This article analyses the relationship between guilds and information asymmetries using a large database of quality disputes from early modern Italy. It finds that a high‐quality urban textile industry was able to solve externalities using a range of ex ante and ex post monitoring mechanisms based on private market relationships and fair sanctions which effectively reduced adverse selection and information asymmetries. Instead, when guilds did use their quality regulations, the effect of the guild on information asymmetries and the industry as a whole was generally negative, by providing mechanisms that could be manipulated by entrenched interest groups for rent‐seeking purposes.