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Commission opens formal investigations into licensing and distribution practices

The European Commission (EC) has launched three separate investigations into whether certain licensing and distribution practices of Nike, Sanrio and Universal Studios illegally restrict traders from selling licensed merchandise cross-border and online within the EU Single Market.

EC Commissioner Margrethe Vestager said: "The Commission is investigating whether Nike, Sanrio and Universal Studios are restricting cross border and online sales of merchandising products. We are going to examine whether the licensing and distribution practices of these three companies may be denying consumers access to wider choice and better deals in the Single Market".

The investigations concern the licensing and distribution of merchandising products. These are products, such as clothes, shoes, phone accessories, bags or toys, on which an image or text is applied during the manufacturing process. The aim is to increase the products' attractiveness for consumers, who are typically children or teenagers who want to buy a product which is associated with their favourite sports team or film.

The relationship between the owner of the relevant intellectual property rights (licensor) and the manufacturer (licensee) is typically regulated by a licencing agreement. The EC will investigate whether the three companies, in their role as licensors of rights for merchandising products, may have breached EU competition rules by restricting their licensees' ability to sell licensed merchandise cross-border and online. These practices may ultimately harm consumers by preventing them from benefiting from greater choice and lower prices, both online and offline.

If proven, the companies' behaviour may breach EU competition rules that prohibit anti-competitive agreements between companies. A breach of these rules may result in mega fines, criminal sanctions and/or the unenforceability of the licensing agreements.

The EC will now carry out its in-depth investigation as a matter of priority. 

These investigations follow the recent publication of the EC's final report on the e-commerce sector inquiry, as it aims to tackle potential barriers to online and offline cross-border trade within the EU single market.

Brands which engage third parties to manufacture and distribute products within the EU should review their licensing agreements and practices in order to ensure that they are on the right side of the law.