EC fines Guess €40 million for anticompetitive agreements to block cross-border sales
Staff Writer |
The European Commission fined the clothing company Guess €39 821 000 for restricting retailers from online advertising and selling cross-border to consumers in other Member States ("geo-blocking"), in breach of EU competition rules.
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Guess designs, distributes and licenses clothing and accessories under numerous trademarks, including "GUESS?" and "MARCIANO". Guess operates a selective distribution system in the European Economic Area (EEA), where authorised retailers are chosen on the basis of quality criteria.
Companies in the EEA are generally free to set up the distribution system that best serves them, including selective distribution systems, where the products can only be sold by pre-selected authorised sellers.
However, these systems must comply with EU competition rules.
In particular, consumers must be free to purchase from any retailer authorised by a manufacturer, including across national borders.
At the same time, authorised retailers must be free to offer the products covered by the distribution contract online, to advertise and sell them across borders, and to set their resale prices.
In June 2017, the Commission opened a formal antitrust investigation into the distribution agreements and practices of Guess to assess whether it illegally restricted retailers from selling cross-border to consumers within the EU Single Market.
The Commission investigation has found that Guess' distribution agreements restricted authorised retailers from:
1. using the Guess brand names and trademarks for the purposes of online search advertising;
2. selling online without a prior specific authorisation by Guess. The company had full discretion for this authorisation, which was not based on any specified quality criteria;
3. selling to consumers located outside the authorised retailers' allocated territories;
4. cross-selling among authorised wholesalers and retailers; and
5. independently deciding on the retail price at which they sell Guess products.
The agreements allowed Guess to partition European markets. The Commission has observed that in Central and Eastern European countries (Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia) the retail prices of Guess products are, on average, 5-10% higher than in Western Europe.
On this basis, the Commission concluded that Guess' illegal practices, which the company engaged in until 31 October 2017, deprived European consumers of one of the core the benefits of the European Single Market namely the possibility to shop cross-borders for more choice and a better deal. ■