A news that shakes the luxury market: the European Commission fined high-end fashion companies Gucci, Chloé and Loewe for adopting the practice of the

The fines, which have been reduced in all three cases thanks to the collaboration of the companies with the EU executive, total over 157 million euros, of which 119.7 million euros for Gucci, 19.7 million euros for Chloé and 19.7 million euros forLoewe.TheThe infringement of European law has spread over the entire European Economic Area (EEA) and has therefore had a significant impact on the price trend of luxury goods and on the possibility of the retailers applying discounts. The main consequence of the conduct in place was the restriction of competition in the market sector of high fashion.

□ We have today fined three European fashion houses for interfering with the prices of their independent retailers, violating EU competition rules. In Europe, all consumers, whatever they buy and wherever they buy it, online or offline, deserve the benefits of genuine price competition. This decision sends a strong signal to the fashion industry and beyond: we will not tolerate this kind of practice in Europe because fair competition and consumer protection apply to everyone, in the same way.

The Commission's Competition Commissioner, Teresa Ribera, has given a ruling on this.

The three European luxury houses: an introductory overview

All three companies involved in the anti-competitive scandal are internationally active in the design, production and distribution of high-end products, including

clothing, leather goods and various accessories.

In particular, the Gucci mark is held by the French parent company Kering, which has a

market capitalisation of around €37.43 billion and the majority shareholder of which is the holding company Artemis, owned by the Pinault family. In recent years, the title of Kering SA has suffered a strong decline due to the unsatisfactory performance of Gucci, whose difficulties have been linked to a general slowdown in the luxury market and internal governance choices.

Riechmond is a Swiss financial holding company, based in Geneva and listed on the Zurich Stock Exchange for a total value of 85.80 billion euros, which has several luxury brands such as Cartier, Van Cleef & Arpels, Montblanc, IWC and, as far as interest is concerned, Chloé. Finally, the Spanish fashion house Loewe is owned by the French giant Lvmh, whose shares have a total market value of 306.91 billion euros.

The sanctioned conduct: a closer look at the accusation and the subsequent condemnation brought by Brussels concerned a particular anticompetitive practice called

freedom of choice for consumers, compromising the proper functioning of the consumer principle

free competition within the European single market.

In particular, the three fashion companies have interfered with the commercial strategies of the retailers by imposing strict restrictions on them, including the prohibition of deviations from (i) resale prices fixed by the companies; (ii) maximum discounts established by the same companies; (iii) predetermined periods for the application of discounts. In some cases, these companies have even been able to prohibit, albeit temporarily, any form of discount by the dealers, requiring them to adopt the same price conditions as those applied by the companies directly in their channels ofsale.ButWhat was the ultimate purpose of the conduct? Gucci, Chloé and Loewe's strategies were essentially aimed at protecting their sales from competition with retailers. Analyzing a practical example, Gucci imposed on retailers the prohibition of selling a particular line of products online, which could therefore be offered to the public only through physical sales points.

The practice of the

The RPM method consists of four basic phases.

First, it is necessary to identify the resale price, i.e. the amount at which the product is sold.

is sold to an independent third party: in other words, it is the market price applied to goods sold to unrelated parties (which, in the present case, are resellers). Subsequently, the gross profit margin is determined which can be achieved by the Commission.

The Commission considers that the Commission's assessment of the compatibility of the measures with the internal market is not sufficient to assess the compatibility of the measures with the internal market.

Once a comparable gross profit margin has been established, the same is deducted from the resale price. The difference thus obtained represents the normal purchase cost of the goods originally purchased by the related undertaking. If the retailer's margin deviates from the market data benchmarks between independent parties, the tax authorities may challenge the price and make adjustments, the

to bring it back to the principles of free competition.

Finally, it is necessary to verify whether the dealer profile differs from that of comparable dealers and, if this happens, adjustments may have to be made to ensure reliable comparison. A careful functional market analysis is therefore essential to justify any changes or adjustments to the data used.

European legislation infringed: Article 101 TFEU and Article 53 EEA Agreement

Decisions taken by the European executive ensure that anticompetitive conduct

the subject matter of the three proceedings shall supplement a single and continuous infringement of Article 101 of the Treaty.

Treaty on the Functioning of the European Union (TFEU) and Article 53 of the Agreement on the European Economic Area (EEA). These provisions prohibit agreements and concerted practices having as their object and/or effect the prevention, restriction or distortion of competition in the internal market, potentially affecting trade between Member States.

Although the three fashion houses have formally operated independently, the partial coincidence of the conducts and the common presence of the same retailers, who market products signed by all three brands, reveal a homogeneous overall context. The three decisions concern the highest segment of the fashion sector and take particular importance as they strongly reaffirm the illegality of the practices of Resale Price Maintainment (RPM).

