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On 17 December 2018, the European Commission imposed a fine of around EUR 40 million on Guess, a clothing company, for the illegal design of its selective distribution system after Guess had prohibited its authorised distributors addressing online advertising or online selling to consumers of other Member States (so called "geoblocking").
Guess manufactures garments, inter alia, under the brand names "GUESS?" or "MARCIANO" and distributes them throughout the EEA in a selective distribution system. Guess selects retailers on the basis of certain quality characteristics. As early as June 2017, the European Commission had initiated a procedure to examine the distribution agreements and practices used by Guess under antitrust law as a result of the sector inquiry into e-commerce. Due to its extensive cooperation with the European Commission in this procedure, Guess was granted a reduction of fines of 50 %.
As a result, the Commission found a number of arrangements which enabled Guess to close off the European markets. In particular, the Commission objected:
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The prohibition on retailers from using Guess brand names and trademarks for advertising on online search engines
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No online sale without the prior express consent of Guess, with Guess having unrestricted discretion not based on objective quality criteria
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The prohibition to sell to consumers outside the allocated territories
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The prohibition of cross sales between authorised wholesalers and retailers
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The prohibition to set independent retail prices for Guess products
The Commission has found that retail prices in Central and Eastern Europe are on average 5 to 10 % higher than in Western Europe. Guess had already stopped using the clauses in question during the proceedings on 31 October 2017.
Comment
The antitrust authorities continue to take action against restrictions on online trading. As far as the European Commission also decided on the ban on retailers to use brand names and trademarks for advertising on online search engines, this confirms the previous opinion of the Federal Cartel Office (Bundeskartellamt) at European level. In a slightly different constellation the question on the use of trademarks was already subject of the ASICS decision, which was issued by the Federal Cartel Office in 2015. Back then the German antitrust authority also criticised such a ban, as it made advertising with brand names and trademarks outside its own homepage impossible (BKartA, Decision of 26.08.2015, B2 - 98/11).
Regulation (EU) 2018/302 ("Geoblocking Regulation"), which entered into force on 3 December 2018 and which declared objective is also the strengthening of online trade, aims in a similar direction to yesterday's decision of the European Commission. The Geoblocking Regulation is intended to enable EU consumers, irrespective of nationality, place of residence or place of establishment, to purchase goods and services from traders from other EU countries and thus to strengthen the European internal market. In particular, the answering of unsolicited customer enquiries from other Member States ("passive sales") may not be prohibited if certain conditions are met. The Commission's objections to Guess' conduct with regard to the restriction of passive sales would therefore today also be inadmissible under the Geoblocking Regulation.
Links
Press Release European Commission, 17.12.2018
Regulation (EU) 2018/302 "Geoblocking Regulation" (Read here the assessment of our colleagues Sara Bandehzadeh and Anke Saßmannshausen (née Röschenkemper) on the Geoblocking Regulation)
Electronic Commerce Sector Inquiry 2017
BKartA, decision of 26.08.2015, B2 - 98/11 - ASICS