In the spring of 2020, during the earliest and darkest months of the coronavirus pandemic, a group of clothing managers and designers began talking – for now – about turning around some of the hidden practices of the global fashion industry.
During several Zoom conversations, they talked about tearing up the calendar that requires fall designs to be presented in the spring and spring clothes in the fall. Others suggested postponing traditional discount periods and cutting mid-season sales, hurting profits.
Finally, what if they could work together to improve the efficiency of their industry to avoid the mountains of unsold inventory and wider waste problems that contributed to the environmental impact of fashion on the planet?
In May 2020, they published a proposal in an open letter called the Forum Letter, soon followed by a second initiative called Rewiring Fashion.
“We are faced with a fashion system that is less and less conducive to true creativity and ultimately serves no one’s interests: not designers, not retailers, not customers – and not even our planet,” reads the open letter, signed by designers including Dries Van Noten, Erdem Moralioglu, Joseph Altuzarra and Missoni, as well as executives from retailers such as Selfridges in the UK and Mytheresa in Germany. “We wanted to think boldly and hope to find common ground with industry peers tackling similar issues.”
The ambitious statements never led to the intended changes. But they did ring alarm bells in Brussels.
Last May, European Union antitrust regulators raided several unnamed fashion houses, a move they described as “a preliminary investigative step into suspected anticompetitive practices.” In a statement, the European Commission said the targets may have broken price-fixing rules and may have created a cartel.
The goals? Reuters reported that it was designers and executives who signed the 2020 declarations on transforming fashion. People from several companies, who wished to remain anonymous because of the potential lawsuits, confirmed that they had been contacted. The companies have declined to comment and the European Union has not publicly identified the targets.
The research raises questions about how a notoriously cutthroat industry can make itself more efficient and sustainable without violating antitrust rules aimed at preventing collusion.
The signatories from the high-end fashion world shared common complaints in the open letter. Fast fashion was constantly undermining their business model, while third-party retailers were able to discount their designs year-round. That pressure, they said, forced them to mindlessly produce and sell more and more things, draining profits and attracting environmental critics. Being sustainable and competitive at the same time proved impossible. Enough was enough.
But collaboration on such issues, including environmental, social and governance topics, known as ESG, could be interpreted as crossing the line into illegal collaboration and stifling competition, analysts say.
“There is definitely a tension between antitrust and ESG,” said Hill Wellford, former chief of staff for the Justice Department’s antitrust division, who now heads the antitrust government investigation team at law firm Vinson & Elkins. “A lot of ESG policies would have the effect of increasing prices and decreasing quantity.”
“Several client consortia have called me about making arrangements for environmental purposes,” he added, “and I have to tell them, ‘That’s a dangerous thing to do.’”
A wall of silence
Silence on the matter has spread from the people and organizations that have signed the 2020 proposals to some of the world’s most powerful luxury conglomerates such as LVMH Louis Vuitton Moët Hennessy and Kering (neither of whom have signed the proposals), whose multi-brand portfolios are strong. determine how the mode system works. Their wall of silence underscores the industry’s reluctance to publicly discuss issues that could put them in law enforcement’s crosshairs, as well as brewing cultural and political wars.
On the regulatory side, there is debate about how to look at companies working together to properly promote the environment.
“There’s a lot of debate going on in antitrust law about what we’re trying to achieve and whose perspective we should take,” said William Kovacic, director of the Competition Law Center at George Washington University and former chairman of the Federal Trade Commission. “Is it a consumer vision or a citizen welfare vision?”
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In the United States, these conflicting goals have become increasingly political. Republican officials at the state and federal levels have become vocal in their opposition to ESG principles, claiming that companies are being forced into unprofitable policies. They use antitrust as a way to pressure them into tempering or abandoning such targets.
Arkansas Republican Senator Tom Cotton said the ESG movement is “an effort to weaponize corporations, to reshape society in ways voters never approve of at the ballot box.”
Just days before the midterm elections, as Republicans prepare to shift the balance of power in Congress, Senator Cotton and others wrote to law firms last week to prepare them for impending investigations into ESG efforts by preserving documents for upcoming investigations.
“Congress will increasingly use its oversight powers to investigate institutionalized antitrust violations committed in the name of ESG,” the Nov. 3 letter said.
Good intentions, bad legal advice
The fashion industry has come under fire for practices such as burning or destroying unsold inventory or sending it to landfills in the South. At the same time, Rewiring Fashion’s proposal cited how “some brands quickly copy our designs and market them in cheaper, disposable fast fashion” as an issue that needs to be addressed.
The Forum Letter and Rewiring Fashion suggested changes to produce less unsold inventory at the end of the seasons to encourage more full-price sales. And efforts would be made to reduce waste in fabrics and inventory and business travel, through increased use of digital showrooms and fashion weeks.
These ideas may have raised concerns among antitrust authorities as to whether they have violated aspects of European Union antitrust laws that prohibit agreements that “have the object or effect of preventing, restricting or distorting competition.” In particular, the rule refers to agreements on price fixing, limitation or control of production and technical development.
“Why would fashion companies limit collections or sales periods?” said Professor Kovacic. “Imagine car dealers to limit sales. Suppose they all say, “We will raise prices because that price signal will prevent overconsumption.”
Some European competition authorities have begun to consider how sustainability goals might fit into antitrust laws. In the Netherlands, competition authorities have recently drawn up a roadmap for increased cooperation between farms that want to build farm-to-fork food chains without fear of regulatory retaliation. The European Commission has proposed a similar approach for other consumer industries in Europe.
The influential Sustainable Apparel Coalition conference, held in Singapore this month, was titled “Collective Action on Common Ground” and promoted the idea that the urgency of fashion’s sustainability challenges would only be addressed through collaboration and partnership. And climate finance researchers from Oxford University, Harvard University and IMD Business School in Switzerland recently wrote in Harvard Business Review, counting more than 150 business collaborations on net-zero targets, carbon accounting, sustainable investment and the like. various sectors, including clothing and agriculture. They noted that such collaborations had yielded valuable results, but pointed out some legal pitfalls surrounding anti-collusion laws.
The writers said, among other things, “Consult with your lawyers.”
Two Brussels-based antitrust lawyers said many of the topics discussed in those fashion industry documents are likely to have raised concerns among regulators.
Companies meeting to discuss a shared vision is “great if the shared vision is about sustainability,” said one of the lawyers, who asked not to be named because the person’s company had fashion brands that were clients. “It’s certainly not great when the conversation is about pricing.”
However, some critics said regulators hadn’t gone far enough to make room for companies to work together, given the urgency created by the climate crisis.
“Inside advisors at large corporations who really want to be leaders in sustainability see antitrust as their biggest hurdle,” said Amelia Miazad, an expert on sustainable capitalism and the founder of the Business in Society Institute at Berkeley Law. “Companies cannot continue to produce products for consumers in the future unless they can work together.”
But some industry observers remain concerned that sustainability targets could be used to justify anticompetitive discussions or agreements. mr. Kovacic, the supervisor turned professor, said working together to solve sustainability issues can be a slippery slope.
“I am wary of walking these paths,” he said. “The way to do this is to make proposals more transparent and have a public consultation where companies develop these arguments. I’d rather have a full open-air conversation than a secret meeting of CEOs at an airport.”
