Guess imposed five restrictions on retailers in its selective distribution network between January 2014 and October 20171. These included a ban on retailers using Guess brand names and trademarks in online search advertising. Guess confessed this restriction to the European Commission (EC) as part of its cooperation efforts in the investigation, providing the EC with its first competition infringement decision involving restrictions on online search advertising. In exchange, Guess received 50% off the EC's fine.
The other four restrictions Guess imposed were:
- a requirement for retailers to obtain specific authorisation from Guess to make online sales (even though the retailers had already met the requirements for admission to Guess's selective distribution network);
- a ban on retailers selling to consumers located outside the retailers' allocated territories;
- restrictions on cross-selling between authorised wholesalers and retailers; and
- restrictions on the prices at which retailers could sell Guess products.
The EC found that the five restrictions prevented retailers from advertising and selling Guess products cross-border, leading to artificially high retail prices in some Member States.
The EC's full infringement decision, which is expected to be made available in early 2019, will no doubt be of interest to branded suppliers and retailers. Online advertising restrictions have been on the EC's radar since its 2017 report on the e-commerce sector inquiry, which observed that restrictions "may be in the interest of the manufacturer ... to allow its own retail activities to benefit from a top listing and/or keep bidding prices down"2. But until the Guess decision, only the German competition authority had considered trademark advertising bans as an unlawful restriction of competition3. The Guess case provides some guidance on how such restrictions will be treated by the EC – although it remains to be seen whether: (i) the EC's analysis is limited to restrictions imposed within a selective distribution network; and/or (ii) the EC considers online advertising restrictions infringe competition law when not combined with any other restrictions.
As well as breaching competition law, some of Guess' restrictions also breached the Geo-Blocking Regulation4, which came into force on 3 December 2018. In certain respects, the Regulation mirrors competition law by preventing suppliers from prohibiting a retailer from responding to unsolicited customer requests (known as passive sales).
The EC is likely to consider online advertising and sales restrictions in its upcoming review of the Vertical Agreements Block Exemption Regulation and Guidelines5. Meanwhile, brands and retailers should continue to monitor developments in this fast-moving space carefully.
2 Final report on the E-commerce Sector Inquiry, May 2017, paragraph 632, accessed at http://ec.europa.eu/competition/antitrust/sector_inquiry_swd_en.pdf
3 Case B2-98/11, Asics
4 Regulation (EU) 2018/302 on addressing unjustified geo-blocking and other forms of discrimination based on customers' nationality, place of residence or place of establishment within the internal market
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