thegoods in discount stores on grounds of the trademark's prestige, the trademark owner can invoketheir rights against the licensee. This applies if the trademark owner can establish that the sale of theproducts damages their "allure and prestigious image", the

The CJEU has also ruled, in L'Oréal v eBay (C 324/09) , that trademark owners can oppose the saleof their product after the removal of its original packaging, if it contains "essential information". Thisincludes the identity of the manufacturer or the person responsible for marketing cosmetic products.

"Where the removal of the packaging has not resulted in the absence of that information, thetrademark proprietor may nevertheless oppose the resale of an unboxed perfume or cosmeticproduct bearing his trademark, if he establishes that the removal of the packaging has damaged theimage of the product and, hence, the reputation of the trademark," the court ruled.

These decisions highlight several acceptable exceptions to the trademark exhaustion rule. Eventhough the higher courts in the UK are no longer obliged to follow the rulings of the CJEU, it isunlikely that they will depart from established trademark principles without well-grounded reasons.

Crepslocker used to sell both new and secondhand Chanel products. In the case of new goods, itmay be possible that the UK courts will deem the situation similar to the ones in the CJEU casesmentioned above.

However, an element of novelty rests in the used products which Crepslocker kept in consignmentfrom its customers. Here the courts will probably consider balancing not only Chanel's rights againstCrepslocker's, but also the rights of the natural persons who legitimately bought Chanel goods thatthey wish to sell to benefit from a platform where the used goods can be sold.

In the event the dispute ends in settlement or a win for Chanel, this may have a chilling effect ononline resellers of other luxury brands in the UK and elsewhere in Europe. One can argue thatmaintaining the prestige and value of luxury brands protects both the brands and the consumers ofluxury goods.

However, part of Crepslocker's business responds to a real need of consumers owning luxuryproducts for a resale outlet, and the corresponding demand for such products. Careful consideration should be made as to whether the market for secondhand luxury goods is different from that for newgoods, and whether the exception to the trademark exhaustion principle still applies.

Originally published by WIPR, 16 June 2021.

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