On March 25, 2019, the Commission fined Nike €12.5 million for breaching Article 101 TFEU by imposing restrictions on cross-border and online sales of football merchandising products within the EEA. The Commission granted Nike a 40% fine reduction in return for its cooperation.
Football merchandising products such as mugs, keychains, and toys have logos or images of football clubs and federations, which are protected by intellectual property rights such as trademarks or copyright (“IPRs”). During the infringement period, certain football clubs licensed their IPRs to Nike, who would then manage the club’s retail, merchandizing, apparel, and product licensing business. In particular, Nike would have an exclusive right to use and sub-license these IPRs to third parties who manufacture and distribute the merchandising products featuring the brands of a football club or federation. The Commission’s investigation in this case concerned trademarks of clubs such as FC Barcelona, Manchester United, Juventus, Inter Milan and AS Roma, as well as national federations like the French Football Federation. The Commission found that Nike’s licensing and distribution agreements, which were in place between 2004 and 2017, included the following direct and indirect territorial restrictions:
Nike restricted the licensees’ right to sell outside of their assigned territory in the EEA. Direct restrictions included express prohibitions of, obligations to refer orders to Nike for, or double royalties on out-of-territory sales. Indirect restrictions included threats to terminate contracts or not to supply “official product” holograms to licensees that sold out-of-territory, and audits to ensure compliance with the restrictions.
In certain cases, Nike used “master licensees” in each territory to sub-license the IPRs. Nike subjected master licensees to the direct and indirect territorial restrictions, which compelled them to stay within their territories and to pass them on into their contracts with sub-licensees.
Nike prohibited licensees from supplying merchandising products to customers, often retailers, who could be selling outside the allocated territories. In addition, it obliged its licensees to mirror the territorial restriction clauses in their contracts with retailers.
Nike would also directly intervene to ensure that retailers such as fashion shops and supermarkets would cease to source the relevant products from licensees located in other EEA territories.
The Commission found that the restrictions prevented consumers from being able to shop around Europe—one of the main benefits of the EU Single Market—resulting in less choice and inflated prices for football merchandising products.
Although the Commission’s press release does not provide any details of its legal analysis, the Commission’s approach appears to be consistent with the Commission’s recent precedents. As the Commission noted in Cross-border access to pay-TV, in analyzing territorial restrictions in trademark licenses, EU courts have distinguished between the existence and the exercise of IPRs. The right to assign a trademark under national trademark law cannot be exercised to frustrate EU competition law. In Football Association Premier League, a case that involved licensing agreements restricting cross-border provision of broadcasting services, the Court of Justice held that agreements aimed at “partitioning markets according to national borders or that make the interpenetration of national markets more difficult” infringe Article 101(1) TFEU by object. Finally, the Vertical Block Exemption Regulation would not apply to Nike’s arrangements as it does not cover IPRs licenses unless such licenses constitute an ancillary part of a vertical agreement.
Focus on territorial and online sales restrictions in licensing and distribution agreements. This is the latest Commission decision stemming from the concerns discussed in the Final Report on the e-commerce sector inquiry. The Report highlighted the use of contractual restrictions on product distribution across EU Member States including territorial restrictions in licensing agreements, and geo- blocking measures. The inquiry has already resulted in a number of infringement decisions, including Guess and Pioneer, in which the Commission imposed fines for, amongst others, restrictions of retailers’ cross-border, online sales within the EU included in distribution agreements. Following the same line of investigations, the Commission has also recently accepted commitments offered by Disney, NBC Universal, Sony Pictures, Warner Bros and Sky not to include in the film licensing contracts clauses that would restrict cross-border passive sales of retail pay-TV services and grant absolute territorial exclusivity.
The Nike decision did not end the Commission’s scrutiny into agreements that partition the EU Single Market. On April 5, 2019, the Commission announced that it addressed a Statement of Objections to Valve, owner of the world’s largest PC video game distribution platform, and five PC video game publishers, Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax for potential restrictions on cross-border sales of PC video games within the EU included in distribution agreements, and geo-blocking. The Commission has two additional pending investigations into potential restrictions on cross-border and online sales in licensing and distribution agreements for merchandising products: Character merchandise and Licensed merchandise – Universal Studios.
 Ancillary sports merchandise (Case COMP AT.40436), decision not yet published. See Commission Press Release IP/19/1828.
 See, e.g., Manchester United Annual Report 2014: https://ir.manutd.com/~/media/Files/M/Manutd-IR/Annual%20Reports/manchester-united-plc-20f-20141027.pdf, page 43 (“Our retail, merchandising, apparel & product licensing business is currently managed by Nike. We are now in the final year of a 13-year agreement with Nike, which guaranteed an aggregate minimum of £303 million in sponsorship and licensing fees to the club, subject to certain reductions. Under the terms of the agreement, we granted Nike an exclusive license to exploit certain of our intellectual property, retail, promotional and image rights, subject to certain exceptions.”).
 Cross-border access to pay-TV (Case COMP AT.40023), Commission decision of March 7, 2019, para. 64 (citing Joined Cases 56/64 and 58/64, Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission, ECLI:EU:C:1966:41).
 Report, para. 48 which refers to Football Association Premier League Ltd and Others v QC Leisure and Others (C-403/08) and Karen Murphy v Media Protection Services Ltd (C-429/08), ECLI:EU:C:2011:631 (“Football Association Premier League”), para. 139.
 Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices OJ L 102, 23.4.2010, Article 2(3) and Guidelines on Vertical Restraints OJ C 130, 19.5.2010, para. 31(a).
 See Report from the Commission to the Council and the European Parliament, Final Report on the E-commerce Sector Inquiry, COM/2017/0229 final of May 10, 2017; and Commission Sector Inquiry into E-commerce: http://ec.europa.eu/competition/antitrust/sector_inquiries_e_commerce.html.
 Report, paras. 21-22.
 Report, paras. 45 and 49.
 Guess (Case COMP/AT.40428), Commission decision of December 17, 2018. See also Cleary Gottlieb EU Competition Newsletter, December 2018. The Commission fined Guess €40 million for, amongst others, online sale and territorial restrictions.
 Pioneer (Case COMP/AT.40182), Commission decision of July 24, 2018.
 Cross-border access to pay-TV, para. 76.
 See Commission Press Release IP/19/2010.
 Character merchandise (Case COMP AT.40432), decision not yet issued. See Commission Press Release IP/17/1646.
 Licensed merchandise – Universal Studios (Case COMP AT.40433), decision not yet issued. See Commission Press Release IP/17/1646.