Overview
On May 17, 2022, the European Commission ("Commission") announced that it had carried out unannounced inspections at the premises of companies active in the fashion sector in several Member States. In parallel, the Commission sent formal requests for information to several companies active in the fashion sector. The Commission has not identified the companies concerned or the countries where the raids occurred.
The Commission expressed concern that these companies may have violated Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the European Economic Area Agreement, which prohibits cartels and other anti-competitive business practices, including certain market and customer allocation practices.
Tuesday’s raids are only the most recent steps by the Commission to enforce Article 101 of the TFEU. In June 2021, the Commission conducted a similar raid at the German premises of a clothing manufacturer. On January 31, 2022, the Commission launched a formal investigation to assess whether this manufacturer and the fashion house that licenses its trademark to the manufacturer breached Article 101 by restricting cross-border and online sales of licensed products and the sale of such products to specific customer groups.
It is hard to tell whether these two series of dawn raids, both in the fashion sector, were related or conducted independently of each other. Executive Vice-President Margrethe Vestager, in charge of competition policy, previously commented: “One of the key benefits of the EU’s single market is that consumers can shop around for a better deal. Barriers erected to prevent parallel imports lead to undue fragmentation of the single market. This is why we are going to investigate whether these licensing and distribution practices may be restricting offline and online sales of consumer goods such as garments, shoes, and accessories in the EU.”
Dawn raids are a preliminary investigatory step into suspected anti-competitive practices. The fact that the Commission carries out such inspections does not mean that the companies are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation itself.
That said, companies that license and distribute fashion products in Europe (including the UK) should take the Commission’s recent raids as an opportunity to:
- Assess the impact on their distribution structures and practices, from the pending revisions to the vertical block exemption safe harbours in both the EEA and the new one in the UK which has just been issued and will come into force on June 1, 2022;
- Audit their licensing and distribution strategies in light of such review;
- Prepare for possible information requests, which the Commission has been sending out to market participants; and
- Audit past practices to assess compliance with EU, UK, and other national competition rules.
It is clear that, as we emerge from pandemic restrictions, antitrust investigations and dawn raids are back. Investigations have been launched in several different sectors and businesses need to be alert in terms of compliance and training, but also prepared for unanticipated interventions from authorities. This includes preparation and training for possible dawn raids.
Steptoe’s antitrust team, which has defended companies and individuals in dozens of competition authority investigations and follow-on damages claims across Europe would be happy to support you.
