The European Commission ramps up its enforcement action in the e-commerce sector

On 14 June 2017, the European Commission announced three new antitrust investigations into the licensing and distribution practices of Nike, Sanrio and Universal Studios. These companies are suspected of illegally restricting traders from selling licensed merchandise online and cross border within the EU. These new investigations highlight the Commission’s continued focus on the e-commerce sector, following the Commission’s e-commerce sector inquiry (Final Report, published on 10 May 2017) and the launch of four other investigations in 2017.

The three investigations follow another investigation launched on 6 June into the designer fashion brand Guess. The Commission is expected to examine whether Guess illegally restricts authorised dealers from selling cross border to consumers or to other retailers within the EU Single Market. Guess is also suspected of restricting wholesalers from selling to retailers cross border in the EU.

These three new cases focus on the licensing and distribution practices in relation to licensed merchandise. The companies being investigated own and license the rights to well-known brands including Barcelona Football Club’s merchandise (Nike), Hello Kitty (Sanrio) and the "Minion" and "Despicable Me" film and product brand (Universal Studios).

These licensed rights can only be used by manufacturers (the licensees) if they sign a licensing agreement with the owner of the relevant intellectual property right (in this context Nike, Sanrio and Universal Studios, which are all licensors of their respective rights for merchandising products). The Commission has said that it will investigate whether the companies have breached Article 101 TFEU, which prohibits anticompetitive agreements, by restricting the ability of licensees to sell the licensed merchandise cross border and online in the EU. Such restrictions are considered by the Commission to harm consumers by depriving them of the benefit of greater choice and lower prices, both online and offline.

These three investigations could help to clarify how agreements concerning licensed merchandising sit within the existing competition law regime and provide a useful roadmap for companies dealing with similar arrangements in the future. The fact that the Commission has opened a total of seven investigations in the e-commerce sector this year (in addition to the ongoing Pay TV case involving contractual restrictions between Sky UK and six major US film studios) signals the Commission’s increasing interest and continued focus on the sector. This increased enforcement action should serve to clarify the application of the competition rules (and in particular the rules relating to vertical agreements) to aspects of the e-commerce sector and the interplay between IP rights and competition law.