L. 101 TFEU expressly provides for the prohibition of agreements which violate the general principles governing the internal market. In particular, it is prohibited to include agreements between parties, decisions by associations of undertakings and concerted practices which may

affect trade between Member States and which have as their object or effect the prevention,

restriction or distortion of competition within the internal market, and in particular those

which: (a) direct or indirectly fix purchase or selling prices or any other trading conditions; [...]

The second paragraph of Article 101 TFEU also states that "any agreements or decisions prohibited pursuant to this Article shall be automatically void": this is the case for nullity ex

The aim of the serious sanctioning consequences of any restrictive competition pact is clear: to protect the fundamental principles of the European internal market, based on the pillar of the free movement of goods, persons, services and capital.

The operative part of Article 101 TFEU is also referred to Article 53 of the EEA Agreement (European Economic Area), which regulates competition in Chapter I, Part IV of the law and in particular sets out the rules applicable to thecontracts.

Art..53 (1): . ........................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................

The sanctions imposed by the European Commission: a balance game

The European Commission, when assessing the sanctions to be imposed on the three fashion houses, relied on the European legislation which sets out the guidelines for the imposition of fines, which came into force in 2006 (Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003

The elements which the Commission has taken into account in the analysis of the case are many: the seriousness and duration of the infringement, the geographical area affected, the value of sales directly and indirectly made by the companies in the EEA during the period considered.

Moreover, the Commission had to take into account the fact that the three companies cooperated.

The Commission therefore considers that the Commission's decision to initiate the procedure for the application of Article 107 (1) TFEU is not sufficient to establish whether the aid granted to the applicant is compatible with the internal market.

In particular, Gucci and Loewe provided evidence of significant added value at an early stage of the proceedings.

From a quantitative point of view, this proactive attitude has enabled companies to

the 15% penalty (Chloé) is reduced to even 50% (Gucci and Loewe).

The antitrust cooperation procedure: a win-win practice for all The European Commission, under the Treaty on the Functioning of the European Union, has extensive powers of investigation, including the possibility of carrying out inspections at business premises, and of imposing financial penalties on companies that violate European antitrust rules. The main procedural provisions in this area are contained in Council Regulation (EC) No 1/2003, which regulates, precisely, the investigation powers and the procedures for implementing Articles 101 and 102 TFEU.

In the present case, the Commission initiated the ex officio investigations, carrying out unannounced inspections at Gucci (Italy), Chloé (France) and Loewe (Spain), in April 2023, and formal proceedings were subsequently opened only in July 2024.

The antitrust cooperation procedure is based on the well-established model of the settlement procedure in cartels, which is one of the most serious forms of cartels.

In particular, they are in breach of Article 101 TFEU (competition restrictive agreements) and Article 102 TFEU (prohibiting a dominant position), in order to encourage the discovery of such agreements, the Commission has established a leniency programme (so-called "leniency programme") which encourages undertakings to provide internal evidence on the existence of cartels in exchange for full immunity or significant reductions in fines. More specifically, the first undertaking belonging to a cartel requesting clemency may obtain full immunity from the sanction, if the information provided is sufficient to initiate an investigation. In parallel, the Commission also carries out independent investigations to identify cartels and other restrictive practices.

For the same purpose, the Commission has also established an instrument to facilitate the reporting of anti-competitive behaviour, while ensuring the anonymity of the reporting agent (so-called "whistleblower"): this is made possible through a specially designed encrypted messaging system, which allows for a secure two-way communication between the reporting agent and the Commission.

The antitrust cooperation procedure can also be applied in further cases

In order to ensure that the undertakings are able to fulfil their obligations under the rules of competition of the European Union, the Commission shall, on the one hand, take a more straightforward and rapid approach to the cooperation procedure and, on the other hand, cooperate undertakings may benefit from a reduction in the amount of the fine.

But what is the use of the money from fines imposed on companies for breaching EU antitrust rules? They are paid into the EU general budget: these revenues are not, however, linked to specific expenditure, but involve a reduction in the contributions that Member States are to pay to the EU budget for the following year. In this way, sanctions effectively contribute to the financing of the EU and reduce the tax burden on European citizens.

The action for damages: the protection of the individual injured person

Any natural person or undertaking which has suffered injury from anticompetitive behaviour, such as those described in the cases under consideration, may bring an action before the courts of the Member States for the annulment of the decision.

The Directive on the protection of workers from the risks related to exposure to exposure to radiation

compensation for antitrust damage (-)Antitrust Damages Directive) further simplified access to compensation for victims of anti-competitive practices.According to the prevailing opinion of the case law of the Court of Justice of the European Union and on the basis of Regulation (EC) No 1/2003, a Commission decision which has become final is binding and indisputable before national courts with regard to the existence of conduct deemed unlawful.However, national courts have the power to condemn the person who has put in place compensation which may not take account of the administrative penalty previously imposed at Community level.