Once again, a fashion brand finds itself in the crosshairs of the European Commission for possible breach of EU regulations on free competition

By Patricia Babiano. Lawyer ONTIER FASHION AND LUXURY – EUROPE LATAM USA. The European Commission is reopening an investigation into a company in the fashion industry, in this case, luxury brand Gucci, part of the Kering Group, for a possible breach of EU regulations within the framework of free competition, just as it occurred in 2021 and 2022 in the same sector.

The inspection took place on 18 April at Gucci’s Italian facilities, as confirmed by the multinational group through an official statement, in which they acknowledge their full cooperation with the European Commission.

Free competition is a fundamental principle of the market economy to which our Constitution adheres in Article 38, recognising “the freedom of enterprise within the framework of the market economy“. This is one of the central principles of the so-called “Economic Constitution”, a set of constitutional provisions designed to provide the fundamental legal framework for the functioning of the economic order.

State and supranational legislation prohibit those practices and behaviours of competitors that have the effect of distorting competition in the various market sectors.

The aforementioned investigation originates from suspicions of cartels and practices against free competition, understood as the association between commercial enterprises to avoid competition and control the production, sale and prices of certain products, as well as any agreement, decision, or collective recommendation, or concerted or consciously parallel practice that produces or may produce the effect of preventing, restricting, or distorting competition in markets.

According to a statement issued by the Commission itself, “in the event of suspicion of infringement of the European Union‘s competition policy, the first element to consider is the relevant market, which combines the product market, which comprises all the products and services that consumers consider interchangeable or substitutable due to their characteristics, price, or intended use; and the geographic market, understood as the area in which the affected companies carry out activities of supply of products and provision of the reference services, where competition conditions are sufficiently homogeneous”.

In this regard, EU regulations understand that a market is competitive if customers can choose from a range of products with similar characteristics and if the supplier does not encounter obstacles to supplying products or services in that market. That is, to protect this freedom, it applies rules that prohibit practices that restrict competition or result in abusive exploitation of a dominant position.

In this case, although still in the preliminary investigation phase, Council Regulation 1/2003, based on Article 103 of the TFEU, empowers the Commission to enforce these rules and impose fines on companies for their infringements, thus establishing the principles that fines must be based on the severity and duration of the infringement, setting their maximum amount at 10% of the turnover.