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UPDATE 2-New EU rules let brand owners restrict online sales

 * Rules let brand owners sell only to brick-and-mortar shops
 * Rules ban curbs on Internet sales for approved sellers
 * LVMH, PPR, luxury brand groups welcome new regulation
 * EBay says rules also ban some unfair online restrictions
 
 (Adds LVMH, PPR, lawyer comments, closing shares)
 By Foo Yun Chee
 BRUSSELS, April 20 (Reuters) - Luxury brand owners seeking
to protect their image and exclusivity can bar online retailers
without bricks-and-mortar outlets from distributing their
products under updated EU antitrust rules.
 To counter criticism from online retailers such as eBay
EBAY.O and Amazon AMZN.O and from consumer groups that the
provision could restrict user choice, the European Commission
said it would closely monitor developments.
 "The Commission will be particularly attentive to
concentrated markets to which price-discounters either online
only or traditional may not have access," the European Union
competition watchdog said in a statement on Tuesday.
 It said the provision allows manufacturers to choose
distributors on the basis of quality standards for presenting
their products, whether online or otherwise. For brand owners,
the absence of bricks-and-mortar outlets can constitute a reason
to decline a distributor.
 Brand owners, often in the high-end or luxury goods market,
had argued for the requirement to deter so-called free-riders
who benefit from the marketing spent on luxury brands without
bearing the same costs.
 "Brand owners seem to have won on this issue. Consumers'
choice could be limited," said Michael Rosenthal, a partner at
Hunton & Williams.
 Industry body European Alliance, which represents
three-quarters of global luxury brands, said the regulation
showed the Commission recognised the importance of the luxury
goods industry, which employs 800,000 people, directly and
indirectly, in Europe.
 "This new regulatory framework will allow us to continue the
significant investment our sector makes for our online presence,
as well as in our physical outlets," Guy Salter, a spokesman for
the organisation said.
 LVMH LVMH.PA, the world's largest luxury group, and French
retail and luxury group PPR PRTP.PA, which owns Gucci Group,
itself behind brands such as Yves Saint Laurent and Stella
McCartney, welcomed the updated regulation.
 "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," Pierre Gode, LVMH's vice-president, said in a
statement.
 
 BAN ON UNFAIR ONLINE RESTRICTIONS
 EBay said the updated rules also did away with many unfair
restrictions currently facing online companies and that it would
work with EU governments to "expose any attempts to unfairly
limit online sales".
 Luxury stocks were up on Tuesday, but analysts said the
upward move was more driven by the general market and Burberry's
BRBY.L upbeat forecast and Coach's COH.N strong
first-quarter earnings.
 Shares in LVMH, Hermes HRMS.PA and PPR ended with gains.
 The new "vertical restraints block exemption regulation"
will go into force in June, with a one-year transitional period,
the EU regulator said. It will be valid until 2022.
 It replaces existing guidelines exempting distribution
agreements between manufacturers and distributors from strict EU
competition rules if they comply with certain criteria.
 The Commission said approved distributors were free to sell
on the Internet without limitations on quantities, customers'
location and restrictions on prices, provided both manufacturer
and distributor were not overly dominant in the market.
 "The rules adopted today will ensure that consumers can buy
goods and services at the best available prices wherever they
are located in the EU, while leaving companies without market
power essentially free to organise their sales network as they
see best," said Competition Commissioner Joaquin Almunia.
 (Additional reporting by Luke Baker and Astrid Wendlandt in
Paris; Editing by Rupert Winchester)

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