Reuters, April 20, 2019 – As part of a multi-country inquiry, European Union antitrust officials began inspecting a Gucci facility in Milan on Thursday, casting doubt on Europe’s booming luxury goods market.
According to a source with firsthand knowledge of the situation, the Gucci inspection at a location associated with the production of luggage, purses, and other leather goods was focused on potential violations of Article 101 of the European Union.
The clause forbids agreements that have an impact on trade between EU member states and that limit, thwart, or distort competition within the EU.
The owner of Gucci, Kering (PRTP.PA), a French-listed company, acknowledged the inspection late on Wednesday and added that it was fully working with the European Commission’s inquiry into the sector.
The insider also said that no other Italian locations had been singled out for scrutiny.
A spokesman for Kering said the business had nothing to add to its statement from Wednesday. Competitor LVMH (LVMH.PA) likewise chose not to respond to questions about the raids.
A conversation with Kering’s investor relations team, according to Exane BNP Paribas analyst Antoine Belge, produced little fresh information.
According to Belge, the business is aware that the investigation is a component of a larger inquiry involving numerous companies and that such investigations can take a while.
These inquiries “are not usual in luxury,” he added, adding that it was doubtful that Kering shares would change considerably until there was more information.
The shares were down 0.9% lower as of midday on Thursday.
The European Commission said on Tuesday that antitrust regulators had raided companies in the fashion sector in several EU countries, but did not name the companies involved or specify the potential breaches it was investigating.
Companies found guilty of breaking EU rules face fines of as much as 10% of their global turnover.
A research note from Italian investment bank Equita said a potential fine of up to 10% of revenue, the worst-case scenario, would amount to 3% 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.