The European Commission fined the popular American brand Nike 12.5 million euros earlier this week for forbidding traders to sell licenses merchandise of some of best-known European football clubs to other countries with the European Economic Area (EEA). In 2017, the EU executive opened an antitrust investigation into certain licensing and distribution practices of the American company to evaluate whether it used illegal practices to ban traders from marketing licensed merchandise cross-border and online within the EEA.
Licensed products such as mugs, bags, bedsheets, toys, or stationary often include one or more logos or images protected by intellectual property rights (IPRs) such as copyright. Through a licensing agreement, a licensor can allow a licensee to use some of its IPRs in a certain product. Licensors typically give non-exclusive licenses to boost the number of merchandising products in the market and their territorial coverage. The Commission’s investigation found that Nike’s licensing and distribution agreements were against EU regulations since the company imposed a few of direct measures restricting out-of-territory sales by licensees such as prohibiting sales, obligations to refer orders for out-of-territory sales to Nike or imposing double royalties.
Nike also threatened licensee with ending their contract if they marketed their products out-of-territory and refused to provide “official product” holograms if it suspected that sales could be going outside the EEA. In some cases, Nike included clauses that explicitly banned licensees from selling the merchandise, often in retail. Nike’s core business is the design and sale of athletic footwear and apparel including its famous “swoosh” logo.