EU: Clothing company fined €40M for “geo-blocking”

On Monday, December 17, the European Commission fined the clothing company Guess €39.8 million (US$45.2 million) for restricting retailers from online advertising and selling cross-border to consumers in other Member States (“geo-blocking”), 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.”

The investigation into Guess began in June 2017 following a year-long inquiry into the cross-border online sales practices of 1,900 companies.

The European Commission said 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.

Specifically, the investigation found that Guess’ distribution agreements restricted authorized retailers from:

• 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 authorization, which was not based on any specified quality criteria;

• selling to consumers located outside the authorized retailers’ allocated territories;

• cross-selling among authorized wholesalers and retailers; and

• independently deciding on the retail price at which they sell Guess products.

Guess cooperated with the Commission beyond its legal obligation to do so, in particular by revealing an infringement of EU competition rules not yet known to the Commission – the prohibition to use Guess brand names and trademarks for the purposes of online search advertising. Therefore, the Commission granted Guess a 50% fine reduction in return for this cooperation.

ission – the prohibition to use Guess brand names and trademarks for the purposes of online search advertising. Therefore, the Commission granted Guess a 50% fine reduction in return for this cooperation.

Full Content: Reuters & Europa Press

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