Clothing firm Guess has been fined nearly €40 million by the European Commission’s Guess antitrust investigation for breaching EU competition rules.
The Commission’s Guess antitrust investigation found that Guess, which operates a “selective distribution system” under which its products can only be sold in the European Economic Area (EEA) through authorised sellers chosen for quality, had illegally restricted its authorised retailers from selling across borders within the EU Single Market. While companies based in the EEA are free to choose their preferred system of distribution, EU competition rules mandate customers must be able to purchase from any authorised retailer across Member States.
The Guess antitrust investigation, first opened by the European Commission in June 2017, found that distribution agreements implemented by Guess restricted authorised retailers working with the company from:
- Using Guess trademarks in online search advertising;
- Selling Guess products to customers outside the retailer’s “allocated territories”;
- Cross-selling between authorised retailers; and
- Independently determining the retail price of the Guess products they sold.
The geographically specific agreements Guess entered into with its distributors allowed the company to effectively “partition” markets across the EU, with the result that retail prices of Guess products were between five and 10 per cent higher in Central and Eastern European Member States than in Western Europe. Based on the rate of sales at the artificially inflated prices and the egregiousness of the infringement, the company was fined a total of €39.82 million by the Guess antitrust investigation.
Margrethe Vestager, the Commissioner in charge of competition policy, said: “Guess’s distribution agreements tried to prevent EU consumers from shopping in other Member States by blocking retailers from advertising and selling cross-border. This allowed the company to maintain artificially high retail prices, in particular in Central and Eastern European countries. As a result, we have today sanctioned Guess for this behaviour. The Guess antitrust investigation complements the geoblocking rules that entered into force on 3 December – both address the issue of sales restrictions that are at odds with the Single Market.”