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December 19, 2018updated 20 Dec 2018 7:45am

Guess imposed €39.82m fine for blocking cross-border sales in Europe

The European Commission (EC) has imposed a €39.82m fine on US-based retailer Guess for blocking retailers from online advertising and cross-border selling to consumers in Europe.

The European Commission (EC) has imposed a €39.82m fine on US-based retailer Guess for blocking retailers from online advertising and cross-border selling to consumers in Europe.

Following a year-long inquiry into the cross-border online sales practices of 1,900 companies, the EC began investigating Guess in June 2017, reported Reuters.

The EC claims that the distribution deals Guess made with retailers restricted them from using the Guess brand names and trademarks for online advertising. It also prevented retailers from independently setting up retail prices.

Retailers were only allowed to sell Guess products online once they had authorisation from the brand, but the criterion for this authorisation was not based on any particular quality requirement. Retailers were not allowed to sell the company’s products to consumers beyond their authorised areas.

“Guess’ distribution agreements tried to prevent EU consumers from shopping in other member states by blocking retailers from advertising and selling cross-border.”

Using this system, Guess separated some European markets, which caused price fluctuations of up to 10% in Central and Eastern Europe.

EU 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.

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“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 the company 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.”

According to the EC, the illegal practices occurred up to 31 October 2017. As the retailer cooperated by offering evidence, it received a 50% reduction in the fine.