EU fines Guess €40m for anticompetitive agreements
Company's case complements the European geo-blocking rules that entered into force this monthEuropost
European Union antitrust regulators fined US clothing brand Guess almost €40m (€39 821 000, to be exact) on Monday for using restrictions that prevented retailers from selling and advertising its products across borders, blocking this way e-commerce in the EU. The penalty comes after in June 2017 the European Commission opened a formal inquiry into the cross-border online sales practices of 1,900 companies as part of a crackdown against geo-blocking in the EU.
As a result Commission found out that Guess’ distribution deals with retailers restricted them from using the Guess brand names and trademarks for online search advertising and also prevented them from setting the retail price independently. Retailers were also required to get authorization from Guess before they were allowed to sell online, while the criteria for such approval was not based on any specified quality criteria. Sellers were also not allowed to sell to consumers outside their authorized areas.
All this allowed Guess to partition European markets. As a result 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.
"Guess' 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. Our case complements the geo-blocking rules that entered into force on 3 December – both address the issue of sales restrictions that are at odds with the Single Market," Commissioner Margrethe Vestager, in charge of competition policy, commented.
Guess had already estimated the EU fine at 37 to 40.6m euros in a regulatory filing last month, saying that it had already made certain changes to business practices and agreements in response to the EU investigation.