Who: The European Commission, Guess? Inc., Guess? Europe and Guess Europe Sagl (Guess)
Where: EU
When: 26 June 2019
Law stated as at: 26 June 2019
What happened:
The growing importance of e-commerce led Guess to develop a comprehensive e-commerce strategy aligning B2C and B2B activities. The development of Guess’s website and online store was at the heart of this strategy.
As part of this, Guess imposed restrictions on authorised retailers preventing them from using or bidding on specific AdWords for the purposes of online search advertising, including the Guess brand names. Guess sought to maximise traffic to its own website at the expense of traffic to independent distributors’ websites and aimed to minimise its advertising costs, as letting B2B customers bid on AdWords drove up Guess’ costs and put its B2C site at a disadvantage.
The European Commission found that this was anticompetitive and could not be justified. Importantly, it found that the policy was anticompetitive by object which means that its purpose was to restrict competition. In these circumstances the Commission did not have to prove that it had any anticompetitive effect on the market.
Guess was ultimately fined almost €40,000,000 for this and other competition breaches.
Why this matters:
Online search advertising is widely used. The platform selects keywords and the advertisers can bid on them in an auction which, in turn, determines the position of the advertisement in the search results. This is a competitive process.
Guess’s attempts to reduce the competition innate to bidding for keywords led the European Commission to view Guess’ AdWords policy as unlawful and anticompetitive. It considered this restrictive policy was ultimately intended to deprive European customers of one of the core benefits of the European Single Market: the ability to shop around for more choice and a better deal.
This case also establishes the legal precedent that contractual and other de facto restrictions on online search advertising restrictions such as AdWords bidding are in principle anticompetitive and could result in substantial fines.
For more on the Guess decision and the wider competition implications, see our previous insight.
