The European Union is investigating into how fashion sets its prices

According to The Fashion Law, the European Commission is conducting an investigation into the pricing policies of numerous luxury brands, focusing on how luxury brands determine the prices of bags and leather goods sold through multi-brand retailers. In April, the headquarters of several luxury brands underwent extensive inspections aimed at determining whether these companies impose resale prices on their wholesalers (thus not affecting the prices at which individual brands sell products directly to consumers) and threaten to withhold supplies if retailers do not adhere to the established prices. This includes practices such as setting margins, defining maximum discounts, requiring manufacturers' consent for price revisions, and using monitoring systems to discourage discounts. The investigation is centered around potential violations of the European Union's competition law, particularly regarding cartels and restrictive business practices. However, the Commission has not disclosed the names of the fashion companies under investigation.

The investigation likely focuses on the practice of luxury brands imposing minimum prices for their products sold by "external" retailers. Although these pricing conditions are presented as suggestions and recommendations, retailers risk losing access to supplies if they do not adopt the recommended prices, making these practices a form of disguised extortion. As a result, multi-brand retailers tend to comply with the price suggestions of their major partners (including numerous fashion brands) to maintain their valuable business relationships. Needless to say, these price impositions almost never apply to small independent brands, putting them at a disadvantage in the situation. This situation puts pressure on retailers to align with the pricing strategies of major brands to avoid potential conflicts. Essentially, what brands want to avoid is having the same product sold at a lower price on a retailer's website compared to their own. It is clear that the implicit message they want to avoid, beyond economic profit issues, is that a certain product does not possess the real value for which it is sold.

If the European Commission were to take action against fashion companies for price-fixing behaviors, one could expect hefty fines, assuming, of course, the investigation involves major luxury groups, specifically LVMH and Kering. In reality, there have been fines in the past, but not for luxury brands. In 2018, Guess was fined €40 million by the antitrust authority for attempting to manipulate the prices of its retailers. And just last January, Yoox was hit with a €5 million fine by the Antitrust authority, both for blocking certain users' ability to request returns and because, as stated by the authorities themselves, «the reference price against which discounts were applied was not the actual price applied by Yoox, but an amount representative of the alleged market price applied in fashion stores. In this way, more advantageous offer conditions (reference price and discounts) were presented compared to those actually practiced».