The European Commission today fined the clothing company Guess €39,821,700 for restricting retailers from online advertising and selling cross-border to consumers in other European Member States, in breach of EU competition rules.
Commissioner Margrethe Vestager, in charge of competition policy, said: "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 geoblocking rules that entered into force on 3 December – both address the issue of sales restrictions that are at odds with the Single Market."
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.
The Commission investigation has found that Guess' distribution agreements restricted authorised retailers from:
- using the Guess brand names and trademarks for the purposes of online search advertising;
- 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;
- selling to consumers located outside the authorised retailers' allocated territories;
- cross-selling among authorised wholesalers and retailers; and
- 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.
Guess cooperated with the Commission beyond its legal obligation to do so. Therefore, the Commission granted Guess a 50% fine reduction in return for this cooperation.