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EU: The Nike decision of the EU Commission on competition law.

The EU Commission’s decision of March 25, 2019 which fined Nike for 12.5 million Euros for violation of Article 101 TFEU and Article 53 EEA Agreement, was finally published on June 21, 2019.

Silvia BORTOLOTTI - 16.09.19
Country expert

Although the relevant contracts were license agreements for the sales of licensed football merchandise (merchandising), the decision in fact concerns the restrictions on the sales and distribution of such products within the EU and the EEA market.

Basically, Nike Inc., through different subsidiaries of its group obtained the IP license for the manufacturing and distribution of several kind of products from the main European football clubs and federations (FC Barcelona, Manchester United, Juventus, Inter Milan, AS Roma and the French Football Federation). Such rights were further licensed by Nike to third parties through direct or master license agreements, which provided non-exclusive rights to manufacture and distribute such products in certain territories of the EU and EEA.

In its decision the Commission found a series of “practices” restricting active and passive cross-border sales of the licensed products. Namely,

a) direct measures (contract clauses) restricting out-of-territory sales by licensees, such as (i) prohibitions of out-of-territory passive (including online) and active sales; (ii) obligations to refer orders for out-of-territory sales or queries to Nike; (iii) clauses clawing back royalties and revenues deriving from out-of-territory sales; and (iv) clauses imposing double royalties for out-of-territory sales;

b) indirect measures restricting out-of-territory sales by licensees such as threats to end the agreements for those licensees selling outside their allocated territories;

c) restrictive practices implemented vis-à-vis master licensees to compel them not to sell outside their territories and to enforce restrictions vis-à-vis their sub-licensees on behalf of Nike; and

d) obligations to pass on the restrictions regarding out-of-territory sales through practices including at times prohibiting sales by licensees to third parties selling out-of-territory the licensed merchandise of Nike's clubs.

Based on the above, the Commission decided that such restrictive practice was to be regarded as a restriction of competition “by object”, quoting the recent “Carte Bancaire” case (CB v. Commission, C-67/13) and therefore concluded that it had a sufficient degree of harm to competition that there was no need to examine its effects.

Namely, the Commission stated that: “Nike restricted the ability of its licensees and master licensees to sell licensed merchandise cross-border, thereby restoring the divisions between national markets” and “those practices also led to a reduction in the choice available to consumers and, potentially, increased prices for certain products as a direct result from the lower level of competition”.

The Commission also excluded possible exemptions based on Article 101(3) TFEU, stating that the relevant restrictions of out-of-territory active and passive sales had a hardcore nature under both Reg. 330/2010 (VABER) and, even if probably not applicable in the case at issue, the Technology Transfer Block Exemption Regulation (Reg. 316/2014).

Nike was therefore fined for 12.5 million Euros for violation of Article 101 TFEU and Article 53 EEA Agreement.

 

Silvia Bortolotti, Secretary General IDI, IDI Country Expert for Italy

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