Hugo Boss and retailers have violated competition rules

Hugo Boss is a manufacturer of Hugo Boss brand clothing and a retailer of the brand in its own stores in Illum and Magasin. Kaufmann and Ginsborg are both retail chains within menswear, including the Hugo Boss brand. Hugo Boss thus has so-called parallel distribution, where they both have their own retail sales and sell through retailers.

Hugo Boss has retailer agreements with Kaufmann and Ginsborg, which are so-called vertical agreements. At the same time, Hugo Boss competes with Kaufmann and Ginsborg in the retail market with sales from its own stores (horizontal level).

When trading with a retailer, various information is exchanged that is common and necessary for the trade (vertical level). Conversely, it may constitute an infringement of the competition rules if competing companies exchange information about their respective market behaviour (horizontal level).

Background

In the period from January 2014 to April 2018, Hugo Boss regularly and in several cases at the request of Kaufmann and Ginsborg, respectively, sent information to the two retailers about prices, discounts, times of sales and which products were on sale in Hugo Boss' own stores in Illum and Magasin. The cases concern whether the exchange of information between Hugo Boss and Kaufmann and Ginsborg during the period was of a horizontal or vertical nature and whether it was in violation of the competition rules.

The Competition Council's decision in the Hugo Boss case

The Competition Council considered the cases in 2020 and found that there was an illegal exchange of information between Hugo Boss and Kaufmann and Hugo Boss and Ginsborg respectively.

The companies brought the Competition Council's decisions before the Maritime and Commercial High Court and argued, among other things, that the exchange of information was an expression of normal trade practice between a manufacturer and retailer in the fashion industry, the nature of the information exchange was vertical, and that the information was not confidential when exchanged.

The Maritime and Commercial High Court: Hugo Boss acted as a competitor

By judgment of 6 May 2024, the Maritime and Commercial High Court upheld the decisions. Specifically, the Maritime and Commercial High Court found that the exchange of information between Hugo Boss and the retailers was of a horizontal nature. The court thus found that the exchange of information was between competitors, not between a manufacturer and its dealers.

The court based its conclusion on the fact that the information exchange concerned prices, discounts, sales etc. in Hugo Boss' stores in Illum and Magasin and not Hugo Boss' sale of goods to the two retailers. The court did not find that Hugo Boss' dealer relationship with Kaufmann and Ginsborg changed the fact that the information exchanged was predominantly between competitors and thus of a horizontal nature.

According to the court, the information was strategic, individualised and future information that had a significant impact on how Kaufmann and Ginsborg could design their own offer strategy. The Maritime and Commercial High Court emphasises in particular that, based on the information from Hugo Boss, Kaufmann and Ginsborg could adapt which products were to be on offer and when sales were held in their respective stores. The Maritime and Commercial High Court therefore found that there was an infringement of object, as the exchange of information could affect Kaufmann's and Ginsborg's pricing of Hugo Boss products to the detriment of consumers.

Sanctions in the Hugo Boss case

The Competition Council has reported the violations to the National Special Crime Unit (NSK) for criminal prosecution.

On 23 May 2023, Kaufmann admitted to having violated the Danish Competition Act's prohibition of anti-competitive agreements and paid a fine of DKK 6 million. In addition, two senior executives of Kaufmann have each paid a fine of DKK 120,000.

Horten's comments on the Hugo Boss case

The case shows that companies involved in the distribution of products where there is parallel distribution must be very careful to ensure that their dialogue does not focus on the areas where they are competitors. This applies especially to information that relates to current and future market behaviour (horizontal level).

The case material shows a large number of specific examples of Hugo Boss continuously providing Kaufmann and Ginsborg with information about Hugo Boss' offers in Illum and Magasin. It is this correspondence that is central to the court's assessment of the case. The case material thus provides clear examples of illegal information exchange, which can be used as a guide, for example in compliance training.

The Maritime and Commercial High Court's judgments of 6 May 2024 can be found here:

Hugo Boss v Competition Council, Case: BS-30903/2021-SHR

Axel Kaufmann v Competition Council, Case: BS-30782/2021-SHR