The European Commission announced on Tuesday that it has carried out its latest inspections at the premises of companies “active in the fashion industry in several Member States,” and has sent requests for information to other entities that active in the sector. While the European Union regulator has not identified the fashion companies concerned or the countries where the raids occurred, it did reveal that the competition-centric raids stem from concerns of potential violations of the EU’s prohibition against cartels and other restrictive business practices as set out in Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the European Economic Area Agreement.
The Commission further stated that the raids are not related to the ones carried out in the fashion industry last year, which saw regulators probe the signatories of “an open letter issued in 2020 that called for fundamental changes in the industry to make it more environmentally and socially sustainable,” including by adjusting the seasonal runway show and product delivery schedules in order “to encourage more full price sales” and fewer discounted wares in the wake of the COVID-19 pandemic. It also confirmed that the recent raids are unrelated to its June 2021 inspections of the German premises of “a company active in the sector of manufacturing and distribution of garments.”
Penalties for companies in breach of the Treaty on the Functioning of the European Union could include fines of up to 10 percent of their global turnover, the Commission stated.
Gucci owner Kering confirmed on Wednesday that it is among the entities that the Commission is targeting, saying in a brief statement, “In the scope of an inspection carried out as part of a preliminary investigation into the fashion sector in several countries under EU antitrust rules, the European Commission has started on April 18, 2023, an inspection at the Italian premises of Gucci, a subsidiary of Kering. The Group is fully cooperating with the Commission in the context of this investigation.”
Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) and Article 53 of the European Economic Area (“EEA”) Agreement prohibit agreements that appreciably affect trade between EU member states and that aim to prevent, restrict, or distort competition within the internal market. While much attention has been paid to the anti-competition crackdown in the tech space in the European Union, consumer goods brands – from sportswear titans to skincare companies – have found themselves in the crosshairs of the European Commission on competition grounds in recent years, as well.
For example: European competition actions have targeted: (1) French skincare brand Caudalie on the basis of its practice of prohibiting authorized distributors from selling its products for less than a specified price and limiting their abilities to sell its offerings online to consumers in other member states; (2) Nike, which was fined 12.5 million euros in 2019 for banning traders from selling licensed merchandise to other countries within the EEA; and (3) Guess, which was fined nearly 40 million euros in December 2018 for restricting retailers from online advertising and selling cross-border to consumers in other Member States, among others.
More recently, the Commission announced in January 2022 that it had commenced a formal antitrust investigation to assess whether Pierre Cardin and its licensee the Ahlers Group may have breached EU competition rules by restricting cross-border and online sales of Pierre Cardin-licensed products, as well as sales of such products to specific customer groups. In a statement last year, the Commission revealed that it was concerned that Pierre Cardin and Ahlers “may have breached EU competition rules by restricting the ability of Pierre Cardin’s licensees to sell Pierre Cardin-licensed products cross-border, including offline and online, as well as to specific customer groups.” More specifically, the Commission said it would investigate “whether Pierre Cardin and Ahlers have developed a strategy against parallel imports and sales to specific customer groups of Pierre Cardin-branded products by enforcing certain restrictions in the licensing agreements.”
THE BIGGER PICTURE: Little detail has been made public about the latest raids; it is customary for the Commission to withhold company names. However, the fact that the probe follows relatively closely from another fashion industry-specific investigation last year suggests that the Commission is continuing to focus its efforts on this segment of the market. The Commission has also targeted fashion/retail more broadly by way of new sustainability-centric regulations and guidelines under the umbrella of the Strategy for Sustainable and Circular Textiles, which aims to ensure that “almost all physical goods on the EU market are more friendly to the environment, circular, and energy efficient throughout their whole lifecycle from the design phase through to daily use, repurposing and end-of-life.”
Given that the Commission – alongside other antitrust/competition enforcers – “has started to conduct more raids again after a period of relative calm caused by the coronavirus pandemic,” GreenbergTraurig attorneys stated in a note that “fashion and retail companies doing business in the EU may wish to review business practices to ensure they are not running afoul of EU antitrust and anti-competition regulations.”
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