The European Commission has announced that it has launched separate investigations into whether certain distribution practices of Nike, Sanrio (the company behind Hello Kitty), and Universal Studios illegally restrict traders from selling licensed merchandise cross-border and online within the EU.
The products in question include clothes, shoes, and bags on which an image or text is applied during the manufacturing process.
Nike is the licensor of rights for (among others) FC Barcelona’s merchandise whilst Sanrio is the licensor of rights for Hello Kitty.
By restricting their licensees’ ability to sell licensed merchandise cross-border and online (by, it seems, requiring the licensees to restrict the licensees’ distributors to sell cross-border and online) Nike, Sanrio and Universal Studios may have breached EU competition law.
The launch of these investigations comes just seven days after the EU Commission announced an investigation into the distribution practices of Guess Inc. (for more info, click here). Indeed, the Commission pointed out that its investigations into Nike, Sanrio and Universal Studios complement the investigation into Guess. Further, as in the case of Guess, it is possible that Nike may face potential securities claims by shareholders under US law.
Take home points
- The Nike, Sanrio and Universal Studios investigations mark a new phase for the European Commission if, as anticipated, it is their licensees who are parties to the distribution agreements in question.
- As in the case of Guess, the outcome of the investigations into Nike, Sanrio and Universal Studios remain to be seen.
- In any event, for the time being, it would appear that in launching these investigations within one week of each other and highlighting other pending investigations, the EU Commission is trying to send a message that businesses which are involved in distribution agreements that infringe EU competition law are vulnerable to attack.