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On 28 November 2024, the European Commission imposed fines totalling €5.7m on Pierre Cardin and its onetime largest licensee, Ahlers, for breaching the competition rules of the European Union (EU).
The Commission believed that the two business had restricted cross-border trade in the EU’s internal market.
Pierre Cardin is a long-established French fashion house. It licenses its trademark to third parties to enable the latter to manufacture and distribute fashion items with the ‘Pierre Cardin’ mark. Ahlers was Pierre Cardin’s largest licensee in the European Economic Area (EEA) during the infringement.
In 2021, the Commission conducted a dawn raid/unannounced inspection at Ahlers' premises. In 2022, the Commission opened formal proceedings into possible anticompetitive conduct by Pierre Cardin and Ahlers. In 2023, the Commission sent the parties Statements of Objections and the parties responded. In early 2024, the oral hearing was held. From “inspection” to “fine”, there was a gap of over 40 months.
The breach which the Commission claims to have found was that between 2008 and 2021, Pierre Cardin and Ahlers had entered into anticompetitive agreements and concerted practices. These arrangements prevented Ahlers facing from competition in those EEA countries where the company held a Pierre Cardin licence. The arrangements breached article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the EEA Agreement.
The Commission states in its press release that “the Commission found that such anticompetitive agreements and concerted practices aimed at preventing other Pierre Cardin licensees and their customers from selling Pierre Cardin-branded clothing, both offline and online: (i) outside their licensed territories; and/or (ii) to low-price retailers (such as discounters) that offered the clothing to consumers at lower prices. The ultimate objective of such coordination between Pierre Cardin and Ahlers was to ensure Ahlers' absolute territorial protection in the countries covered by its licensing agreements with Pierre Cardin in the EEA.”
The consequence was that the “illegal practices prevent retailers from being able to freely source products in Member States with lower prices and artificially partition the internal market.”
In terms of the penalty, the Commission imposed fines based, the Commission said, on the serious nature of the infringement, its geographic scope and its duration.
There was a fine of €2,237,000 on Pierre Cardin and a fine of €3,500,000 on Ahlers. These fines totalled €5,737,000. By comparison with some recent fines – particularly those for procedural breaches – the fines appear relatively small, but fines are calculated not in an absolute sense but relative to the parties’ turnover and the conduct of the parties.
In its media release, the Commission made a useful insight:
“Traders and retailers try to procure products in the internal market where the prices are lower and trade them to markets where prices are higher. This generally leads to price decreases in countries where prices are higher. Restrictions to such parallel trade can lead to the isolation of a national market whereby the manufacturer or supplier can charge higher prices to the detriment of consumers. They can also lead to less product diversity. Therefore, restrictions to parallel trade amount to non-regulatory barriers to a better functioning of the Single Market and are among the most serious restrictions of competition.”
There is always the possibility of follow-on damages actions against businesses breaching competition law. It may well be that there would be no such actions in this case.
The EU is based on the notion that there is an internal market or common market. Within this internal market, there must be no obstacles to trade other than those limited exceptions permitted in EU treaty law (e.g. objectively justified public health or public policy reasons).
The notion of the internal market is a fundamental or core principle of the EU. The Commission, as guardian of the EU’s treaties, is zealous in upholding the notion that there must be an internal market. In terms of competition law enforcement, the Commission imposes high fines on those undertakings which breach the rules and seek to establish their own barriers to trade within the internal market.
The Commission would regard this type of behaviour as illegally fragmenting the internal or single market. It prevents consumers from benefiting from greater choice. So, the fact that – provided the evidence was present – there was a fine is not surprising. If anything, the fine seems relatively low as compared to other penalties imposed by the Commission particularly in procedural breaches of competition law. But the case is a useful reminder to all in business to avoid any private arrangements which hinder or limit the benefits of the internal market.
For further information in relation to this topic, please contact Dr Vincent Power, Partner, or any member of the EU, Competition & Procurement group.
Date published: 4 December 2024
