Luxury industry under scrutiny as EU probes Gucci and others

Paris: Europe’s flourishing luxury goods industry was under scrutiny on Thursday after European Union antitrust regulators inspected Gucci’s Milan headquarters this week as part of an investigation spanning several countries and companies.

The European Commission said on Tuesday that antitrust regulators had raided companies in the fashion sector in multiple EU countries, but did not name the companies involved or specify the potential breaches it was investigating.

Reuters reported on Wednesday that EU antitrust regulators were inspecting a facility of luxury goods company Gucci as part of the probe.

The inspection of the Gucci site was aimed at possible violations of the European Union’s Article 101, according to a source with direct knowledge of the matter.

The article prohibits agreements that restrict, prevent or distort competition within the EU and which have an effect on trade between EU member states.

The source identified the site at the centre of the probe as Gucci’s Milan headquarters, a former airplane factory in the eastern part of Italy’s fashion capital.

The site, known as the Gucci Hub, was opened in 2016 serving as headquarters for its offices in the city, worldwide showrooms, photo studios and fashion show venue, according to Gucci’s website.

Kering, the French-listed owner of Gucci, late on Wednesday confirmed the inspection, adding that it was cooperating fully with the European Commission investigation into the industry.

A Kering spokesperson said the company had no further comment beyond Wednesday’s statement. Rival LVMH also declined to comment on the raids.

Exane BNP Paribas analyst Antoine Belge said in a research note that a conversation with Kering’s investor relations team had yielded little new information.

According to Belge, the company understands the probe is part of an overall investigation involving many companies and that such inquiries can take a long time.

“These investigations are not common in luxury,” he said, adding that Kering shares were unlikely to react significantly until there was further news.

Kering shares were down 0.4 per cent at 1320 GMT on Thursday.

Companies found guilty of breaking EU rules face fines of as much as 10 per cent of their global turnover.

A research note from Italian investment bank Equita said a potential fine of up to 10 per cent of revenue, the worst-case scenario, would amount to 3 per cent of Kering’s market capitalisation.

The Commission said on Tuesday that the latest action was not related to other raids involving the fashion industry in the past two years.