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Guess faces legal action over potential EU competition law breach

Guess is facing the possibility of more than one legal challenge after the European Commission opened an investigation into whether its distribution practices breached EU competition law.

Two New York law firms have said they are looking into filing class action suits on behalf of the company’s shareholders, as a result of losses incurred from a drop in share prices. Bronstein, Gewirtz & Grossman LLC and Rosen Law Firm have both appealed to anyone who bought shares prior to the European Commission’s announcement to join their potential suit.

Share prices for Guess, which is listed on the New York stock exchange, fell to a low of $11.13 during trading on 6 June, when the European Commission announced its investigation, down from a closing price of $12.01 the day before. Shares have not yet returned to the pre-announcement price, and opened at $11.55 on Tuesday.

The European Commission investigation was opened after information surfaced indicating that Guess’s distribution agreements in Europe may have restricted European Union retailers from selling online to customers in other member states.

Commissioner Margrethe Vestager stated: “One of the key benefits of the EU’s single market is that consumers can shop around for a better deal.”

Under EU competition law, consumers must be free to buy from any retailer authorised by the manufacturer, including across borders.

Stephen L Sidkin, partner and head of commerce and technology at law firm Fox Williams, told Drapers that, in addition to any potential shareholder action, Guess could face other consequences if it is found to have contravened the EU rules.

“If the Commission finds that there has been an infringement of EU competition law, it will be open to the Commission to impose a very substantial fine. In addition, the actions taken by Guess in respect of its distribution agreements may result in infringement of the national competition laws of certain member states. In turn, these may give rise to other penalties.”

Drapers has contacted Guess for comment. 

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