Renowned clothing company Guess was fined €39,821,000 yesterday by the European Commission for restricting the cross-border advertising and sales of its goods to consumers in other Member States.
Guess’ actions breached the EU competition rules, according to the Commission, depriving consumers the right to purchase from their choice of retailers.
“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.” – Margrethe Vestager, EU Commissioner for Competition
Guess’ unfair practices disclosed
The Commission’s investigation of Guess’ distribution agreements back in June 2017, led to the discovery of the restrictions the company has imposed on authorized retailers, such as:
- Using the Guess brand names and trademarks for the purposes of online search advertising
- Selling online without a prior specific authorization by Guess. The company had full discretion for this authorisation, which was not based on any specified quality criteria;
- Selling to consumers located outside the authorised retailers’ allocated territories
- Cross-selling among authorised wholesalers and retailers
- Independently deciding on the retail price at which they sell Guess products
It was also found that the retail prices of Guess products in Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia were 5-10% higher than those in Western Europe.
The EU Competition Law clearly states that consumers must be free to purchase from any retailer authorised by a manufacturer, even beyond national borders. In the same way that authorised retailers must be free to sell and advertise online in accordance with their distribution contract.
The €40 million fine imposed on Guess was actually a 50% reduction of the total amount because the clothing retailer, according to the watchdog, admitted to an infringement of EU competition rules unknown to the Commission.
Was the fine imposed by the Commission enough to curb the bullying abilities of big retailers? Let us know what you think in the comments below or over on our Facebook Group.