Guess? Inc. Fined $45 Million for Violating EU Commerce Regulations
BRUSSELS—Following an antitrust investigation opened in June 2017, the European Commission has fined Los Angeles–based apparel brand Guess? Inc. for alleged practices the commission deemed restrictive to retailers. Guess reportedly subjected its retailers to geo-blocking—or prohibitive practices restricting cross-border sales to customers in other European Union member states—and prevented online advertising using the company’s branding, such as name and trademarks. The European Commission fined Guess $45 million.
An investigation into practices by Guess was opened after the commission completed a sector inquiry into e-commerce to examine markets throughout the European Union, which included evidence from 1,900 companies. Through this sector inquiry launched in May 2015, the commission discovered that manufacturers relied on contractual restrictions—such as pricing stipulations, marketplace or platform bans, price-comparison-tool restrictions and the exclusion of certain online partners from distribution networks—to control distribution of their goods.
Findings from the sector inquiry revealed one in 10 retailers whose business was examined were forced to adhere to cross-border sales restrictions within at least one product category. At the time, Commissioner Margrethe Vestager explained in a statement that Guess’s suspected practices inhibited the European Union’s single market.
“The commission has information indicating that Guess, in its distribution agreements, may ban cross-border sales to consumers,” she said in June 2017. “One of the key benefits of the EU’s single market is that consumers can shop around for a better deal.”
By engaging in practices such as placing restrictions on authorized retailers’ online advertising and implementing geo-blocking, Guess violated the commission’s rules regarding trade within the European Economic Area. In addition to these violations, Guess demanded its partners receive authorization to sell goods online, prevented stores from establishing their own retail pricing for the company’s products, and restricted cross-selling between authorized wholesalers and retailers. These practices violated Article 101 of the European Union’s Treaty on the Functioning of the European Union, which protects competition within the region’s Single Market.
“Guess’s distribution agreements tried to prevent EU consumers from shopping in other member states by blocking retailers from advertising and selling cross-border,” Vestager said in a statement explaining the commission’s findings this week. “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 behavior.”
Due to Guess’s engagement in these unlawful practices from Jan. 1, 2014, until Oct. 31, 2017, the commission found that shoppers in Central and Eastern European countries were charged higher prices than their Western European counterparts. In countries including Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia, retailers were forced to charge an average of 5 percent to 10 percent more for Guess products than shops in Western Europe.
The commission decreased the initial Guess fine by 50 percent as the company cooperated with the investigation by voluntarily revealing details of its illegal practices that were unknown to investigators.