The European Union investigates pricing practices of luxury brands

The investigations began in April, and on Monday, Reuters reported, citing information from three different sources close to the matter, that European Union competition authorities are currently analyzing the pricing practices of luxury brands.

Last April, the premises of Gucci and other prestigious fashion houses were subjected to searches, and financial documents were seized. The revelations focus on the examination of relationships between luxury brands and retail boutiques, particularly multi-brand retailers. According to European authorities, these retailers are allegedly being subjected to fixed prices set in advance by the parent company. It is reported that retailers who did not comply with these unilateral decisions faced severe consequences, such as being excluded from the sales channel.

Such practices are considered illegal within the European Union. If the irregularity is confirmed, the implicated brands could face sanctions corresponding to approximately 10% of the company's global revenue, according to the information available. This has raised concerns among the executives of Kering and other fashion houses. Following the searches conducted last spring at Gucci's offices in Milan, the luxury group communicated that the company's flagship brand was actively cooperating with authorities to clarify the matter.

While Gucci's name has been mentioned in the press, the same cannot be said for the other companies currently under scrutiny by European authorities. The Commission has chosen not to comment on this matter, limiting itself to stating that the companies may have violated current regulations on restrictive commercial practices. There is a legal precedent: in 2018, the Guess brand had to pay a fine of 40 million euros for prohibiting multi-brand distributors from freely establishing the selling prices of selected products.

Italian tax inspectors also participated in the inspections at Gucci. The brand is of vital importance to the French group. The sales revenue of the Italian brand accounts for approximately half of Kering's 20 billion euros in revenue in 2022. Therefore, the investigation has the potential to shake the flagship of the group, which is already weakened by the departure of designer Alessandro Michele in early 2023.