Fashion retailer fined for violating European pricing rules
Guess has been fined for selling overpriced merchandise in European countries.
The European Commission charged the fashion company with a $45.2 million (U.S. dollars) fine on Dec. 17 for “geo-blocking,” or restricting retailers from advertising and selling cross-border. This practice allowed Guess to maintain artificially high retail prices, in particular in Central and Eastern European countries. The Commission opened a formal antitrust investigation into Guess’ distribution agreements and practices in June.
Companies in the European economic area (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 authorized sellers. However, these systems must comply with European competition rules.
In particular, consumers must be free to purchase from any retailer authorized by a manufacturer, including across national borders. At the same time, authorized 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.
According to the Commission, Guess’ retail prices in Central and Eastern European countries (Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia) are, on average, between 5% and 10% higher than in Western Europe. The company upheld the prices until Oct. 31, a move that deprived European consumers “the opportunity to shop cross-borders for more choice and a better deal,” according to the organization.
“As a result, we have today sanctioned Guess for this behavior,” the commission said in a statement. “Our case complements the geo-blocking rules that entered into force on Dec. 3 – both address the issue of sales restrictions that are at odds with the single market.”
The fine is in line with Guess’ estimates that ranged from $42.4 million to $46.6 million (U.S. dollars). The company shared this estimate along with its third quarter earnings. At the time, the company reported it was cooperating with the European Commission’s investigation, and was “likely to reach an agreement.”
The European Commission charged the fashion company with a $45.2 million (U.S. dollars) fine on Dec. 17 for “geo-blocking,” or restricting retailers from advertising and selling cross-border. This practice allowed Guess to maintain artificially high retail prices, in particular in Central and Eastern European countries. The Commission opened a formal antitrust investigation into Guess’ distribution agreements and practices in June.
Companies in the European economic area (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 authorized sellers. However, these systems must comply with European competition rules.
In particular, consumers must be free to purchase from any retailer authorized by a manufacturer, including across national borders. At the same time, authorized 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.
According to the Commission, Guess’ retail prices in Central and Eastern European countries (Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia) are, on average, between 5% and 10% higher than in Western Europe. The company upheld the prices until Oct. 31, a move that deprived European consumers “the opportunity to shop cross-borders for more choice and a better deal,” according to the organization.
“As a result, we have today sanctioned Guess for this behavior,” the commission said in a statement. “Our case complements the geo-blocking rules that entered into force on Dec. 3 – both address the issue of sales restrictions that are at odds with the single market.”
The fine is in line with Guess’ estimates that ranged from $42.4 million to $46.6 million (U.S. dollars). The company shared this estimate along with its third quarter earnings. At the time, the company reported it was cooperating with the European Commission’s investigation, and was “likely to reach an agreement.”