Paying a €40 million fine imposed by the European Commission instead of adding this amount to revenues made from Christmas sales is a painful thing any company could experience at this time of the year.
Clothing company Guess were subjected to such by the Commission for restricting authorised retailers from the cross-border sales and advertising of their goods.
By investigating Guess’ distribution agreements and policies back in June 2017, the Commission learnt that the company have restricted authorised retailers from the following:
- 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
- Independently deciding on the retail price at which they sell Guess products
In the EU Commission’s press release, which came out Monday this week, Commissioner Margrethe Vestager 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.”
Guess, guilty of bumping up prices
The Commission also discovered that consumers in Central and Eastern European countries (Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia) were negatively affected as they had to pay 5-10% more on Guess products than in Western Europe.
Clearly, that is enough evidence to prove that the clothing company have deliberately violated EU competition rules which put the interest of consumers first.
However, despite finding out that Guess’ infringement of the EU competition rules ran from 1st January 2014 to 31st October 2017, the Commission granted them a 50% fine reduction because they cooperated beyond their legal obligation to do so.
Aside from admitting that they have breached the EU competition law, Guess also revealed an infringement offence that was initially unknown to the watchdog.
Is €40 million punishment enough for Guess? We’d love to hear your thoughts on this matter from the comments below.
As always, to your continued success,
Dave & Matt