Retail

EU Fines GUESS $45.3M For Restricting X-Border Sales

European Union antitrust regulators have fined U.S.-based retailer GUESS 40 million euros ($45.3 million) for illegally blocking cross-border sales in Europe.

The investigation into GUESS was launched in June 2017 after a larger inquiry into the cross-border online sales practices of 1,900 companies. The illegal activity by GUESS took place, according to the European Commission, from January 1, 2014 through October 31, 2017.

“GUESS’ distribution agreements tried to prevent EU consumers from shopping in other Member States by blocking retailers from advertising and selling cross-border,” Commissioner Margrethe Vestager, in charge of competition policy, said in a press release. “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. 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.”

Specifically, GUESS’ distribution agreements restricted retailers from: using the GUESS brand names and trademarks for online search advertising; selling online without a prior authorization by GUESS, which was not based on any specified quality criteria; selling to consumers outside the authorized retailers’ allocated territories; cross-selling among authorized wholesalers and retailers; and deciding on the retail price at which they sell GUESS products.

As a result of these actions, retail prices were 5 to 10 percent higher in Central and Eastern Europe than in Western Europe.

GUESS cooperated fully with the investigation “beyond its legal obligation to do so,” and even revealed it had broken one of EU competition rules that the Commission hadn’t yet discovered: not allowing the use of GUESS brand names and trademarks for online search advertising. “The company also provided evidence with significant added value and expressly acknowledged the facts and the infringements of EU competition rules,” according to a statement. In return for its cooperation, the Commission granted GUESS a 50 percent fine reduction.

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