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Nike fined €12.5m for merchandise sale practices

12 Apr 2019

Fans of Manchester United, FC Barcelona, Juventus, Inter Milan, AS Roma and the French Football Federation will be interested to hear that Nike had to change how it sells its merchandise to the advantage of consumers.

The sportswear giant was recently fined €12.5m for its cross-border sales practices that affected football merchandise sales between 2004 and 2017. As part of its licencing agreements, Nike blocked merchandise traders from selling products outside their territories and even expressly prohibited firms from suppling customers in other countries within the EEA if such countries were outside agreed territories. Such practices resulted in football fans having less choice over their merchandise and having to put up with higher prices.

The European Commission found that Nike’s practices hindered competition and partitioned the single market contrary to EU law. The Commission’s decision comes as good news to football fans who have a right to shop around in the single market and benefit from choice of merchandise and pricing available in any member state.

EU competition conflict

How did Nike’s branding get into conflict with EU competition law, and is your business at risk of falling foul of cross-border trade requirements?

Besides its own branded sportswear, Nike produces licenced merchandise which features the brands of football clubs. Nike then licenses the IP rights of the merchandise to third parties for manufacturing and distribution. It is the licencing agreements with the third parties that were challenged by the European Commission. The non-exclusive agreements contained provisions that restricted cross-boarder sale within the EEA.

Whilst Nike acts rightfully as the licensor of the IP rights featured on the football merchandise, it cannot contravene EU competition law in its licencing agreements by restricting manufacturing and distribution of the football products in the EEA. Such restrictions are contrary to Article 101 of the Treaty on the Functioning of the EU.

The EU Commission is currently still looking into similar licensing and distribution practices of Sanrio and Universal Studios. 

If you are concerned that your business might have controversial provisions in your licencing agreements, or if you have any other questions in regards to IP rights, get in touch with Beatrice Bass.

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